Shares of Applied Optoelectronics (AAOI) tumbled 8.54% in after-hours trading on Thursday, despite the company reporting better-than-expected first-quarter results for 2025. The stark contrast between the positive financial report and the stock's decline has left investors puzzled.

Applied Optoelectronics announced Q1 revenue of $99.9 million, slightly surpassing the analyst consensus estimate of $99.4 million. This represents a significant 145.52% increase compared to the same period last year when sales were $40.67 million. The company's adjusted earnings per share (EPS) came in at $(0.02), beating the analyst estimate of $(0.04) by 50%. This marks a substantial improvement from the $(0.31) loss per share reported in the same quarter of the previous year.

Despite these seemingly positive results, the after-hours plunge suggests that investors may have had even higher expectations or are concerned about other factors not immediately apparent in the earnings report. The company's net income for Q1 was still negative at $9.2 million, which could be a point of concern for some investors. Additionally, while the adjusted gross margin improved to 30.7%, it's possible that market participants were looking for more significant profitability improvements given the substantial revenue growth. As the market digests this information, investors will be closely watching for any forward-looking statements or guidance that might explain the unexpected stock movement.