Applied Optoelectronics (AAOI) stock plummeted 15.78% during Tuesday's intraday trading session, marking a sharp reversal from its recent strong performance.

The significant decline follows analyst caution regarding the company's aggressive financial projections. Raymond James analyst Simon Leopold noted that Applied Optoelectronics' guidance for achieving $378 million in monthly data-center revenue by the middle of next year is viewed as "too aggressive," though potentially achievable in a perfect scenario. This comes after the company recently missed revenue expectations for its 800G transceivers in the fourth quarter due to a firmware issue that affected interoperability with key customer Amazon.com, raising execution concerns.

Additionally, the stock's nearly tripled value in 2026 has likely prompted profit-taking among investors. The decline also reflects broader sector weakness, with multiple photonics stocks experiencing significant drops during the same trading period.