Applied Optoelectronics (AAOI) stock plunged 7.38% in Friday's trading session, continuing its downward trajectory from the previous day's after-hours trading. The significant drop comes despite the company reporting better-than-expected first-quarter results for 2025, highlighting investors' ongoing concerns about the company's path to profitability.

Applied Optoelectronics announced Q1 revenue of $99.9 million, marking a substantial 145.52% year-over-year increase and slightly beating analyst estimates. The company's adjusted earnings per share (EPS) of $(0.02) also surpassed expectations, improving from a $(0.31) loss in the same quarter last year. However, these positive figures were overshadowed by a persistent negative net income of $9.2 million for the quarter, fueling investor skepticism about the company's ability to achieve sustainable profitability.

Adding to the downward pressure, Raymond James analyst Simon Leopold lowered the firm's price target on Applied Optoelectronics to $18 from $20, while maintaining an Outperform rating. This price target cut, coupled with the company's Q2 outlook projecting revenue between $100 million and $110 million and adjusted EPS between $(0.09) and $(0.03), may have contributed to investors' cautious stance. As the market reassesses Applied Optoelectronics' long-term prospects, the stock's sharp decline reflects the ongoing challenge of balancing impressive revenue growth with the need for consistent profitability.