Applied Optoelectronics (AAOI) experienced a significant 24-hour plunge of 7.32% on Thursday, despite reporting better-than-expected first-quarter results for 2025. The stark contrast between the positive financial report and the stock's decline has left many investors puzzled and searching for explanations.

The company announced Q1 revenue of $99.9 million, slightly surpassing the analyst consensus estimate of $99.4 million. This represents a remarkable 145.52% increase compared to the same period last year. Applied Optoelectronics' adjusted earnings per share (EPS) came in at $(0.02), beating the analyst estimate of $(0.04) by 50%. While these figures show substantial improvement from the previous year, the market's negative reaction suggests underlying concerns.

Several factors may be contributing to the stock's decline. Despite the revenue growth, the company's net income for Q1 remained negative at $9.2 million. Additionally, while the adjusted gross margin improved to 30.7%, investors might have been looking for more significant profitability improvements given the substantial revenue growth. The company's Q2 outlook, projecting revenue between $100 million and $110 million and adjusted EPS between $(0.09) and $(0.03), may have fallen short of market expectations. As the dust settles, investors will be closely monitoring Applied Optoelectronics' ability to translate its growing revenue into sustainable profitability in the coming quarters.