Applied Optoelectronics (AAOI) shares surged 11.78% in post-market trading, staging a dramatic recovery after an initial after-hours dip following the company's second-quarter earnings release. The optical networking company's stock rebounded sharply as investors digested a stronger-than-expected earnings report, a bullish demand outlook, and a favorable policy environment.

The rally was driven by multiple catalysts. AAOI reported Q2 revenue of $191.9 million, an 86.4% year-over-year increase that beat analyst estimates of $190.5 million. Adjusted earnings per share came in at $0.06, significantly above the consensus estimate of $0.01 to $0.02, marking a return to non-GAAP profitability. Data center revenue surpassed $100 million for the first time, surging 140% year-over-year to $107.7 million, now accounting for 56% of total revenue. The company's 800G product volume more than doubled sequentially, and management forecast that demand would continue to outpace production capacity through mid-2027.

Looking ahead, AAOI issued third-quarter revenue guidance of $255 million to $290 million, well above the prior quarter's results. The company also announced that its first 1.6T product is expected to complete customer certification within weeks and begin shipping later in the third quarter. Additionally, the stock continued to benefit from reports earlier in the week that the U.S. is drafting a ban on imports of new Chinese data center components, including optical transceivers, positioning AAOI as a primary beneficiary as a domestic supplier. During the earnings call, management stated that customer demand currently exceeds AAOI's supply capacity by approximately 20% to 40%, reinforcing confidence in the company's growth trajectory.