Applied Optoelectronics (AAOI) shares surged 13.27% in pre-market trading, staging a powerful rally as investors repriced the stock following a stellar second-quarter earnings report and an overwhelmingly bullish demand outlook. The move reversed an initial after-hours dip that had been triggered by profit-taking and third-quarter guidance that came in slightly below consensus estimates.

The optical networking company reported Q2 revenue of $191.9 million, an 86.4% year-over-year increase that surpassed analyst estimates of $190.5 million. Adjusted earnings per share came in at $0.06, significantly beating the consensus estimate of $0.01 to $0.02 and marking a return to non-GAAP profitability. Data center revenue topped $100 million for the first time, surging 140% year-over-year, with 800G product volume more than doubling sequentially. Management emphasized that customer demand currently exceeds supply capacity by approximately 20% to 40%, and forecast that demand would continue to outpace production capacity through mid-2027.

Looking ahead, the company issued third-quarter revenue guidance of $255 million to $290 million, well above the prior quarter's results, and announced that its first 1.6T product is expected to complete customer certification within weeks and begin shipping later in the third quarter. The stock also 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. The pre-market surge suggests the market is looking past near-term guidance softness and repricing the stock on strong execution and structural demand tailwinds.