Zhongtai Securities Co.,Ltd. has released a report indicating that the communications sector demonstrated notable outperformance in the first half of 2026, driven by a synergy between industry prosperity and increased institutional positioning. With AI capital expenditures remaining at elevated levels, commercialization progress is reinforcing the sustainability of optical communications demand.
Optical modules continue to represent the segment with the most fully realized earnings delivery, while optical chips, optical fibers, and optical components are experiencing synchronized improvements in industry conditions, alongside differentiated growth drivers. Looking ahead, the optical communications industry is poised to benefit from the triple drivers of AI computing power expansion, speed upgrades, and network architecture evolution. Overall, the industry remains in an upward cycle, with subsequent focus directed toward the persistence of AI capital expenditures, the pace of high-speed product ramp-ups, and the earnings delivery capabilities across various sub-segments.
First-Half 2026 Outperformance Driven by Industry Momentum and Institutional Allocation
In the first half of 2026, the communications sector (Shenwan classification) posted a cumulative gain of 73.59%, outperforming the CSI 300 Index by 66.04 percentage points, with the bulk of the rally concentrated in the second quarter. Active fund allocations increasingly favored technology and growth sectors, with allocation ratios for the electronics and communications industries rising to 37.67% and 12.19%, respectively. At the individual stock level, Zhongji Innolight (300308.SZ), Eoptolink Technology (300502.SZ), Dongshan Precision Manufacturing (002384.SZ), and Yuanjie Semiconductor (688498.SH) secured positions among the top ten heavy-weight holdings of funds, with institutional capital further concentrating in AI computing, semiconductors, and core optical communications assets.
High AI Capital Expenditures Persist, Reinforcing Demand Sustainability
During the second quarter of 2026, the combined capital expenditures of four major North American tech giants reached approximately $170.1 billion, with AI infrastructure remaining the core investment direction. Concurrently, revenues from Google Cloud, AWS, and Microsoft Cloud continued to grow at a robust pace, with AI demand progressively expanding from leading model developers to a broader base of enterprise clients. Third-party data also points to sustained growth in high-speed optical interconnect demand. LightCounting projects that 800G optical module shipments will more than double year-over-year in 2026, while 1.6T modules are rapidly scaling to tens of millions of ports. TrendForce estimates the global AI optical module market will reach $26 billion in 2026, and Yole projects the global optical transceiver market to reach $112.3 billion by 2031.
Optical Modules Lead in Earnings Delivery, With Concentration Among Leaders
In the first half of 2026, sample companies generated combined revenue of RMB 81.56 billion and non-GAAP net profit attributable to parent companies of RMB 22.26 billion. Zhongji Innolight and Eoptolink Technology together contributed 76.9% of sample revenue and 92.5% of non-GAAP net profit, with profitability further concentrating among industry leaders. The 800G segment continues to scale, while 1.6T enters the early stages of mass deployment. Zhongji Innolight's 1.6T silicon photonics modules are entering a phase of significant volume expansion, and Eoptolink Technology maintains strong profitability levels. Manufacturers such as Accelink Technologies, Liantech Technology, and Huilv Ecological Environment are also benefiting from high-speed product upgrades and optimized business structures.
Optical Chips, Fibers, and Components Show Synchronized Improvements With Differentiated Growth
In the optical chip segment, data center demand is driving upgrades of CW and EML products toward higher power and higher speeds. Yuanjie Semiconductor's data center business is experiencing rapid volume growth, while Source Photonics and Yongding Co., Ltd. are advancing 100G/200G EML and high-power CW-DFB products. In optical fiber, AI computing and digital infrastructure construction, combined with improved supply-demand dynamics, are lifting volume, pricing, and product mix at YOFC, with Hengtong Optic-Electric and Zhongtian Technology seeing earnings recovery. In optical components, T&S Communications maintains robust profitability, while Optowide Technologies and Changxin Bochuang benefit from increased demand for precision optical components. Emerging optical interconnect solutions, including CPO/NPO, OCS, and DCI, continue to make progress.
Future Outlook: Triple Drivers to Sustain Industry Upswing
Going forward, the optical communications industry is expected to continue benefiting from the triple drivers of AI computing power expansion, speed upgrades, and network architecture evolution. On the optical module front, 800G maintains high momentum while 1.6T enters mass deployment, with evolution toward 3.2T and CPO/NPO. Demand for 200G EML and high-power CW light sources is projected to rise in optical chips. Optical fiber demand is extending from traditional telecom networks toward high-value applications such as AIDC, DCI, submarine cables, and CPO polarization-maintaining fiber. Optical components are expanding from traditional module support toward CPO, OCS, and high-density connectivity.
Overall, industry momentum remains in an upward cycle, with subsequent attention focused on the sustainability of AI capital expenditures, the pace of high-speed product ramp-ups, and the earnings delivery capabilities of each sub-segment.
Risk Factors
Risks include downstream demand falling short of expectations, AI development underperforming expectations, intensifying market competition, distortion of third-party data, adjustments in industrial policies and changes in the international trade environment, and the risk of research report information lagging or failing to be updated in a timely manner.