Shares of Applied Optoelectronics (AAOI) plummeted 5.24% in Friday's pre-market trading session, following the release of disappointing second-quarter 2025 financial results and weaker-than-expected third-quarter guidance. The optical networking products manufacturer's performance fell short of analyst expectations, raising concerns among investors about its near-term profitability.

For the second quarter, Applied Optoelectronics reported revenue of $103 million, missing the consensus estimate of $105.8 million. More concerning was the adjusted net loss of $8.8 million, or $0.16 per share, which was significantly wider than the expected loss of $0.08 per share. Despite the miss, revenue still showed a substantial year-over-year increase of 137.93% from $43.27 million in the same quarter last year.

Adding to investor concerns, the company provided third-quarter revenue guidance of $115 million to $127 million, below the consensus expectation of $118.64 million. Applied Optoelectronics also projected a non-GAAP net loss between $5.9 million and $2.0 million for Q3. Management attributed the elevated operating expenses to strategic investments in R&D and SG&A, particularly for new customer qualification efforts in 800G and 1.6Tb transceivers. While these investments are expected to drive future revenue opportunities, they are currently weighing on the company's bottom line. Despite these challenges, Applied Optoelectronics highlighted strong demand in its datacenter and CATV businesses, which could potentially drive growth in the coming quarters but was not enough to offset immediate concerns about profitability.