Applied Optoelectronics Sees Laser Shortage as Hyperscalers Demand 800G and 1.6T Optics

CFO Stefan Murry says in-house laser manufacturing is key as industry faces supply constraints

Mar. 3, 2026 at 4:18pm

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Applied Optoelectronics (NASDAQ:AAOI) Chief Financial Officer Stefan Murry outlined the company's positioning in data center optics and cable outside plant equipment, emphasizing that its combination of in-house laser manufacturing and automated transceiver production is central to its strategy as demand for higher-speed interconnects accelerates. Murry highlighted the laser diode capacity as a critical bottleneck for the industry, noting that only a subset of transceiver suppliers also manufacture their own optical devices in-house.

Why it matters

The shift to higher-speed 800G and 1.6T optics in data centers is driving increased demand that is straining industry capacity, especially for key components like laser diodes. Applied Optoelectronics' in-house laser manufacturing capability gives it a potential advantage as hyperscale operators seek to secure long-term supply commitments.

The details

Murry said Applied Optoelectronics primarily serves two major end markets: data centers, which make up about two-thirds of the business, and cable TV outside plant. In the data center segment, he provided historical context on the industry's shift from copper to optics, driven by the expansion of hyperscale facilities and the rise of AI workloads. Murry characterized 800 gigabits per second and above as typical for 'back end' compute infrastructure, while 'front end' networks tend to be 400 gigabits per second and below. He said hyperscale operators are increasingly seeking long-term commitments to secure supply as they anticipate insufficient industry capacity for optical transceivers and key components like laser diodes.

  • Murry said AOI expects to ship $2 million of 800G products in Q2 2026 after resolving a firmware-related delay.
  • He said the company's 400G ramp is beginning after a customer re-engagement and qualification last year, with 800G expected to follow a couple quarters later.

The players

Applied Optoelectronics

A 29-year-old company founded and headquartered in the Houston area, with operations based in Sugar Land, Texas. It primarily serves the data center and cable TV outside plant markets.

Stefan Murry

The Chief Financial Officer of Applied Optoelectronics.

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What they’re saying

“Murry said investors may be underestimating the extent to which indium phosphide manufacturing capacity will be a critical industry bottleneck, pointing to AOI's long-standing heritage in laser production and its in-house indium phosphide fabrication capabilities.”

— Stefan Murry, Chief Financial Officer

What’s next

Murry said achieving the company's mid-2027 revenue target of around $378 million for transceivers would require significant capacity additions, with initial expansion concentrated in Taiwan and most 800G and 1.6T production eventually shifting to the United States, supported by new facilities in the Houston area.

The takeaway

Applied Optoelectronics' in-house laser manufacturing capability gives it a potential advantage as the industry faces supply constraints, especially for critical components like laser diodes, amid the accelerating shift to higher-speed 800G and 1.6T optics in data centers.