AAOI 2026Q1業績直播
Key Takeaways (AI-Generated)
Financial Performance
- Q1 2026 revenue reached record $151.1 million, up 51% year-over-year and 13% sequentially
- Non-GAAP gross margin of 29.2%, within guidance range of 29%-31%
- Non-GAAP loss per share of $0.07, meeting guidance expectations
- Data center revenue grew 154% year-over-year to $81.4 million
Business Highlights
- Completed first volume shipment of 800G single mode transceivers to hyperscale customer
- Received first volume order for 1.6T transceivers from major customer
- Expanded Texas manufacturing to 900,000 square feet across multiple facilities
- Manufacturing capacity reached 100,000 units per month for 800G and 1.6T products
Financial Guidance
- Q2 2026 revenue guidance raised to $180-198 million
- Full year 2026 revenue expected to exceed $1.1 billion, up from $1 billion
- Expected to generate over $140 million in non-GAAP operating income for 2026
- Monthly data center transceiver revenue projected at $471 million by mid-2027
Opportunities
- AI infrastructure deployment driving unprecedented demand for high-speed transceivers
- Strong volume ramp anticipated for 800G products starting in Q2
- Strategic partnerships with three major hyperscale customers secured
- Forecast demand continues to outpace production capacity through mid-2027
Risks
- Supply chain constraints for indium phosphide substrates and specialized equipment
- Market competition from contract manufacturers entering transceiver space directly
- Economic fluctuations from tariff impacts, though $5.7 million refund expected
- Production capacity limitations amid rising demand through 2027
Full Transcript (AI-Generated)
Operator
Good afternoon. I will be your conference operator. At this time, I would like to welcome everyone to Applied Optoelectronics First Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Please note that this call is being recorded. I will now turn the call over to Lindsay Savarese, Investor Relations for AOI. Miss Savarese, you may begin.
Lindsay Savarese
Thank you. I'm Lindsay Savarese, Investor Relations for Applied Optoelectronics. I am pleased to welcome you to AOI First Quarter 2026 Financial Results Conference Call. After the market closed today, AOI issued a press release announcing its first quarter 2026 financial results and provided its outlook for the second quarter of 2026. The release is also available on the company's website at ao-inc.com. This call is being recorded and webcast live. A link to the recording can be found on the Investor Relations section of the AOI website and will be archived for one year.
Joining us on today's call is Doctor Thompson Lin, AOI's Founder, Chairman and CEO and Doctor Stephen Murray, AOI's Chief Financial Officer and Chief Strategy Officer. Thompson will give an overview of AOI's Q1 results and Stephen will provide financial details and the outlook for the second quarter of 2026. A question and answer session will follow our prepared remarks.
Before we begin, I would like to remind you to review AOI Safe Harbor statement. On today's call, management will make forward-looking statements. These forward-looking statements involve risks and uncertainties as well as assumptions and current expectations which could cause the company's actual results, levels of activity, performance or achievements of the company or its industry to differ materially from those expressed or implied and such forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as believes, forecasts, anticipates, estimates, adjusts, intends, predicts, expects, plans, may, should, could, would, will, potential or thinks or by the negative of those terms or other similar expressions that convey uncertainty of future events or outcomes. The Company has based these forward-looking statements on its current expectations, assumptions, estimates and projections.
While the Company believes these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond the Company's control. Forward-looking statements also include statements regarding management's beliefs and expectations related to the expansion of the reach of its products into new markets and customer responses to its innovations, as well as statements regarding the Company's outlook for the second quarter of 2026 and for the full year of 2026.
Except as required by law, AOI assumes no obligation update these forward-looking statements for any reason after the date of this earnings call to conform these statements to actual results or to changes in the Company's expectations. More information about other risks that may impact the Company's business are set forth in the Risk Factors section of AOI's reports on file with SEC, including the company's Annual report on Form 10K and quarterly reports on Form 10Q.
Also, all financial results and other financial measures discussed today are on a non GAAP basis unless specifically noted otherwise. Non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation between our GAAP and non GAAP measures as well as a discussion of why we present non GAAP financial measures are included in the company's earnings press release that is available on AOI's website.
Before moving to the financial results, I'd like to note that AOI management is attending the 21st Annual Needham Technology, Media and Consumer Conference on Wednesday, May 13th. This discussion will be webcast live and a link to the webcast will be available on the Investor Relations section of the AOI website. Lastly, I'd like to note that the date of AOI second quarter 2026 earnings call is currently scheduled for August 6th, 2026. Now I would like to turn the call over to Doctor Thompson Lin, AOI's Founder, Chairman and CEO. Thompson.
Thompson Lin
Thank you, Lindsay, and thank you for joining our call today. We are pleased to deliver solid fourth quarter results. They were in line with our expectation driven by robust demand in both our data center and CATV business, which generated our 4th consecutive quarter of record revenue as we escalated where to expand our manufacturing capacity.
We continue to see accelerating customer demands needed to support the next wave of AI infrastructure deployment and we anticipate steady sequential revenue growth throughout these years with a significantly large ramp expected starting in Q3 as additional capacity come online. During the fourth quarter, we deliver revenue of $151.1 million, non GAAP gross margin of 29.2% and non GAAP loss per share of seven cent or in line with our expected guidance range.
Importantly, during the quarter we saw and continually see strong customer engagement around our 800G and 1.6 P products, particularly as AI driven data center investment is late. We completed our first volume shipment of our 800G single mode transceiver to one of our large hyper scale customer in Q1 and we continue to anticipate a strong volume ramp of our 800G products starting in Q2.
During the fourth quarter, we announced that we'd receive our first volume order for our 1.6 T transceiver from another long term major hyperscale customer along with two new volume orders from this customer for our 800G single mode transceivers. Looking ahead, forecast demand continue to outpace our production capacity throughout mid 2027. We are working hard to add additional capacity to meet this demand.
Based on new demand in our anticipated capacity ramp, we now believe our 2026 revenue will exceed $1.1 billion and we now expect it to generate more than $140 million in non GAAP operating income in this year. With that, I will turn the call over to Stephen to review the details of our Q1 performance and outlook for Q2. Stephen.
Stephen Murray
Thank you, Thompson. As Thompson mentioned, we are pleased to deliver solid first quarter results that were in line with our expectations. Driven by robust demand in both our data center and CATV businesses. We generated our 4th consecutive quarter of record revenue as we executed well to expand our manufacturing capacity. We continue to see accelerating customer demand needed to support the next wave of AI infrastructure deployments and we anticipate solid sequential revenue growth throughout this year with a significantly larger ramp expected starting in Q3 as additional capacity comes online.
In Q1, we delivered revenue of $151.1 million which was in line with our guidance range of $150 million to $165 million. We recorded non GAAP gross margin of 29.2% which was in line with our guidance range of 29% to 31%. Our non GAAP loss per share of seven cents was in line with our guidance range of a loss of $0.09 to break even.
Notably, we continued to make progress on our key priorities in the first quarter, which included one, scaling our next generation data center products including both our 400G and 800G solutions. Two, expanding our production capacity in a disciplined manner to support anticipated demand, particularly in our Texas facilities. Three, diversifying our revenue base and four, strengthening operational execution to improve our margins and long term profitability.
Importantly, during the quarter we saw and continue to see strong customer engagement around our 800G and 1.6 terabit products, particularly as AI driven data center investments accelerate. We completed our first volume shipment of our 800G single mode transceivers to one of our large hyperscale customers. Notably, 800G revenue in the first quarter was $4.6 million or 5.6 percent of our total data center revenue. Looking ahead, we continue to anticipate a strong volume ramp of our 800 G products starting in Q2.
During the quarter in line with our expectations. Along with the increasing demand for our 800 G products, we also saw particular strength for our 400 G products. Looking ahead, we expect continued strength in our 400G business and we expect to ship nearly four times the quantity of 800 G compared to our Q1 shipments.
In Q1, we announced that we received our first volume order for our 1.6 terabit transceivers from another one of our long term major hyperscale customers. We also announced that we had received 2 new volume orders from this customer for our 800G single mode transceivers. Following product qualification. We expect to begin delivering these 800 G orders in Q2, the 1.6 terabit order as early as Q3 and to complete all of the deliveries by the end of this year.
This hyperscale customer has been a key and valued customer of ours for many years and we are excited by the increased engagement and meaningful discussions we have had. As this customer boosts its network bandwidth for AI workloads, we expect these orders to return this customer as a 10% plus customer for us. Looking ahead, forecast demand for 800G and 1.6 terabit modules are projected to continue to exceed our production capacity through mid 2027. We are working to add additional capacity to meet this demand at OSC.
In March, we provided more color on our ambitious plans to increase our manufacturing capacity. During the first quarter, we made solid progress on this production capacity ramp, particularly for our 800G and 1.6 terabit products. As a reminder, our US manufacturing footprint is anchored in Sugarland just outside Houston. Through a combination of real estate acquisition and leases, we have expanded our Texas manufacturing footprint to about 900,000 square feet.
This includes 135,000 square feet of existing capacity at our headquarters. 2 new buildings of 388,000 square feet in Pearland, TX, a 210,000 square foot facility which is under development and a 154,000 square foot building in Houston, TX. For those of you who are not familiar with the Houston area, all of these facilities are located within a 15 mile radius of our current headquarters facility in Sugarland.
During the quarter, we made progress building out our recently leased 210,000 square foot facility. We expect to begin initial production in this facility in the third quarter. Notably, this facility is located just a few 100 yards from our headquarters and will be entirely dedicated to manufacturing of 800 G and 1.6 terabit transceivers. While this will not directly increase our Indium phosphide wafer capacity, we plan to move the existing transceiver production from our current headquarters facility to this new building, which will allow expansion of our Indium phosphide capacity.
The facilities in Pearland in Houston will be built out to expand our production capacity for 800G and 1.6 terabit transceivers. We expect these facilities to come online in early 2027. As a reminder, internationally, we have 795,000 square feet across 3 facilities in Taiwan focused on optical transceivers as well as a larger 1.2 million square foot facility in Ningbo, China primarily dedicated to transceiver and cable TV manufacturing.
Exiting Q1, our total manufacturing capacity approached 100,000 units per month of 800 G and 1.6 terabit capacity. Looking ahead, we expect to continue to rapidly expand our production capacity to approach 150,000 per month of 800 G and 1.6 terabit this quarter. As a reminder, we expect by the end of this year that we will be capable of producing over 650,000 pieces of 800 G and 1.6 terabit products per month with about 30% of that output coming from Texas.
As we expand into additional facility space and bring new production online by the end of next year 2027, we expect to grow our production capacity to be able to produce over 930,000 pieces of 800 G and 1.6 terabit products per month with over half of that output coming from Texas. These investments reflect measured scaling of our footprint while aligning with our strong and growing customer demand and qualification progress across both 800 G and 1.6 terabit products.
As a reminder, our 800G and 1.6 terabit products can be manufactured on the same production line with the same process, while our 1.6 terabit products will require a different final testing our 800G automated manufacturing line. Have been developed with an architecture that will allow us to support future high speed products as customer demand materializes and evolves over time.
While we continue to be encouraged by the conversations we are having with our customers pertaining to our 1.6 terabit products, we continue to believe that our 800 G products will drive the near term data center ramp. Our 1.6 terabit products are on track to begin to contribute to our overall revenue later this year with the bigger ramp beginning in 2027.
At OSC we also discussed our plans to increase our manufacturing capacity for our external light source or ELSFP that's for Co packaged optics or CPO. This utilizes the ultra narrow line with high power laser that we announced late last year. We have very limited production of these modules now, but we anticipate ramping production later this year and into 2027, ultimately culminating in about 400,000 pieces per month by the end of 2027.
As a reminder, we will be making the high power lasers for these modules for the in house production of the ELSFP. We believe our in house laser capabilities continue to be a strategic advantage for the company. As we have mentioned before, we have been manufacturing lasers internally for many years. This has allowed us to avoid some of the shortages that affected others in the industry.
As we continue to expand our footprint in Texas, our in house laser manufacturing positions us well to support both near term customer needs and longer term growth. We believe that in the future CPO will continue to drive increased demand for high power lasers and we plan to continue to expand our laser manufacturing capacity in Texas in order to accommodate these future growth drivers. We expect to further expand our laser fabrication capacity by around 350% by the end of 2027.
A central element of our strategy is a high process for transceivers. Which allows us to deploy production capacity where it makes the most sense economically and geopolitically, while scaling output quickly, reliably and efficiently. As I mentioned, this automation platform is also highly flexible, enabling us to produce across multiple generations from 400G to 800G to 1.6 terabit using many of the same techniques and equipment.
In a fast moving AI environment. That flexibility is critical as it allows us to rapidly ramp specific products and shift production in response to changing customer demand. This capability is the result of over a decade of investment in proprietary in house design equipment and tightly integrated product and process engineering.
The plans that we have unveiled have been evolving for some time. So while some of the required equipment does have long lead times, we've already ordered many of the key pieces of equipment and are working closely with our vendors to ensure on time delivery. Notably, equipment availability has not been a problem for us to date, which we believe is largely due to the fact that most of this equipment is developed in house, which means that we're not generally in direct competition with other similar companies for supply of the necessary machinery and equipment to build our factories.
There are exceptions to this of course, but overall we feel that our in house developed technologies give us an edge in ensuring reliable supply of production equipment. During the first quarter, direct tariffs had a $1.4 million impact on our income statement. With the overturn of the IEPA tariffs, we have applied for a refund which we currently anticipate will be at least $5.7 million. Our application for the refund has been approved, but as the process is still very new, we currently cannot estimate the time frame for recovery of these tariffs.
Turning to our first quarter results, our total revenue was a record $151.1 million, which increased 51% year over year and increased 13% sequentially off a strong Q4 and was in line with our guidance range of $150 million to $165,000,000. During the first quarter, 54% of revenue was from our data center product, 44% was from cable TV products and the remaining 2% was from FTTH Telecom and other.
In our data center business, Q1 revenue came in at $81.4 million, which was up 154% year over year and 9% sequentially. Sales of our 100 G products increased 36% year over year, while sales for our 400 G products increased tenfold year over year. In the first quarter, 41.9% of data center revenue was from 100 G product 46.7% was from 200G and 400G product. 5.6% was from 800 G transceiver product and 5.6% was from 10G and 40G transceiver product.
In our CATV business, CATV revenue was $66.8 million, which was up 4% year over year and 24% sequentially and was at the high end of our expectations of $61 million and $67 million. Similar to the last couple of quarters, we shipped a significant quantity of 1.8 gigahertz amplifiers to our largest CATV customer in Q1. And based on recent conversations with customers, we believe demand will be somewhat higher than our initial projections for 2026.
We continued to see momentum with a newer set of MSO customers that we have talked about on our prior few earnings calls. Looking ahead to Q2, we expect our CATV revenue will be between 75 and $80 million. Looking further ahead, we now currently expect to generate over $325 million annually in CATV. While the vast majority of our CATV revenue expectations for this year are related to our amplifiers, we do anticipate that we will generate some revenue from our software solutions this year.
Now turning to our Telecom segment, first quarter revenue from our telecom products of $2.6 million was down 13% year over year and 50% sequentially. As we have said before, we expect telecom sales to fluctuate from quarter to quarter. For the first quarter, our top 10 customers represented 98% of revenue compared to 97% of revenue in Q1 of last year. We had three greater than 10% customers, one in the CATV market which contributed 44% of total revenue and two in the data center market which contributed 26% and 25% of total revenue respectively.
In Q1, we generated non GAAP gross margin of 29.2% which was in line with our guidance range of 29% to 31% and compared to 31.4% in Q4 2025 and 30.7% in Q1 2025. As we discussed on our last quarterly earnings call, while we do expect continued gradual improvement in gross margins, we continue to expect that the revenue mix in data center in the short term will be a slight headwind.
We remain committed to our long term objective of returning non GAAP gross margins to around 40% and believe that this goal is achievable as our mix shifts towards higher margin products and as we capture additional efficiencies across our operation. That margin expansion combined with increased scale positions us to move towards sustainable profitability which we continue to expect to approach on a non GAAP basis beginning this quarter.
The revenue figures presented above our net of a Contra revenue amount due to the accounting for warrants provided to customers. As a reminder, this amounts to approximately 2.5% of revenue derived from certain customers to whom AOI has provided warrants in exchange for future revenue. In Q1 the amount of this Contra revenue was $1 million.
Total non GAAP operating expenses in the first quarter were $51.4 million or 34% of revenue, which compared to $35.5 million or 36% of revenue in Q1 of the prior year and were in line with our expectations of $50,000,000 to $57 million. Looking ahead, we expect non GAAP operating expenses to be in the range of $50,000,000 to $58 million per quarter.
Non GAAP operating loss in the first quarter was $7.3 million compared to an operating loss of $4.8 million in Q1 of the prior year. GAAP net loss for Q1 was $14.3 million or loss of $0.19 per basic share compared with the GAAP net loss of $9.2 million or loss of $0.18 per basic share in Q1 of the prior year.
On a non GAAP basis, net loss for Q1 was $4.9 million or $0.07 per share, which was in line with our guidance range of a loss of $7,000,000 to a loss of $3,000,000 and non GAAP income per share in the range of a loss of $0.09 to break even. This compares to a non GAAP net loss of $0.9 million or two cents per share in Q1 of the prior year. The basic shares outstanding used for computing the earnings per share in Q1 were 76,000,000.
Turning now to the balance sheet. We ended the first quarter with $449.4 million in total cash, cash equivalents, short term investments and restricted cash. This compares with $216 million at the end of the fourth quarter of 2025. We ended the first quarter with total debt excluding convertible debt of $77 million, which compared to $67.3 million at the end of last quarter.
As of March 31, we had $206.2 million in inventory, which compared to $183.1 million at the end of Q4. The increase in inventory is primarily due to raw material and work in progress needed for production, partially offset by a decrease in finished goods inventory as purchase orders to customers were fulfilled in the quarter.
We made a total of $68.7 million in capital investments in the first quarter, which was mainly used for manufacturing capacity expansion for our 400G 800G and 1.6 terabit transceiver products. We expect to continue to make sizable CapEx investments this year as we prepare for increased 400G 800G and 1.6 terabit data center production. On a quarterly basis, we expect our capital expenditures to be above the total that we spent in Q1.
We expect to finance these investments through a combination of cash on hand, cash generated from operations and some equity sales along with additional debt. Notably, in Q1, we increased availability under existing and new loan agreements by $13.4 million and added another $14.5 million in April. Going forward, we believe we are well positioned for sustained growth across both our data center and CATV businesses and the capital investments underway are expected to fundamentally strengthen the company as we execute on these opportunities.
Given the rising demand, we now believe that by mid 2027 100G and 400G revenue will be approximately 90 million dollars, 800G revenue will be approximately $217,000,000 and 1.6 terabit revenue will be approximately $164 million monthly. In total, this is about $471,000,000 per month of data center transceiver revenue with about 40% of this capacity in the US.
Moving now to our Q2 outlook. We expect Q2 revenue to be between $180 million and $198,000,000. Accounting for a sequential increase in CATV revenue as well as a sequential increase in our data center revenue. We expect non GAAP gross margin to be in the range of 29% to 30%. Non GAAP net income is expected to be in the range of a loss of $2.5 million to income of $2.8 million and non GAAP earnings per share between the loss of $0.03 per share and earnings of $0.03 per share using a weighted average basic share count of approximately 80.7 million shares.
Looking more broadly at 2026, we now expect to generate over $1.1 billion in revenue this year with a non GAAP operating profit of over $140 million. As we have discussed previously, this revenue level is limited by our production capacity and supply chain, not market demand which we believe is much larger. Based on our plan capacity additions, we expect to see an acceleration in the second-half of the year as new production capacity comes online and additional customer qualifications are completed and orders begin to ship.
We believe that this is an ambitious yet achievable target based upon our customers forecasts and what we know about the unprecedented investments that are being made in AI infrastructure. With that, I will turn it back over to the operator for the Q&A session.
Operator
We will now begin the question and answer session. To ask a question, you may press * then one on your touch tone phone. If you were using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press * then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Simon Leopold with Raymond James. Please go ahead.
Simon Leopold
Thank you very much for taking the question. I wanted to dig in a little bit to understand the risk profile for ramping the capacity. I appreciate the nuance that you do a lot of your own tooling and machinery and so that should put it in your control. But I wonder if you could reflect on sort of the prior capacity expansions, you know, what led to any kind of timing or disruption and help us understand sort of how to prioritize the risk for meeting your schedule. And then I've got a quick follow up.
Stephen Murray
Sure, Simon. I think it's important to understand that the expansion that we're undergoing. While it's large in scope is not something that's brand new to us, right. We've built significant capacity, especially in our Asian factories over the last couple of years and now we're basically adding additional increments to that capacity. The same type of equipment, you know, the same manufacturing process here, mainly here in the US, OK, here in Texas, as we talked about during the call.
So from a risk standpoint, you know the risk of doing something that you've already done is a lot lower than doing something that's brand new, right. As we mentioned on the call on the prepared remarks, a lot of this equipment is developed in house. So the risk of supply chain disruptions for the equipment, I mean it's not eliminated right, of course, but it's a lot lower than if we were relying on the same equipment that was being bid up by you know other suppliers and it had limited supply to begin with, right.
So I think those two risks are minimized because of the nature of the manufacturing process that we have. It's worth noting too that because the process for us is very highly automated, we're not hiring a lot of, you know, people. So the labor, the risk associated with, you know, quality control issues or being able to scale labor doesn't really exist to any great extent for us as well.
So it's really just a matter of can we get the equipment in and can we, you know, put it into production, you know, on time. And so far we're executing very well to that, which isn't surprising because we've done a good job of it over the last couple of years already. Right.
Simon Leopold
Maybe just a quick, yeah, just a quick follow up. I want to make sure I understand and clarify the metric you shared with us towards the end of the call, the $471,000,000 monthly of production by the middle of 27. I want to make sure I understand is that a capacity number or is that a number that assumes a certain percent utilization of the total capacity available? How should we take that 471,000,000 value? Is that a revenue forecast or is that a capacity capability and we should assume some haircut to that for lower utilization? Thank you
Thompson Lin
Let's based on revenue actually the actual capacity is higher, but you don't understand we've got equipment you need the several months to hire people qualification. So that means based on the order in hand or minimal commitment when a customer cross the equipment has been fully qualified. So that means June, July less than we believe we can deliver for sure. Not only, I think another risk is the material. So This is why we are working with all the material supplier to see keyword the material supplier.
There's a number we feel comfortable to commit at this moment. But if you say the actual demand could be even higher than this number, but that's the best we can do. Let me say that the actual number from the customers bigger and actually what they expect is April, not June, July. So we just want everything deploying.
Stephen Murray
And Simon, just to make it really clear, if you go back to our remarks in the last earnings call, that number was 378,000,000 monthly. So that 471 is directly comparable to that and it represents almost 100 million a month of additional revenues in the middle part starting in the middle part of next year.
Simon Leopold
Appreciate it. Thank you.
Operator
Up next, we have George Knotter with Wolf Research. Please go ahead.
Taryn Gaut
Hey, guys. It's Taryn Gaut on for George Knotter on the ELSP business. Can you talk a little bit more about the customer engagements you're seeing there? Who are you working with or how many customers you're working with? Any DSO's would be appreciated.
Thompson Lin
Yeah, we have a couple of large customers that we're working with. We haven't said who they are, but let me say that right now we are working on three-year long term agreement with server customer. I would say 3 including laser, including the ESAP. So that's the number we're talking about. That's why not only the transceiver, we are expanding very fast about our laser capacity and right now we have been doing a four inch growth process.
Our targets go to 6 inch by end of next year. So yes, I think we need to do more investment to meet the demand for CPO market. As you know, the CPO laser is. It's about 300 to 400 mini Watt compared to 70 mini Watt for 100G transceiver and 100 mini Watt for 1.6 terabit transceiver. The size is much bigger, OK and minimum maybe five times or six times bigger.
That's all we need to go to. Maybe that's what we already go from like 2 inch to three inch to 4 inch in the past 18 months. I was still planning to go to 6 inch by end of next year and cooled in the they will increase our capacity a lot, but at the same time we are adding a lot of capacity like most CBD EP and stepper called everything. OK,
Stephen Murray
yeah, turn we, we see a shortage of Indium phosphide laser manufacturing capacity across the industry right now and we think that's going to persist and even get more acute with the advent of the LSSP as Thompson mentioned. That's why we see this need to really expand our Indium phosphide fabrication capability pretty dramatically over the next, you know, 12 to 18 months.
Taryn Gaut
Great. And then just to follow up on that, how do you see the ability to secure the substrate capacity for the Indium phosphide?
Thompson Lin
Right now we regard 4 to 5 suppliers. We have some kind of discussion. Sorry, not much we can say, but four of them are outside of China. So I would say right now we should have enough inventory minimum for almost one year. But since the volume we increase our phase, we are begging calls with all the supply. I would say we've got good line of sight into how we think we can, you know not see a shortage there, but we can't say too much about it specifically at this point because a lot of it's under discussion still.
Taryn Gaut
Got it. Thank you.
Operator
Again, if you have a question, please press * then one. Our next question comes from Michael Genovese with Rosenblatt Securities. Please go ahead.
Michael Genovese
Right, thank you. Can you give us more granularity on when you expect qualification for 800G with this hyperscaler? That sounds like we'll be your third hyperscale 10% customer. But when in the quarter exactly do you think you'll have this qualification And then does your guidance de risk it meaning that if you got it sooner or if things went to plan would there be upside in the quarter?
Stephen Murray
Well, as we mentioned in our prepared remarks, we've already started shipping. So I'm not sure what the qualification question really is referring to.
Thompson Lin
So, OK, so we had two big customers, one is qualified, another one is almost qualified. The one give us a large order for I don't remember 100, I don't know 40 million. I think they are negotiate with AOI with some kind of three-year long term agreement with a very big volume. The qualification is pretty smooth. I think we started shipping some volume in next month. Another customer, we've been working for a long time as qualifier. We increase the capacity in this month on this quarter too. So, so we started shipping volume to 2 big customers like on a small one.
Michael Genovese
Got it. OK. And then you know your guidance for the year, you're doing about 1/3 of the revenue for the year in the first half. And then obviously expect big sequential growth in the third quarter. Would then we have more big sequential growth in the fourth quarter or IS3Q and four Q more linear like how should we think about the shape of the second-half
Thompson Lin
not linear. That that is very great question. Do I now as they say, because then let me explain to you from a day when you order equipment and qualification, installation everything and sometimes we are the reliability even the Asia easy would take five to seven months. In US it's getting another two months because of shipping, OK. So that's why the ramping from the Q3, not Q2, OK, even we've got some equipment in already, but still it goes a lot of process which takes seven months.
So right now in Q3, we can see compared to Q2 60 to 80% increase, Q4 should be similar and you can figure out the number. And let me say that the actual demand is not 1.1 billion, The actual demand is 1.4 1 point 5 billion. So right now with our target still go to 1.2 or 1.2 billion, but we still need to work very hard like the supply chain and in the manpower everything, but right now 1.1 billion. Is the number we feel very competent and it's increased from 1 billion we commit in the last quarter, but our internal number is high.
Stephen Murray
Like if you just to summarize what Thompson said, right, that's what Thompson said, right. The limiting factor for deliveries is our ability, the manufacturing capacity that we have available. So once that capacity that we've been building, we talked in detail about the real estate that we have and the number of square feet that we've added and the equipment. Simon asked some very, you know, detailed questions about you know our equipment capacity and how confident we are on that.
Once that starts to come online, it's not going to be a linear type of thing. It's going to, you know, it's, it's going to be another large increment and then another large increment in Q4 as Thompson outline. But that's why it's not you, you can't extrapolate from the first half and go, well, you know, there's only a certain growth rate. No, when you have new factories coming online that adds capacity very quickly
Thompson Lin
and then let's say even you got the equipment, OK, it still take easy to include. Maybe you just like cycle time, it take at least more than three months or even longer to deliver revenue, OK, because sometimes cost will need to do another on sale auditing some kind of qualification. So we got a lot of equipment in, but to count the real revenue is more like Q3. So that's what I told you. Yes, I think Q2 we have maybe 30% growth. Let's give me about our capacity. But Q3Q4, we're talking about 60-70 or even 80% of growth in every quarter. Oh, actually even in even Q1 next year too. Well, in the next few quarters, of course we'll be very fast because that's when we can start to deliver to the customer.
Michael Genovese
Perfect, Great. Thank you so much. Appreciate the color.
Operator
Our next question comes from Ryan Koontz with Needham. Please go ahead.
Ryan Koontz
Great, thanks. Just want to ask about get back to the Indium phosphide topic here and where you are in terms of that capacity relative to your demand and you know the different fab equipment you need to support that growth. Can you maybe kind of walk us through some of the major milestones we should think about for the laser supply internal here, you know over the next couple of quarters?
Stephen Murray
Right, great question. So you know as I said earlier, I think Indium phosphide capacity is critical right now. You know the fact that we have our own in house laser manufacturing capability is one of our key advantages. Certainly when you talk to customers that's one of the big things that they like about it, especially now that we're seeing you know shortages across the industry.
So our fab expansion is well underway. As Thompson mentioned, you know, we've got a number of critical pieces of equipment and most CVDS, you know, coding machines and others that are that are, you know, in various stages of either being delivered or being qualified. It does take a pretty extended period of time to qualify a new piece of laser manufacturing equipment as you can imagine. You know, you don't want to take a risk of having a, an unknown, you know, quality issue there.
So a lot of that is already here and already undergoing qualification or it's very close to be here. And that's why we can be pretty confident that our, our capacity is going to be where we need it to be. It's just a matter of going through that qualification process internally, which is by the way different from the transceiver qualification here. I'm talking about our internal qualification of new equipment as it comes in.
Thompson Lin
Let me let me say it's very thin from transceiver for the laser from the day you press the order to order equipment supply, you take minimum 18 months or even longer. Even right now asking with the equivalent delivery state take 21 to 24 months for use to start to deliver laser to the customer. OK. Because sometimes the customer requires 3000 hour or even 5000 hour of reliability data.
So we press a lot of order to every more than 50 supplier. Let me say that we got a commitment from the supplier and we get in the some equipment in house already I think every month. And let me say that by end of next year we should be or is it minimum top three laser supply worldwide, OK, I can't tell you how many equipment we had this common danger. That's why we are working. We save a customer for not only this for laser, not only for transceiver, including laser and for ELSFP.
But as I say, ELSFP is very challenge this very high spec and very high power with your weapons control. I would say the trench is more than 10 times of like 70 or 8100 milliwatt laser for transceiver. This total different ball get this is our focus and you know AOI has been doing the laser since day one, including my PS. This user has been doing a laser since 1990. So we know how to do a good job.
Ryan Koontz
Yeah, Thompson, yeah, thank you. If I get a quick, quick follow up there in terms of your margins and how we should think about that and the mix, you know, as your production mix of 800 moves up here, should we think about that's the tailwind for margins? Maybe can you unpack that for us just a little bit how to think about the mix? Thank you.
Stephen Murray
Yeah, the margins get a lot better as we expand the capacity. Right now what's going on is you know we're in this shifting mix between 400 and 800 and between predominantly cable TV and predominantly data center, right. So as we see that continue to shift and as 800 takes precedence, you'll start to see growth in gross margin in the second primarily in the second-half of the year.
Thompson Lin
So I was that we go to 35% gross margin by end of this year and at the same time in Q1Q2 since we start the ramping up, Yeah, under the 1.6T, we need the time to fine tune the process, OK. So the efficiency size as good as what we expect. But I think within 2-3 months, I think with a fully automatic manufacturing line, we can tune out the efficiency and eat very fast. That's the major advantage of automation by Q3 for sure. By Q4, the gross margin, the whole company should be, I would say, more than 40%, but special with the laser beams that will kick in, in Q3Q4 next year.
Ryan Koontz
That's helpful. Thank you both.
Operator
All right. Again, if you have a question, please press * then one. Our next question comes from Tim Savageau with Northland Capital Markets. Please go ahead.
Tim Savageau
Pardon me. Hey, good afternoon. First question is trying to understand where you are capacity wise versus what you're forecasting. So you know, I think in the release you talked about 100,000 units a month exiting Q1 in 800 gig and you know that puts your capacity revenue wise well over $100 million, right. 1/4 we've got orders in hand for $124 million of 800 gig, the capacity theoretically to ship those orders and you're guiding to what 18 million, 20 million in 800 gig revenue. What I'm trying to understand is that delta and what's driving that apparent disconnect. I have a follow up.
Stephen Murray
It's just timing on how long it takes to do the manufacturing process really not all that, not all that 100,000 was online, you know in the middle of the quarter and then you add the cycle time to it, it puts the real production output for that closer to middle to even you know 2/3 of the way through the quarter. It's just the timing of the manufacturing lead time.
Thompson Lin
So that's not what I say when the salmon eggs, why we talking about $471 million for June, July the next year. That's why I said that is the revenue. Now the capacity, the capacity is much higher because as I said, when the capacity you need to have add in more than one month or maybe visual cycle time of six weeks plus maybe customer needs to answer auditing or vacation. There's all kind of requirement.
So the the day you have even you install you download the tire around everything. You still with easy take another 2-3 or four months to realize the revenue or even something that customer even have the light, some kind of light hub, you know all kind of you know different process. That's why I said, that's why I made clear when we're talking about $471 million of revenue, not capacity and we're talking about equal to about what 780,000 of transceiver per month by middle next year, but actual capacity could be high.
Tim Savageau
OK, got it. Yeah, I mean incidentally that would make you about the same size as coherence after you know kind of a multi year ramp over there. So the numbers kind of match up. Yeah, another another question. Yeah, go ahead. Speaking of competition, earlier this week, we had a prominent contract manufacturing space announced 2 deals whereby there they would be making transceivers for hyperscale customers directly. How would you assess the, you know, competitive and margin impact of that development on AOI?
Thompson Lin
We don't really know. But anyway right now I think that the match most of all get delivered and they should let me say that there here we are negotiating with these 3 customers. The three-year number is crazy high. OK. So so it depends. Let me say that for money mode, OK, it's easier. Maybe you can use like by brilliant or whatever or isn't even or even by for like BIA it's easier to manufacture, but you'll be very tough for like 100 G 1.6 T to buy Fr 4 because you need 4 laser.
But he's the other same thing. Can you get laser or not? But even there's many laser transceiver supplier, but how quick is the laser from right now momentum called it out on complete book even broke up even soon it's almost so. So without it, how can you make any chance here?
Tim Savageau
Got it. And last one for me, this goes back to the 1.6 T comments where Stephanie, I think you talked about, you know, some revenue contribution later in the year in a bigger ramp in 27. And yet I think it was my understanding that the big order that you announced was, was that to be shipped completed in 26. Has there been some change there or what's the
Stephen Murray
no, it means that it means that order is just a small order compared to what we're going to see in 2027 or much, much bigger. I think the body's light. All right. So we got to define our terms. 200 million is not a big ramp, OK, I got it exactly.
Thompson Lin
Next year we are talking about more than $2 billion, one point 1.6 even more, much more than $1.6 billion we need to deliver in next year. OK.
Tim Savageau
Thanks very much.
Operator
This concludes our question and answer session. I would like to turn the conference back over to Doctor Thompson Lin, Founder, President and CEO for any closing remarks
Thompson Lin
again. Secondly, for joining us today, as always, we want to extend a thank you to our investors, customers and employees for your continuous support is an exciting time for our industry. As for AOI, we continue to believe the fundamental driver of long term demand for our business remains robust, but we are in rate position to drive value from this opportunity. We look ahead to see many of you at upcoming investor conference. Thank you.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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