Who Is Paying For AOI’s Cash Burn

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Applied Optoelectronics (AAOI), which calls itself AOI, makes transceivers for data centers and amplifiers for cable television (CATV) networks. Its sales are rising fast, yet it spends far more cash than its business brings in. In fiscal Q3 2026, the cash left after running the business and capital spending came to negative $361 million, and AOI burned cash in each of the last four quarters. So who has been paying for that burn, and how long can the cash hold out?

How Fast Is AOI Burning Cash?

AOI burned cash equal to 133.9% of its sales in fiscal Q3 2026, compared to 66.5% in the same quarter a year earlier. Over the four quarters ending in September 2026, the burn was nearly three times what it was over the four quarters before.

The burn is growing. Still, the business came close to breaking even on cash in fiscal Q3 2026, so nearly all of that quarter's burn was capital spending.

How Long Would AOI's Cash Last?

At the end of September, AOI held $605 million in cash and short-term investments. If the company raised nothing and kept burning cash at the average pace of the last four quarters, that cash would last nearly three quarters. At the latest quarter's pace alone, the cash would last under two. Since the quarter ended, AOI has also signed a $200 million bank loan, which does not appear in those counts. Neither does any money from AOI's share sales that came in after September.

AOI's debt stood at $350 million, less than the cash it held. Even so, the cash covers less than a year of burn at either pace.

Who Has Paid For The Burn So Far?

So far, existing shareholders have paid a large part of it. AOI sold new shares, which leaves each existing share with a smaller piece of the company: its diluted share count rose 107.6% between September 2024 and September 2026. AOI announced in early October that it had completed a $600 million program of selling shares on the market. Management did not say on the call how much of that money arrived before the end of September.

Lenders paid for part of the burn too. AOI's debt rose from $121 million to $350 million over the same two years. Management also said on the call that it could raise its U.S. bank loan to $400 million or $500 million over the next 12 months, if necessary.

What Has To Change At AOI

On the November 5 call, management said the capital spending goes mainly to capacity for 400G, 800G and 1.6 terabit transceiver products, and expects it to rise in fiscal Q4 2026 from Q3. Management said purchase orders and long-term agreements back that spending, including one signed in October with a hyperscale data center customer. Sales grew 127.5% from a year earlier in fiscal Q3 2026.

For the burn to shrink, AOI has to bring in cash from its business closer to what it spends on capacity. The cash AOI burns each quarter, $361 million in fiscal Q3 2026, is the figure to watch when it reports in February 2027.

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