Applied Optoelectronics (AAOI) stock experienced a sharp 7.38% decline in Friday's trading session, despite reporting better-than-expected first-quarter results for 2025. The significant drop reflects ongoing investor concerns about the company's path to profitability and follows a pre-market plunge of 5.69% and an after-hours drop of 7.32% on Thursday.

The company announced Q1 revenue of $99.9 million, marking a substantial 145.52% year-over-year increase and slightly beating analyst estimates. Applied Optoelectronics also reported an adjusted earnings per share (EPS) of $(0.02), surpassing expectations and improving from a $(0.31) loss in the same quarter last year. However, these positive figures were overshadowed by a persistent negative net income of $9.2 million for the quarter, fueling investor skepticism about the company's ability to achieve sustainable profitability.

Adding to the downward pressure, Raymond James analyst Simon Leopold lowered the firm's price target on Applied Optoelectronics to $18 from $20, while maintaining an Outperform rating. This price target cut, combined with the company's Q2 outlook projecting revenue between $100 million and $110 million and adjusted EPS between $(0.09) and $(0.03), likely contributed to the negative sentiment surrounding the stock. As trading unfolds, investors continue to reassess Applied Optoelectronics' long-term prospects in light of these mixed signals.