Ramping 800G and 1.6T optical modules drove second-quarter revenue above expectations; Goldman Sachs raises earnings forecasts and target price

Overview

The report reviews Eoptolink's 2Q26 results and analyzes AI infrastructure demand, the ramp-up of 800G and 1.6T optical modules, supply and capacity expansion, and valuation changes. Goldman Sachs believes the company's revenue performance exceeded expectations and that its product mix will continue shifting toward higher-speed products. It therefore raises its 2026–2028 earnings forecasts and 12-month target price while reiterating its Buy rating.

Core views

The key highlight of the 2Q26 results was better-than-expected revenue. The company generated revenue of RMB12.6bn, up 97% YoY and 51% QoQ, exceeding Goldman Sachs' forecast and Bloomberg consensus by 11% and 6%, respectively. Net profit reached RMB4.8bn, up 101% YoY and 71% QoQ, within the company's guidance range of RMB4.2bn to RMB6.2bn. Goldman Sachs attributes the revenue acceleration to three factors: strong customer demand driven by AI infrastructure expansion, improved chip supply compared with 1Q26, and an accelerating ramp-up of silicon photonics products that has begun supporting deliveries of 1.6T optical modules. The report believes that supply preparedness and capacity expansion have laid the foundation for further volume growth in 2H26E. At the end of 2Q26, the company's inventory rose to RMB11.7bn, compared with RMB9.0bn at the end of 1Q26 and RMB7.2bn at the end of 4Q25. Prepayments increased to RMB869mn, compared with RMB682mn and RMB17mn at the end of 1Q26 and 4Q25, respectively. Goldman Sachs views these changes as inventory buildup and supply assurance measures taken by the company in preparation for a shipment ramp-up in the second half. The company is also continuing to expand optical-module capacity in China and Thailand. It has both EML solutions—including single-channel 100G and 200G—and silicon photonics solutions, which should help secure production of 800G, 1.6T, and higher-speed optical modules. Regarding products and the growth trajectory, Goldman Sachs remains optimistic about the revenue-mix improvement resulting from the company's shift toward higher-speed products. In addition to 800G and 1.6T optical modules, the company is collaborating with customers to develop NPO and Scale-up solutions to capture incremental opportunities. The report's thesis is that AI infrastructure demand, improved chip supply, ramping silicon photonics products, and new capacity will jointly drive shipments of higher-speed products, whose increasing share will become an important source of future growth. After incorporating the 2Q26 results, Goldman Sachs raised its 2026, 2027, and 2028 earnings forecasts by 4%, 7%, and 8%, respectively, mainly due to higher revenue forecasts associated with shipments of 800G and 1.6T optical modules, supported by capacity expansion and improving supply. The earnings forecast revisions do not stem from higher margin assumptions, as the report broadly maintains its gross-margin and operating-expense-ratio assumptions. On valuation, Goldman Sachs continues to use a forward P/E methodology based on 2027E earnings. The target P/E was lowered from 29.3x to 27.8x. This multiple was determined based on the relationship between peers' trading P/E multiples and their one-year-forward YoY net-income growth and operating margins, together with Eoptolink's average net-income growth and average operating margin in 2027–2028E. Despite the lower target multiple, the higher earnings forecasts still drove the 12-month target price up from RMB633 to RMB639. The main body of the report states that 27.8x is consistent with the company's historical average forward P/E of approximately 28x since September 2018, while the summary page describes the historical average as approximately 29x since 2018. Goldman Sachs therefore reiterates its Buy rating.

Analysis framework

Goldman Sachs first compares 2Q26 revenue and net profit on a YoY and QoQ basis and against company guidance, its own forecasts, and market consensus. It then explains the sources of the upside through AI infrastructure demand, chip supply, and the ramp-up of silicon photonics products. Next, it assesses shipment support for the second half based on inventory, prepayments, and capacity expansion in China and Thailand, and accordingly raises its 800G and 1.6T revenue and earnings forecasts. Finally, it applies a P/E valuation based on 2027E earnings, referencing the relationship between peer valuations and forward net-income growth and operating margins, while cross-checking the target multiple against the company's historical forward P/E.

Methodology notes

• Valuation MethodP/E and PEG Valuation

  Forward P/E valuation based on 2027E

  The report derives the 12-month target price by applying a target P/E multiple of 27.8x to forecast 2027 earnings. The target multiple references both peer valuations relative to forward fundamentals and the company's own historical forward P/E.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  High-speed optical-module shipments and product-mix analysis

  The report mainly attributes its earnings forecast upgrades to increased revenue associated with shipments of 800G and 1.6T optical modules, while broadly maintaining its gross-margin and expense-ratio assumptions to distinguish the contribution from revenue-scale changes from that of margin changes.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Combined assessment of demand, supply, and capacity

  The report uses AI infrastructure customer demand as the basis for its demand-side assessment and evaluates whether the company can meet shipment growth in 2H26E based on improved chip supply, higher inventory and prepayments, and capacity expansion in China and Thailand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Eoptolink (300502.SZ)

  The report views AI infrastructure expansion, ramping shipments of 800G and 1.6T optical modules, and improving supply as the primary drivers of the company's revenue and earnings growth.

  Strengths

  Rapid 2Q26 revenue and net-profit growth; revenue exceeded both Goldman Sachs' forecast and market consensus; capabilities in both EML and silicon photonics solutions; capacity expansion in China and Thailand; and progress on NPO and Scale-up solutions.

  Weaknesses

  The growth trajectory depends on high-speed optical modules ramping as planned, a stable optical-transceiver supply chain, and no significant deterioration in the competitive environment.

  Comparison

  2Q26 revenue was 11% above Goldman Sachs' forecast and 6% above Bloomberg consensus. The target multiple references the relationship between peer trading P/E multiples and forward net-income growth and operating margins and is close to the company's historical forward P/E.

  Risks

  A slower-than-expected 800G ramp-up, geopolitical disruptions to the optical-transceiver supply chain, and intensifying competition leading to price erosion and lower margins.

Key data

• 2Q26 RevenueRMB12.6bnUp 97% YoY and 51% QoQ; 11% above Goldman Sachs' forecast and 6% above Bloomberg consensus
• 2Q26 Net ProfitRMB4.8bnUp 101% YoY and 71% QoQ; within the company's guidance range of RMB4.2bn to RMB6.2bn
• Inventory at End-2Q26RMB11.7bnRMB9.0bn at the end of 1Q26 and RMB7.2bn at the end of 4Q25
• Prepayments at End-2Q26RMB869mnRMB682mn at the end of 1Q26 and RMB17mn at the end of 4Q25
• 2026–2028 Earnings Forecast RevisionsRaised by 4%, 7%, and 8%, respectivelyPrimarily reflects higher revenue forecasts for 800G and 1.6T optical modules, with gross-margin and operating-expense-ratio assumptions broadly unchanged
• 2027E Target P/E27.8xPreviously 29.3x; the report states that it is consistent with the company's historical average forward P/E of approximately 28x since September 2018
• 12-Month Target PriceRMB639.0Previously RMB633

Impact & implications

The report believes that better-than-expected second-quarter revenue validates the trends of strong AI infrastructure demand and ramping high-speed optical modules, while improved chip supply, increased inventory buildup, and capacity expansion in China and Thailand enhance the feasibility of a continued ramp-up in 2H26E. Because Goldman Sachs made essentially no changes to its gross-margin and expense-ratio assumptions, the earnings forecast upgrades mainly depend on higher 800G and 1.6T shipments and revenue. Higher earnings offset the impact of the lower target P/E and drove a modest increase in the target price.

Risks

• The ramp-up of 800G optical modules may be slower than expected.
• Geopolitical issues may affect the optical-transceiver supply chain.
• Competition may be more intense than expected, leading to price erosion and lower margins.

What to watch

• Monitor whether inventory, prepayments, and new capacity translate into actual shipment growth in 2H26E.
• Monitor the ramp-up and delivery progress of 800G and 1.6T optical modules.
• Monitor the sustainability of improving chip supply and the volume ramp-up of silicon photonics products.
• Monitor customer collaboration and incremental opportunities for NPO and Scale-up solutions.
• Monitor changes in competition, product pricing, and margins.