ASIC servers increase demand for optical modules, Goldman Sachs raises Eoptolink's target price by 11%

Author: Bao Yilong

Source: Hard AI

Despite a quarter-on-quarter decline in revenue for Eoptolink in the third quarter of 2025 due to delays in orders from a single customer, Goldman Sachs views this as a temporary "interlude." The real investment value and market expectation gap lie in 2026 and beyond.

On December 4th, Goldman Sachs' research team reported that the decline in Eoptolink's third-quarter performance was due to delays in the delivery of 400G/800G products from a single customer, which is not an industry-wide or systemic risk.

The report emphasizes that Eoptolink's management has strong confidence in a recovery in growth, expecting momentum to resume starting in the fourth quarter of 2025, with robust year-on-year/quarter-on-quarter growth in 2026. Therefore, Goldman Sachs believes that the third-quarter performance should not be over-interpreted.

Additionally, the report points out that the core engine driving Eoptolink's growth is switching, with future incremental demand coming from the accelerated release of 1.6T optical modules and ASIC AI servers.

Growth Engine Switch, 2026 is the "Main Uptrend"

The core argument of the report focuses on the future growth drivers of Eoptolink, which are mainly composed of four pillars:

First, the 1.6T products are entering an accelerated track. Goldman Sachs notes that Eoptolink's 1.6T optical modules began initial volume production in the second half of 2025. As generative AI places higher demands on network bandwidth, Goldman Sachs expects that shipments of 800G and 1.6T optical modules will see accelerated growth in 2026.

Data forecasts indicate that the company's revenue from 800G optical modules will grow by 53% year-on-year in 2026, while the higher-speed 1.6T products will achieve an astonishing 141% year-on-year growth in 2027.

Second, ASIC AI servers bring new demand.

Goldman Sachs emphasizes that recent chips are diversifying towards ASIC. This architecture requires high-speed multi-chip connections, directly driving the demand for high-speed optical modules.

Global cloud service providers' (CSPs) ASIC AI servers are expected to begin volume production in the second half of 2026, opening up new market space for Eoptolink's high-speed product line.

Third, self-developed silicon photonics technology enhances profit margins. The report points out that besides revenue growth, margin improvement is also key. Eoptolink has an internal silicon photonics (SiPh) technology team dedicated to developing higher-margin SiPh products.

Data shows that the company's overall gross margin is expected to steadily increase from 44.7% in 2024 to 53.0% in 2026, with product structure optimization continuing to improve profitability.

Finally, capacity expansion ensures delivery. Goldman Sachs believes that the capacity expansion of the Thailand factory will provide solid support to meet the future surge in order demand.

Goldman Sachs Raises Earnings Forecast, Optimistic About High Growth in the Next Two Years

Based on optimistic judgments about the future, Goldman Sachs has adjusted its earnings forecast for Eoptolink. Although considering the third-quarter performance, it has lowered the revenue forecast for 2025 by 6% and the net profit forecast by 6% to RMB 9.478 billion. However, more importantly, is the outlook for the future. The report will:

• Raise the 2026 revenue forecast by 10% to 42.368 billion yuan, and raise the net profit forecast by 12% to 18.494 billion yuan.
• Raise the 2027 revenue forecast by 11% to 54.390 billion yuan, and raise the net profit forecast by 11% to 24.095 billion yuan.

This means that Eoptolink's revenue will achieve year-on-year growth of 61% and 29% in 2026 and 2027, respectively.

Goldman Sachs maintains a 27 times expected price-to-earnings ratio for 2026, raising the 12-month target price from 450 yuan to 502 yuan. The report specifically points out that the 27 times valuation multiple is basically consistent with the company's average forward price-to-earnings ratio of 29 times since 2018, which is reasonable.

Finally, the report highlights three major potential risks that investors need to be aware of:

1. 800G volume not meeting expectations: If the scaling application speed of 800G products is slower than market expectations, it will affect short-term growth.
2. Geopolitical risks: Any geopolitical issues that may impact the global supply chain of optical modules could affect the company's operations.
3. Intensified market competition: Unexpectedly fierce competition may lead to product price wars and a decline in the company's profit margins