ASIC servers boost demand for optical modules, Goldman Sachs raises target price for Eoptolink by 11%.
```
Author of this article: Bao Yilong
Source: Hard AI
Although Innolight experienced a quarter-on-quarter revenue decline in Q3 2025 due to an order delay from a single client, Goldman Sachs views this as a short-term "interlude". The true investment value and market expectations lie hidden in 2026 and beyond.
On December 4, the Goldman Sachs research team reported that the reason for Innolight’s Q3 performance drop was a delay in delivery of 400G/800G products for a single client, which is not an industry-wide or systemic risk.
The report emphasizes that Innolight’s management is strongly confident in growth recovery, expecting momentum to resume from Q4 2025 and strong year-on-year/quart-on-quarter growth in 2026. Goldman Sachs believes that Q3 performance should not be overinterpreted.
In addition, the report points out that the core driver of Innolight’s growth is shifting, and in the future, accelerated volume of 1.6T optical modules and incremental demand from ASIC AI servers will jointly drive this growth.
Growth Engine Shift; 2026 is the "Main Upward Wave"
The core argument of the report focuses on Innolight’s future growth momentum, which is built on four pillars:
First, the 1.6T product is entering the acceleration track. Goldman Sachs points out that Innolight's 1.6T optical modules began initial volume shipments in the second half of 2025. With generative AI demanding greater network bandwidth, Goldman Sachs forecasts an accelerated ramp-up in shipments of 800G and 1.6T optical modules in 2026.
According to forecasts, the company's 800G optical module revenue will grow by 53% year-on-year in 2026, while the even faster 1.6T products will achieve an impressive 141% year-on-year growth in 2027.
Second, ASIC AI servers bring brand new demand.
Goldman Sachs emphasizes that chips are currently diversifying towards ASICs. This architecture requires high-speed multi-chip connections, which directly fuels the demand for high-speed optical modules.
Global cloud service providers (CSPs) are expected to begin volume deployments of ASIC AI servers in the second half of 2026, opening up new market space for Innolight’s high-speed product line.
Third, self-developed silicon photonics technology boosts profit margins. The report notes that besides top-line growth, margin improvement is also key. Innolight has an in-house silicon photonics (SiPh) technical team dedicated to developing higher-margin SiPh products.
According to the data, the company's overall gross margin is expected to steadily rise from 44.7% in 2024 to 53.0% in 2026. Product structure optimization will continuously enhance profitability.
Lastly, capacity expansion guarantees delivery. Goldman Sachs believes that the expansion of capacity at its Thailand factory will provide strong support for meeting surging future orders.
Goldman Sachs Upgrades Profit Forecasts, Optimistic About High Growth in the Next Two Years
Based on its optimistic outlook, Goldman Sachs has adjusted its profit forecasts for Innolight. While considering Q3 performance, 2025 income forecast was lowered by 6%, and net profit forecast was reduced by 6% to 9.478 billion yuan.
However, the outlook for the future is more crucial. The report raises:
2026 income forecast by 10% to 42.368 billion yuan, and net profit forecast by 12% to 18.494 billion yuan.2027 income forecast by 11% to 54.390 billion yuan, and net profit forecast by 11% to 24.095 billion yuan.
This means that Innolight’s revenue in 2026 and 2027 will achieve year-on-year growth of 61% and 29% respectively.
Goldman Sachs maintains a 27x projected P/E ratio for 2026 and increases the 12-month target price from 450 yuan to 502 yuan. The report especially notes that a 27x valuation multiple is basically consistent with the company's 29x average forward P/E ratio since 2018, which is reasonable.
Finally, the report outlines three potential risks investors should watch:
800G ramp-up below expectations: If mass adoption of 800G products is slower than market expectations, short-term growth will be affected.Geopolitical risk: Any geopolitical issue that impacts the global supply chain for optical modules could affect the company’s operations.Intensified market competition: Fiercer-than-expected competition may lead to price wars and margin pressure for the company.
This article is from WeChat Official Account “Hard AI”. For more cutting-edge AI news, please visit here
Risk Warning and DisclaimerThe market involves risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their specific circumstances. Investing accordingly is at your own risk. ```