What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of Applied Optoelectronics (AAOI) revenue becomes net income?

For TTM through Q1 2026, Applied Optoelectronics turned $507M of revenue into -$43.3M of net income — a net margin of -8.5%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are Applied Optoelectronics (AAOI) gross, operating, and net margins?

For TTM through Q1 2026, Applied Optoelectronics reported a gross margin of 29.6%, an operating margin of -11.6%, and a net margin of -8.5%. Each subtotal in the waterfall corresponds to one of these margins.

Why does Applied Optoelectronics (AAOI) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

Applied Optoelectronics (AAOI) Income Statement Waterfall

Revenue

$507M

Gross Margin

+29.6%

Operating Margin

-11.6%

Net Margin

-8.5%

Income statement waterfall for Applied Optoelectronics (AAOI) — TTM through Q1 2026

Net income: -$43.3M

Margin breakdown for Applied Optoelectronics (AAOI) — TTM through Q1 2026

Line item	Amount	Running total
Revenue	$507M	$507M
Cost of Revenue	-$357M	$150M
Gross Profit	$150M	$150M
Operating Expenses	-$209M	-$58.7M
Operating Income	-$58.7M	-$58.7M
Other Income / Expense	$7.89M	-$50.8M
Pre-tax Income	-$50.8M	-$50.8M
Tax Benefit	$7.43M	-$43.3M
Net Loss	-$43.3M	-$43.3M

Revenue$507M
Cost of Revenue-$357M
Gross Profit$150M
Operating Expenses-$209M
Operating Income-$58.7M
Other Income / Expense$7.89M
Pre-tax Income-$50.8M
Tax Benefit$7.43M
Net Loss-$43.3M

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