When your smartphone's internet speed becomes fast enough to stream 8K videos seamlessly, or when your AI assistant generates photorealistic images in seconds, you're witnessing the transformative power of optical communication technology. The sector's profitability has reached such heights that fiber optic companies are now jokingly compared to premium liquor brands in their financial performance. This remarkable growth signals an unprecedented hardware investment boom, fueled by the insatiable demand for AI computing power.
In early 2026, China's A-share optical communication sector witnessed an earnings spectacle. Three industry leaders—Zhongji Innolight, Eoptolink, and TFC Optical Communication—delivered staggering earnings forecasts that officially marked the arrival of the optical module industry's supercycle. Market observers have dubbed these companies the "Inno-E-TFC" trio, representing both the sector's collective prosperity and their distinct approaches to survival and growth.
Computing Power Surge: Optical Communication Enters Era of "Tight Balance"
The fundamental driver behind the Inno-E-TFC trio's explosive performance lies in the relentless global demand for AI computing power, showing no signs of slowing down. Capital expenditures from cloud giants like Microsoft, Meta, Google, and Amazon serve as key indicators of this cycle's intensity. Projections indicate that the top five tech companies' combined capital expenditures will exceed $370 billion in 2025, potentially surpassing $470 billion in 2026. Unlike previous investment cycles focused solely on servers, this wave encompasses comprehensive expansion across computing power, networks, and storage systems—an unprecedented scale of infrastructure buildout.
This massive investment has created extraordinary demand for upstream hardware components. According to LightCounting, demand for optical modules currently exceeds supply by more than twofold, creating a severe market imbalance. High-speed optical modules play a particularly critical role in AI data centers, handling essential data transmission both within facilities and between clusters. Industry analysts predict a 35% year-over-year growth in the global Ethernet optical module market for 2026, reaching $18.9 billion, with AI cluster applications serving as the primary growth driver.
The demand surge has even reached foundational fiber optic components. In January 2026, prices for G.652.D single-mode fiber jumped over 75% monthly, hitting a seven-year high, while G.657.A1 fiber specifically designed for AI data centers also saw significant price increases—clear evidence of unprecedented infrastructure expansion.
Against this backdrop, the Inno-E-TFC trio delivered performance metrics that define the current industry cycle:
- Zhongji Innolight: Projected 2025 net profits between 9.8 and 11.8 billion yuan, representing 89.5% to 228.17% year-over-year growth. The company's 800G products continue to scale, with 1.6T products rapidly ramping production in Q4—orders are already booked through Q3 2026. Notably, increasing adoption of silicon photonics solutions has improved gross margins.
- Eoptolink: Anticipated net profits of 9.4 to 9.9 billion yuan, marking 231.24% to 248.86% annual growth. This explosive performance stems from expanded computing investments and surging demand for high-speed products.
- TFC Optical Communication: Expected net profits of 1.881 to 2.15 billion yuan, growing 40% to 60% year-over-year. As an upstream optical component supplier, TFC benefits from rigid demand created by optical module manufacturers' capacity expansions, particularly in high-value products like 1.6T optical engines.
While all three companies share the growth trajectory, their positions in the value chain and strategic paths reveal significant differences.
Three Survival Strategies: Differentiation and Future Positioning
Beyond the sector-wide boom, the true distinctions between companies emerge in their technological moats, customer structures, and supply chain control. Eoptolink's growth rate approaches—and in some areas surpasses—Zhongji Innolight's, while TFC maintains steadier progress, reflecting three distinct development models.
Zhongji Innolight: The Platform Champion's Systemic Leap
Zhongji Innolight's greatest strengths lie in its comprehensive product coverage, mass production capabilities, and deep partnerships with top cloud providers. These advantages have maintained its position as global optical module market leader for consecutive years, granting superior pricing power and production allocation priority during supply shortages. The company maintains parallel development across multiple technological pathways—pluggable modules, silicon photonics, CPO/LPO—demonstrating both technical prowess and foresight.
By Q4 2025, silicon photonics accounted for increasing proportions of 800G shipments, with even higher penetration in 1.6T products, improving cost structures and gross margins. More significantly, Zhongji has evolved beyond being a mere module supplier, actively transforming into a systems solution provider. The company has launched 1.6T products based on 3nm technology and expanded into "Scale-up" optical connectivity, collaborating with key clients to develop customized cabinet interconnection solutions expected to achieve scale by 2027. This strategic shift elevates Zhongji's competition from individual modules to complete optical interconnection systems, aiming for leadership in data center optical connectivity.
Eoptolink: High-Client-Driven Hypergrowth
Eoptolink's growth heavily depends on orders from premium clients, with market consensus attributing its performance leap to entering Nvidia's GB200/NVL72 AI system supply chain. While this model delivers explosive growth during market peaks, it demands exceptional technical responsiveness, precise delivery capabilities, and supply chain management. To address diverse market needs, Eoptolink claims readiness for mass production across its full product spectrum from 100G to 1.6T, supported by flexible production lines accommodating nearly 3,000 product variations.
However, overreliance on major clients carries inherent risks. Any fluctuation in primary customer orders could significantly impact Eoptolink's performance. The company must balance maintaining close partnerships with existing clients while actively developing new markets to achieve more diversified growth.
TFC Optical Communication: The Steady Path of an Upstream Enabler
Unlike its counterparts, TFC operates upstream in the value chain, specializing in optical engines and passive components—essentially serving as the optical module industry's "pick-and-shovel" provider. This positioning ensures more stable growth, as demand for high-end optical components remains rigid whenever high-speed modules scale production. TFC's performance directly benefits from capacity expansions by clients like Zhongji and Eoptolink.
TFC's core competitiveness lies in precision manufacturing and materials technology. For instance, its 1.6T optical engines achieve industry-leading yields while supplying critical components for next-generation CPO solutions. Although Q4 2025 brought short-term pressure from currency fluctuations, TFC's facilities in Jiangxi's Gao'an and Thailand provide ample capacity for global orders. Long-term, TFC's strategy centers on "positioning correctness"—focusing on perpetually valuable segments of the value chain while continuously enhancing technical and manufacturing capabilities.
Hidden Challenges Behind the Celebration
Despite the sector's remarkable performance, several constraints demand attention:
- Supply Chain Bottlenecks: Shortages of high-end optical chips like EML and CW have already disrupted some manufacturers' delivery schedules. Zhongji's management acknowledges these constraints may persist through late 2026, making supply chain stability crucial for performance.
- Technology Evolution Pressure: While 1.6T modules begin volume production, 3.2T product development has already commenced. Pluggable modules remain dominant, but CPO and LPO technologies continue pushing performance boundaries, driving next-gen optical architecture evolution. Sustained heavy R&D investment becomes prerequisite for competitive survival.
- Annual Price Reduction: Electronics industries inevitably face price declines. The optical module sector is no exception. Companies must innovate technologically, optimize processes, and integrate supply chains to offset pricing pressures and maintain profitability—a universal long-term challenge.
Globally, Chinese optical module manufacturers are transitioning from "cost-performance" competition to comprehensive contests of "technology + delivery capability." This cycle effectively serves as an industry-wide filtration process that will ultimately reshape the global optical communication landscape. The ultimate winners in this high-stakes transformation remain to be seen.