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AFOP Reports 3rd Quarter 2007 Results with Record Quartery Revenues and Profits

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Contact: Anita Ho
Acting Chief Financial Officer
Alliance Fiber Optic Products, Inc.
Phone: 408-736-6900 x168



Sunnyvale, CA - October 25, 2007 - Alliance Fiber Optic Products, Inc. (NASDAQ CM: AFOP), an innovative supplier of fiber optic components, subsystems and integrated modules for the optical network equipment market, today reported its financial results for the third quarter ended September 30, 2007.

Revenues for the third quarter of 2007 totaled $9,170,000, a 21% increase from revenues of $7,573,000 recorded in the third quarter of 2006 and 5% increase compared with revenue of $8,701,000 for the second quarter of 2007. The Company recorded net income for the third quarter of 2007 of $1,065,000, or $0.03 per share, significantly improved over $358,000, or $0.01 per share, for the third quarter of 2006. This compares to net income for the second quarter of 2007 of $864,000, or $0.02 per share.

Included in net income for the quarter ended September 30, 2007 was $91,000 of stock-based compensation charges under FAS 123(R). Included in expenses for the quarter ended September 30, 2006 and the second quarter of 2007 were $83,000 and $103,000 of stock-based compensation charges under SFAS 123(R), respectively.

Peter Chang, President and Chief Executive Officer, commented, "We are very pleased with the financial performance and progress AFOP made in the quarter ending September 30, 2007. With continued sequential quarterly revenue growth, we delivered record quarterly sales and generated record quarterly profits in the quarter. Both improved considerably compared with the year ago quarter."

"During the quarter, our profit margin improved to 12%, while gross margin remained above 31%. Our balance sheet grew healthier, with 14% lower inventory and higher cash and cash equivalents, which increased by over $2 million in the third quarter of 2007 to over $34 million."

"Looking forward, we are encouraged about market demand, especially in the FTTX sector. As fiscal year 2007 concludes, we expect to deliver a record year for AFOP in both sales and profits. Our annual earnings per share is expected to improve significantly, exceeding the guidance of $0.08 given previously," concluded Mr. Chang.

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About AFOP
Founded in 1995, Alliance Fiber Optic Products, Inc. designs, manufactures and markets a broad range of high performance fiber optic components and integrated modules. AFOP's products are used by leading and emerging communications equipment manufacturers to deliver optical networking systems to the long-haul, enterprise, metropolitan and last mile access segments of the communications network. AFOP offers a broad product line of passive optical components including interconnect systems, couplers and splitters, thin film CWDM & DWDM components and modules, optical attenuators, and micro-optics devices. AFOP is headquartered in Sunnyvale, California, with manufacturing and product development capabilities in the United States, Taiwan and China. AFOP's website is located at

Except for the historical information contained herein, the matters set forth in this press release, including statements as to future market demand, including demand in the FTTX sector, future sales growth and profitability, and our expectations regarding year end 2007 results, including our expectations regarding 2007 earnings per share, are forward looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including, but not limited to, general economic conditions and trends, the impact of competitive products and pricing, timely introduction of new technologies, timely design acceptance by our customers, the acceptance of new products and technologies by our customers, order trends and customer demand, the timing of customer orders, loss of key customers, ability to ramp new products into volume production, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity, failure of cost control initiatives, financial stability in foreign markets, and other risks detailed from time to time in our SEC reports, including AFOP's quarterly report on Form 10-Q for the quarter ended June 30, 2007. These forward-looking statements speak only as of the date hereof. AFOP disclaims any intention or obligation to update or revise any forward-looking statements