AFOP REPORTS THIRD QUARTER, 2014 FINANCIAL RESULTS
WITH SEQUENTIAL GROWTH GUIDANCE

Sunnyvale, CA – October 29, 2014 - Alliance Fiber Optic Products, Inc. (Nasdaq GM: 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, 2014.

Revenues for the third quarter of 2014 were $18,096,000, a 22% decrease from revenues of $23,074,000 reported in the third quarter of 2013, and a 25% decrease from revenues of $24,199,000 reported in the second quarter of 2014.

Net income for the quarter ended September 30, 2014, was $4,303,000, or $0.23 per share, compared to net income of $5,621,000, or $0.31 per share, for the third quarter of 2013, and net income of $3,782,000, or $0.20 per share, for the second quarter of 2014. Included in net income for the third and second quarter of 2014 are income tax benefit and provision adjustments of $168,000 and $2,134,000 respectively, as a result of deferred income tax benefit and expenses based on utilization of net operating loss. Excluding these tax benefit and provision adjustments, net income in the third quarter of 2014 of $4,135,000, or $0.22 per share, compared to net income in the second quarter of 2014 of $5,916,000, or $0.32 per share.

Gross margin for the quarter ended September 30, 2014 was 39.5%, compared to 38.4% in the year ago quarter and 40.1% in the second quarter of 2014. Operating margin for the quarter ended September 30, 2014 was 22.9%, compared to 24.5% in the year ago quarter and 27.1% in the second quarter of 2014.

Non-GAAP net income for the quarter ended September 30, 2014 decreased to $4,571,000, or $0.25 per share, compared to non-GAAP net income of $6,184,000, or $0.34 per share, for the third quarter of 2013, and non-GAAP net income of $6,446,000, or $0.35 per share, for the second quarter of 2014.

Non-GAAP gross margin for the quarter ended September 30, 2014 was 39.9%, compared to 38.9% in the year ago quarter and 40.5% in the second quarter of 2014. Non-GAAP operating margin for the quarter ended September 30, 2014 was 25.3%, compared to 27.0% in the year ago quarter and 29.3% in the second quarter of 2014.

Peter Chang, President and Chief Executive Officer, commented, “During the third quarter, we experienced weakness in normal sales levels across several leading customers without any noted market share loss. Our understanding is that this reflects a weakening in general market conditions, as some companies in the optical network market segment have also reported recently. We adjusted to this shortfall well and continued to deliver strong financial performance within our industry peer group, with stable gross margins, well controlled inventory levels, and an improved balance sheet. Most importantly, we made good progress meeting our customers’ needs, extending our product technology and improving our operations.”

“Regarding forward guidance, we expect revenues in the fourth quarter of 2014 to be in the range of $19 million to $20 million. With this level of quarterly revenue, we will end the year of 2014 with another record annual profit and record annual sales as well. Data bandwidth demands continue to increase and the conversion from copper technology to fiber technology in data center applications is accelerating. We are encouraged by growing demands for our products and the prospect of continuing to deliver record annual sales and profits in the coming years.” concluded Mr. Chang.

Conference Call
Management will host a conference call at 1:30 p.m. PT on October, 29, 2014 to discuss AFOP’s third quarter 2014 financial results as well as the outlook for the fourth quarter of 2014. Please call 877-675-3572 at least ten minutes prior to the call in order for the operator to connect you. The confirmation number for the call is 21291552. AFOP will also provide a live webcast of its third quarter 2014 conference call at AFOP’s website: www.afop.com. The webcast replay will be available on AFOP’s website 90 minutes after the live conference call.

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 and 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 http://www.afop.com.

Except for the historical information contained herein, the matters set forth in this press release, including statements as to our expectations regarding future revenue levels, profits, margins, and sales and the time periods thereof our beliefs regarding demand for data communications and the acceleration of conversion to fiber technology, growth in the fiber optics industry, the reasons for decreases in customer orders, and our expectation regarding future demand for our products 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, trends in demand for bandwidth, the rate of conversion from copper to fiber technology, 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, customer demand for our products, the timing of customer orders, loss of key customers, our ability to ramp new products into volume production, the mix of products sold and product pricing, the costs associated with running our operations, industry-wide shifts in supply and demand for optical components and modules, industry overcapacity and demand for bandwidth, the success of cost control initiatives, our ability to obtain and maintain operational efficiencies, 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, 2014. 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.

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