This paper presents theoretical evaluation of the digital modulation performance of semiconductor lasers in digital communication systems with gigabit rates. The study is based on numerical integration of the rate equations augmented by a nonreturn-to-zero ͑NRZ͒ bit generator. For solitary semiconductor lasers, the performance is evaluated in terms of the eye diagram, turn-on delay jitter ͑TOJ͒, and signal-to-noise ratio. In communication systems, the performance is evaluated by the bit error rate ͑BER͒ and power penalty induced by the laser noise. Contributions of both the intrinsic fluctuations and bit pattern to the TOJ and BER are assessed. The results show that when the modulation current is low and the semiconductor laser is biased relatively above threshold, the power penalty decreases although the eye diagram is not well open. When the modulation current is high enough, biasing the semiconductor laser far-above threshold achieves both lower power penalty and higher eye-diagram quality.