Set up your dredging station. In one bowl, whisk together the flour, salt, and pepper. In another bowl, whisk together the coconut and panko. In a third bowl, whisk together the eggs and water.
Prep. Preheat the air fryer to 375°F and grease the basket with non-stick cooking spray (I like using coconut cooking spray for this recipe). Line a baking sheet with parchment paper.
Bread the shrimp. One handful at a time, coat the shrimp in the flour mixture and then dip it in the egg mixture. Finally, coat the shrimp in the coconut mixture. Arrange the breaded shrimp in a single layer on the prepared baking sheet. Repeat with the remaining shrimp.
Air fry. Arrange the shrimp in a single layer in the basket of the preheated air fryer. Be careful not to crowd the basket. If you need to fry in batches, do so. Air fry for 5 minutes, flip, and air fry for another 5 minutes.
Serve. Serve hot with sweet chili sauce.
Notes
Make sure that the breaded shrimp is placed in an even single layer, making sure that none of the large shrimp overlap. This will make sure the shrimp cooks evenly.