• Revenue: $113.1 million, up 47% from the previous quarter and 206% year-over-year.
• Non-GAAP Operating Margin: 32.4%, up from 24.4% in Q2.
• Non-GAAP EPS: $0.23.
• Non-GAAP Gross Margin: 77.8%, slightly down from 78% in Q2.
• Non-GAAP Operating Expenses: $51.2 million, with R&D at $36 million, Sales and Marketing at $7 million, and General and Administrative at $8.3 million.
• Cash Flow from Operating Activities: $63.5 million.
• Cash and Marketable Securities: $887 million.
• Q4 Revenue Guidance: $126 million to $130 million, up 11% to 15% sequentially.
• Q4 Non-GAAP Gross Margin Guidance: Approximately 75%.
• Q4 Non-GAAP EPS Guidance: $0.25 to $0.26.

• Warning! GuruFocus has detected 2 Warning Sign with ALAB.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Astera Labs Inc (NASDAQ:ALAB) reported a record quarterly revenue of $113 million, marking a 47% increase from the previous quarter and a 206% increase from the prior year.
• The company demonstrated strong operating leverage with a non-GAAP operating margin expanding to over 32% and delivered non-GAAP EPS of $0.23.
• Astera Labs Inc (NASDAQ:ALAB) has entered a new growth phase with multiple product families ramping across AI platforms, contributing to the Q3 sales upside.
• The introduction of the Scorpio Smart Fabric Switch family is expected to significantly expand the company's market opportunity to more than $12 billion by 2028.
• Astera Labs Inc (NASDAQ:ALAB) has joined the Ultra-Accelerator Link consortium, positioning itself at the forefront of developing high-speed, low-latency interconnects for AI infrastructure.

Negative Points

• The company faces risks and uncertainties related to forward-looking statements, which could cause actual results to differ materially from expectations.
• Non-GAAP operating expenses increased to $51.2 million, up from $41.1 million in the previous quarter, driven by higher hiring and commercial opportunities.
• The expected product mix shift towards hardware solutions in Q4 is anticipated to result in a sequential decline in non-GAAP gross margins to approximately 75%.
• Astera Labs Inc (NASDAQ:ALAB) is experiencing a wider range of margin profiles across its product portfolio, making quarterly mix an important factor.
• The ramp-up of new technologies like CXL and the Scorpio product line involves longer qualification cycles, which could delay revenue realization.

Q & A Highlights

Q: Can you discuss your confidence in driving sequential growth over the next several quarters, particularly in the first half of next year? A: Michael Tate, CFO: Our visibility is strong due to our backlog position and the breadth of designs we have. We're entering a new growth phase with diversified revenue streams. Taurus has been incremental, and we expect it to continue growing into 2025. The Gen 5 story still has legs, and Gen 6 will start to play out, providing an ASP boost. We also have line of sight to our first production shipments of Leo starting mid-next year.

Q: How much of a differentiator is your Cosmos software stack for the Scorpio Switch portfolio? A: Jitendra Mohan, CEO: The Cosmos software stack is a significant differentiator. Our chips are architected with a software-first approach, allowing for customization based on Cosmos. This provides a holistic view of AI infrastructure, which is crucial for data center operators. The software's familiarity and integration with our products enhance its value.

Q: Can you provide a sense of the Scorpio business ramp and its potential size in 2025? A: Michael Tate, CFO: We're seeing a lot of interest in Scorpio, especially being first with Gen 6. We expect Scorpio to exceed 10% of our revenues in 2025 as deployments get into production. The P-Series designs will generally be first, but we also see X-Series starting in the back half of the year.

Q: Could you discuss the potential of the X-Series for Scorpio compared to the P-Series? A: Jitendra Mohan, CEO: The X-Series is used for GPU-to-GPU interconnect and is a greenfield opportunity. We expect the X-Series to have a larger TAM over time. Our software-defined architecture allows us to customize the X-Series for specific hyper-scaler requirements, making it a significant opportunity.

Q: How do you view the competitive landscape for your Cosmos software and its impact on your market position? A: Jitendra Mohan, CEO: Cosmos is highly differentiated due to our extensive experience and the integration of diagnostics and network congestion insights. Our software-centric chip architecture allows for unique customization and optimization, providing a competitive edge.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.