Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Harlan Sur - JP Morgan - Analyst : So I've asked the team to maybe kick us off with a brief overview of the March quarter results, June quarter outlook, and then we'll go ahead and kick off the Q&A. So gentlemen, thank you for joining us this afternoon.

Question: Harlan Sur - JP Morgan - Analyst : Great. Perfect. Let's start off at a high level sort of big picture. It's great to look back over the past year post the team coming to the public markets in March of 2024. So if we use this year as a proxy for the team's performance, right, you're currently targeted to drive about $700 million in revenues this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference A year ago, calendar '25 revenue estimates were $400 million, right? So you're tracking 70% better relative to 12 months ago. Earnings power this year, $1.35 per share versus a year ago where we were estimating calendar '25 of $0.50 per share, tracking 2.5x better relative to what we thought a year ago. So it looks like the team will be driving at or close to $1 billion a year before our expectations relative to what we had a year ago. So significant upside, significant outperformance, both revenues, earnings powers over this period of time, the team has brought a plethora of products to the market over the past year. And as we look forward, right, from calendar '24, we still anticipate the team driving a 35%, 40% revenue CAGR, 45%, 50% EPS CAGR. So Jitendra, what are the strong drivers you think for the team over the next kind of, call it, two to three years?

Question: Harlan Sur - JP Morgan - Analyst : Perfect. Let's talk about the overall environment, right? So -- on the overall AI and data center spending environment, there have been some concerns on the CapEx spending momentum potentially peaking this year, maybe some AI compute digestion, right? You've had some -- a lot of noise around efficiencies from model innovations like DeepSeek. We also saw more AI bands to China recently and then obviously, tariff and trade concerns, right? But on the flip side, strong ramp of your merchant GPU customers on the next-gen AI platform, strong new AI XPU ramps, new entrants into the ASIC XPU market, right, since -- and so since the beginning of this year, rewind to the beginning of this year, has anything changed meaningfully positive or negative on customer programs or the demand outlook for this year? And more importantly, your confidence level on continued strong growth into next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference

Question: Harlan Sur - JP Morgan - Analyst : A dynamic that has continued to unfold in AI compute infrastructure is the adoption of custom ASIC AI XPU accelerators, right? Google TPU, Amazon Trainium, Meta's MTIA, Microsoft's Maya program. Additionally, we've seen new ASIC programs even just over the past kind of six to nine months. OpenAI, SoftBank Arm are good examples of that. We estimate that from a unit XPU perspective, mix this year, ASIC XPUs to be 40%, 45% of the overall unit mix with 55%, 60% merchant GPU moving to 50% by calendar '27. Our view is that the move to custom ASIC implementations is actually a net positive for the Astera team, more reliance on standard-based protocols for their scale-up and scale-out connectivity and networking requirements, right? But I wanted to get the team's view on Astera's dollar content capture opportunity, merchant GPU versus sort of ASIC.

Question: Harlan Sur - JP Morgan - Analyst : And would you agree -- you guys, like I said, ship into 90% of all the big AI clusters out there. Are we kind of in the ballpark? This year, kind of 40%, 45% sort of AI ASIC XPU mix, kind of 50%, 55% share merchant GPU. Are we kind of in that ballpark?

Question: Harlan Sur - JP Morgan - Analyst : Before I start talking about some of the product dynamics, does anybody have any questions? If you do have a question, feel free to raise your hand, and we'll get a mic over to you. Any questions? Unidentified Participant Could you help us understand as inference becomes a bigger and bigger portion of this industry, how does that play into your business mix? And any elaboration on your last point? You mentioned that hyperscaler value more internal development. That would suggest that they're leaning more towards pushing ASICs higher and higher. How do you sort of view that world? Thank you.

Question: Harlan Sur - JP Morgan - Analyst : Let's turn to your, product, your product category. So on your flagship Aries, smart retimer, products, still the largest part of your revenue mix, we estimate about 65%-70% of your overall, revenues, all of it, up until recently has been an 5 PCIE retimers, 90% plus market share. Strong growth here in the first half primarily driven by continued adoption of merchant GPU as well as A6, right, first half of the year. You've qualified your next generation PCIE gen 63 [timers] starting to ramp this quarter to support the ramp up, like you said, some of the custom rack scale architectures of the number one GPU supplier in the market. Additionally, you have continued step up of new ASIC programs like Google's Next Generation TPU ramping in second half, still using Gen 5. How do you see the Gen 5 retimer mix versus Gen 6 exiting this year and in and through calendar 26 and you know what are the custom AI XPU platforms or when are the custom ASIC, platforms going to start to migrate to Gen 6?

Question: Harlan Sur - JP Morgan - Analyst : Perfect. And I said 90% share of the retirement market fast-growing markets will always attract competitors. And we've seen competitors introducing Gen 5. We've seen competitors introducing Gen 6 retimer solutions, right? Investors are concerned that customers do want diversification of suppliers. But I'm wondering, especially in AI compute where the cadence of new product introductions is so aggressive, right? And performance reliability is such a top priority, right? And I'm wondering if supplier diversification is actually not that high of a priority, right? But as long as the current REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference supplier has a strong track record of execution in delivering the right products at the right time. From my perspective, there's just too much risk to bring on new suppliers with -- especially with unproven software. You've got, like I said, 85%, 90% share Gen 5, given your design win visibility, does the team anticipate maintaining continued strong share into the Gen 6 adoption curve?

Question: Harlan Sur - JP Morgan - Analyst : Yeah. Speaking about the portfolio being a significant differentiator -- the team launched its Scorpio family of Fabric switches last year. It's a $5 billion market opportunity over the next few years, taking your total addressable market opportunity, I think, to about like something over $12 billion over the next few years. You've already had achieved design win success for both the P Series and X Series of Scorpio, which is expected to drive about 10% of revenues for 2025. Assuming the average ASP for these products is several hundred dollars I mean this would imply that the team is only going to ship like 250,000, 300,000 units in the second half of this year. Assuming a one-to-one attach switch to GPU, this is only 2% to 3% of the market, right? So huge market opportunity still in front of the team, right? Could you maybe comment on the number of customer engagements and maybe the breadth of deployment of your solutions?

Question: Harlan Sur - JP Morgan - Analyst : Yeah, we'll get to UAL in a second, but great to see the team getting qualitation, or ramping your PCI Express Gen 6 portfolio, which includes Scorpio. That being said, there are still a lot more custom AI ASIC programs coming to the market that are still going to be Gen 5, right? They want to get to market quickly. They're familiar with their retimer. They're familiar with their Cosmo software solution. Switching performance from our products is very strong. So has the team also been able to get design win traction on your PCIe Gen 5 Scorpio P-Series based switching solutions as well for these new ASIC platforms? Or are they just future-proofing their platforms by adopting your Gen 6 platform.

Question: Harlan Sur - JP Morgan - Analyst : Let's move on to the Scorpio X. As you mentioned, that's potentially the bigger opportunity here, right? XPU to XPU, scale-up, switching and fabric solution. We've articulated all of the XPU ASIC programs coming to the market either in the market or coming to the market right? All of these programs are RAC scale. Customers really need help with the RAC scale connectivity architecture, perfect entry point for Astera Scorpio X to enable this XPU to XPU connectivity. Given the urgency of these programs, I mean, will you have some customers that will be deploying Scorpio X in production RAC-scale deployments second half of this year?

Question: Harlan Sur - JP Morgan - Analyst : As you engage with customers on Scorpio X, are most of them choosing a PCIe-like protocol? Are they choosing proprietary protocol or the new industry standard-based UA Link protocol? And maybe if you can talk a little bit more about the industry standard UA Link initiative and the benefit it can bring versus proprietary or Ethernet-based solutions.

Question: Harlan Sur - JP Morgan - Analyst : Any questions from the audience? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference Unidentified Participant Jitendra, I just wanted to follow up on the comments you made about the move to RAC scale being a real positive for the company. Does that also apply to NVIDIA-based RACs?

Question: Harlan Sur - JP Morgan - Analyst : Thank you. Software. Let's talk about software. Software is a key part of your silicon solution. It's a key part of actually the differentiation, right? In fact, your Cosmo software and management platform is deeply integrated into your customers' data center software management stocks, right? This is a very sticky part of this solution. Cosmos integrated in your chips enables things like real-time diagnostics, telemetry, debugging, right, ultimately enabling faster time to market, faster bringing up of compute clusters. And so as you bring new solutions to the market like Scorpio P and Scorpio X Series products and continue to expand your product line, is the team continuing to leverage its Cosmo software? And is this still a major competitive advantage for the team.

Question: Harlan Sur - JP Morgan - Analyst : Let's talk about your Taurus product family of AEC networking connectivity, 800 gig Ethernet connectivity, obviously, strong adoption with current AI scale-out networking connectivity, right? But we're not actually starting to see the adoption curve of 800 gig within general-purpose cloud and data center footprint starting to pick up, right? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference Very early days, but starting to see some momentum. 200 gig, 400 gig within the data center starting to maybe lose a little bit of steam, right? And so I guess the question for the team is, are you still on track to shipping your 800 gig AEC solution in volume production this year? And will it be with multiple customers?

Question: Harlan Sur - JP Morgan - Analyst : And to your point, there's an ongoing sort of market debate regarding the choice between AEC versus ACC solutions. But as you engage with your customers, how are they evaluating these two options and how do you envision these technologies sort of evolving over time?

Question: Harlan Sur - JP Morgan - Analyst : On the financial strong gross margins, the team drove strong gross margins. 74% is the guidance for the June quarter, that's tracking 400 basis points above your long-term target model of 70%. While you plan to increase the mix of hardware products over the next several years, which could exert some pressure on gross margins. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 14, 2025 / 5:00PM, ALAB.OQ - Astera Labs Inc at JPMorgan Global Technology, Media and Communications Conference You also actually have a whole bunch of new products that we just talked about, right, like the Ares 6 solution -- products that are beginning to ramp. And I believe Scorpio does carry very high gross margin profile, given the performance, complexity of the chipsets and the software attach and so Scorpio obviously is going to continue to scale higher. So does the team have the potential to sustain margins above the long-term target of 70%.

Question: Harlan Sur - JP Morgan - Analyst : On operating expenses, I mean, they've been higher as you continue to maintain a very, very strong product cadence and expand your networking and connectivity portfolio. How should we think about the trajectory of your operating expenses as we think about it over a multiyear period, as the team continues to build scale, how do we think about your OpEx growth relative to your revenue growth?

Question: Harlan Sur - JP Morgan - Analyst : Jitendra, Mike, thank you very much for your participation and look forward to monitoring the progress of the team this year.