Astera Labs Inc Q1 2025 Earnings Call Summary

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

Question: Harlan Sur - JPMorgan - Analyst : Good afternoon. Thanks for taking my question. High-level question. 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. We also kind of recently saw some of the AI bands to China recently. And then obviously, tariff and trade concerns, as you guys articulated in your prepared remarks. On the flip side, you've got the strong ramp of your merchant-GPU customers on their next-generation AI platforms, strong new AI ASIC XPU ramps. So you've got new entrants into the AI ASIC XPU market. So since last earnings, I mean, has anything changed meaningfully positive or negative on the customer programs or the demand outlook for this year? And more importantly, your confidence level on continued strong growth for next year?

Question: Blayne Curtis - Jefferies - Analyst : Hey, guys. Nice [results]. And thanks for taking my question. I wanted to talk about scale up. You mentioned it several times. I think you even said a couple of hundred dollars per accelerator. Today, I think you're selling some retimers and then some PCIe cabling. Can you walk us through the progression of scale up in your participation and kind of can you maybe set some timing? Because I know UAL is probably later next year. So what's the scale-up opportunity for you in between now and then?

Question: Blayne Curtis - Jefferies - Analyst : Thanks so much. And then I want to ask you on Taurus. You called outgrowth in March and then continued growth in June. Can you talk about, I don't know if you want to frame how big that business has gone, whether there's some rough metrics you can kind of give us? And then just kind of curious, the diversity of the customer base beyond the lead customer as well? 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 06, 2025 / 8:30PM, ALAB.OQ - Q1 2025 Astera Labs Inc Earnings Call

Question: Ross Seymore - Deutsche Bank - Analyst : Hi, guys. Thanks for my ask a question. On last quarter's call, you really made a big point about the diversification of your customer base. Tonight, it seems like it's a lot more about the diversification of your products that you're offering. So I guess if we kind of blend those two together, what are you seeing as the changes in the environment on the ASIC side versus the merchant GPU and how you're broadening technology is being applied differently between them?

Question: Ross Seymore - Deutsche Bank - Analyst : Thanks for all those details. I guess as my follow-up, just sticking on the custom silicon side of things. Does the competitive environment change at all there? I think this was a question that was asked on the last call as well. But considering the XPU providers are oftentimes your primary connectivity competitors, I know the best technology always wins, but does the bundling capability that could occur in that XPU market actually lead to more competition on your side? Or is that something you're not seeing?

Question: Thomas O'Malley - Barclays - Analyst : Hey, guys. Thanks for taking my questions and then nice results. First one is for you, Mike. You mentioned that there was a China impact on your sales. It's never been a significant portion of your model. But could you give us a feeling just how large that impact was and what that impact will be over the next couple of quarters?

Question: Thomas O'Malley - Barclays - Analyst : Helpful. And then, Jitendra, maybe a broader question. So you guys have been very consistent kind of describing the year as first half PCIe scale up, Ethernet scale out and a lot of the custom silicon. With the second half, you see more Scorpio, more retimers. There's been a ton of noise in the market, and that's just the price you pay from being very visible and attached to NVIDIA. But you heard about a lot of differences in terms of like what the ramp cadence was coming into this year versus where we were today. Some large hyperscalers, maybe some weakness in their programs. And then potentially with your large customers, some systems that are maybe delayed and moving to more DGX-style solutions. I understand you have to be sensitive about talking about customers, but to the best extent you can, coming into this year versus where you are today, could you maybe describe if there's any differences to what you saw in the ramp of your revenue? And maybe comment on anything that maybe has changed that can help us understand what's going on? Thank you.

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. I guess we've heard a lot of the large language model developers talk about sort of tightness in inference markets and kind of a lack of hardware to deal with inference. Are you guys seeing that? Does that translate into strength in any part of the business for you? Or just anything you can do to corroborate or mitigate those concerns.

Question: Joseph Moore - Morgan Stanley - Analyst : Great. That's helpful. And for my follow-up, you mentioned racks. A lot of the rack-scale systems seem to be sort of tricky to get up and running. I guess those issues seem to be worse a few months ago. But does that affect you guys? I know you have good content 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 06, 2025 / 8:30PM, ALAB.OQ - Q1 2025 Astera Labs Inc Earnings Call across both rack and non-rack merchant solutions and ASICs. But is that kind of change in ramp schedule, is that having any impact on you guys?

Question: Tore Svanberg - Stifel - Analyst : Yes, thank you and congrats on the quarter. Jitendra, I was hoping you could elaborate a little bit more on the Aries 6 upgrade cycle here, especially in reference to gearbox products. If you could add any color on how diversified are the use case is going to be for Aries 6 gearbox products?

Question: Tore Svanberg - Stifel - Analyst : Thank you for that color, Sanjay. As my follow-up for Mike, not to nitpick here, but I mean your DSOs came in at 40 days. I think throughout most of last year, they were around mid-20s. Anything going on there to note?

Question: Tore Svanberg - Stifel - Analyst : Thank you, Mike.

Question: Papa Sylla - Citi - Analyst : Thank you for taking my question. This is [Papa Sylla] in for Atif. I guess my first question might be more of a broader question for Jitendra or Sanjay. I believe one year ago, kind of Astera announced some progress made around PCIe over optics and this year at OFC, we saw various demos on the technology. I guess at a higher level, does Astera still see PCIe over optic as a path forward to extend PCIe beyond copper and beyond scale up? Or perhaps the focus is still on copper?

Question: Papa Sylla - Citi - Analyst : Got it. No, that's helpful. And for my kind of follow-up, this question might be more for Mike. And I totally get you don't guide beyond the next quarter. But if our math is right, Scorpio sales in September and December could reach mid-teens to 20% of sales on a quarterly basis if you take into account the 10% plus sales you gave out for the year. With that in mind, can we think of actually, the second half gross margin actually being up within the first half qualitatively? 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 06, 2025 / 8:30PM, ALAB.OQ - Q1 2025 Astera Labs Inc Earnings Call

Question: Srinivas Pajjuri - Raymond James - Analyst : Thank you. A question on the custom racks and also, what sort of mix I think you're assuming for custom racks as we go into second half. Maybe first, you can talk about what's driving that inflection? I know it's always been middle of the year for custom racks, but is there any, I guess, software or is it related to the Blackwell Ultra? Or some other hardware component that's kind of enabling customers to switch over to custom racks? And as I said before, if you could talk about what sort of mix assumptions you're making as we go into the second half of the year?

Question: Srinivas Pajjuri - Raymond James - Analyst : Got it. Thanks for that. And then more of a longer-term question, Jitendra. On UALink, obviously, it seems like a very large market potential out there. But at the same time, some of your competitors are focusing on Ethernet. These are obviously pretty large competitors. And I'm guessing some of your customers are probably going to stick to Ethernet as well. Just wondering how you think about how the market might shake out longer term, Ethernet versus UALink in terms of what, I guess, sort of applications might adapt Ethernet for scale up versus UALink? Thank you. 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 06, 2025 / 8:30PM, ALAB.OQ - Q1 2025 Astera Labs Inc Earnings Call

Question: Sujeeva De Silva - ROTH Capital Partners - Analyst : Hi, Jitendra, Sanjay, Mike. Quick question on Scorpio products. Should we think of there being any appreciable price difference between the X product and the P product? Are they fairly similarly priced?

Question: Sujeeva De Silva - ROTH Capital Partners - Analyst : Okay. Great. And then the other question I have is sort of updating on the thoughts versus kind of coming out of the IPO of mostly chips, but then Taurus being a paddleboard. Can you update on your thoughts on chips versus using board-level solutions or even do module level solutions make sense you've given how much content you have to integrate all of that?