Astera Labs Inc Q3 2024 Earnings Call Transcript

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

Question: Harlan Sur - JP Morgan Chase & Co - Analyst : Good afternoon and congratulations on the strong results, on your core retimer business looks like very strong this year, looks strong next year, majority of the [XPU] shipments are still going to be, I think Gen 5 based where your market share is still somewhere in the range of 95%. And your customers both merchant and [Asic] are ramping new skews starting second half of this year, first half of next year, you have also got the ramp of your Gen 6 products, retimers, (technical difficulty) switch products with your lead GPU customer which they are ramping now. [But AC firing. SCM is firing]. So given all of this activity, I assume your visibility and backlog is quite strong. Maybe if you can just qualitatively sort of articulate your confidence on driving sequential growth over the next several quarters or at least visibility for a strong first half of next year versus second half of this year.

Question: Harlan Sur - JP Morgan Chase & Co - Analyst : Okay. Thank you for that. And then on the early traction you are getting with your Scorpio Switch portfolio. Team has talked on some of the performance benefits both at the silicon level and chip level. But how much of the differentiator is your COSMOS software stack that your customers have already built into their data centre management systems. Adopted it with three timer products. And now you got the same software stack is integrated into your switch products that enables telemetry link performance, link monitoring, tuning up parameters, all that kind of stuff, which is so critical for data centre managers, right? If the software stack familiarity, current adoption, you know, sort of a big differentiator on the [traction] with Scorpio.

Question: Harlan Sur - JP Morgan Chase & Co - Analyst : Very insightful. Thank you.

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. Thank you and congratulations on the numbers. I wonder if you could talk about the Scorpio business in terms of you gave a number for 2028. Can you give us a sense for what that ramp looks like? Any kind of qualitative discussion of how big it could be in calendar '25 would be very helpful. 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. NOVEMBER 04, 2024 / 9:30PM, ALAB.OQ - Q3 2024 Astera Labs Inc Earnings Call

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : That's great. Thank you. And then on Leo, you talked about some of the ramps there, I guess this application, in particular of these large memory servers being able to actually reduce the CPU count and maintain this high memory bandwidth. Can you just talk about that application? And are you seeing that as a material factor next year as well?

Question: Joe Moore - Morgan Stanley & Co. LLC - Analyst : Great. 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. NOVEMBER 04, 2024 / 9:30PM, ALAB.OQ - Q3 2024 Astera Labs Inc Earnings Call

Question: Blayne Curtis - Jefferies Group LLC - Analyst : Hey, good afternoon and congrats on the results. I want to ask you last quarter, you kind of talked about the September growth. I think it was like $20 million and your kind of loosely said it was kind of [third timers, third of] the PCIe Cabling and (technical difficulty). I'm not expecting to dial us in completely, but you kind of double that. So I'm kind of just curious, the strength you are seeing between your products, if you could add a little bit more colour and then also just between AI accelerators and GPU. Obviously, the big GPU vendor has a ramp coming with Blackwell, but that is not exactly now. So, I'm just kind of curious, what is driving the strength in September and December a little bit more.

Question: Blayne Curtis - Jefferies Group LLC - Analyst : Thanks. And then Mike, I want to ask you on with the addition of the Scorpio product line. But before you kind of talked about how when some of the products like Taurus or the PCIe modules ramped, it would be a little bit diluted to margins because it's not a chip sale. How do you think about it if you do have switches greater than 10% maybe switch margins or area, how do we think of that, that next year?

Question: Blayne Curtis - Jefferies Group LLC - Analyst : Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2024 / 9:30PM, ALAB.OQ - Q3 2024 Astera Labs Inc Earnings Call

Question: Thomas O'Malley - Barclays Investment Bank - Analyst : Hey guys, thanks for taking my questions. My first one is just on the, the X-Series for Scorpio. I think this is the first real kind of back-end switch that we have seen in the marketplace for PCIe. Could you talk about your positioning there? How far you think you are ahead? And would you the same kind of competitive dynamic that you are seeing in the P-Series switch? Just talk about where you are competitively and just from an opportunity perspective, do you think longer term, the

Question: Thomas O'Malley - Barclays Investment Bank - Analyst : Helpful. Let me sneak in another one. I know I broke the rules there on the first one, but the second is just on the Taurus product family. So historically, you have been concentrated within one customer. Can you talk about the breadth of your engagements there has that kind of expanded to multiple customers and when you look out into next year, is that going to be largely consolidated to one or two customers? Do you see that kind of proliferating across multiple? Thanks again. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 04, 2024 / 9:30PM, ALAB.OQ - Q3 2024 Astera Labs Inc Earnings Call

Question: Tore Svanberg - Stifel Financial Corp - Analyst : Yes. Thank you and congrats on the strong results. You mentioned that PCIe Gen 6 is going to be in pre-production this quarter. When do you expect it to be an actual volume production? Would that be in the first half of next year Q1?

Question: Tore Svanberg - Stifel Financial Corp - Analyst : That is very helpful. And I had a follow up question on Scorpio in relation to your PCIe lead time of business. So, would, those typically pull each other? Meaning, could it be instances where there is a switch PCIe switch with somebody else's retimers or I mean, do they pretty much go hand in hand, especially given the customer software?

Question: Tore Svanberg - Stifel Financial Corp - Analyst : Very helpful. Thank you.

Question: Ross Seymore - Deutsche Bank AG - Analyst : So I asked a couple questions and congrats on the strong results. The first question, Jatinder you mentioned and Sanjay you two about the importance of the [Asic] side of the business really ramping up strongly. What did the inflection point that's really driving that that's something where the market itself is just getting stronger or is there something with the inflection point of your technology that's being adopted and penetrating the market faster?

Question: Ross Seymore - Deutsche Bank AG - Analyst : Thanks for that. And I guess is my one follow up a quarter ago, we were having significant debates about your statements about the average content per GPU. Obviously, that's not as big a topic today. Now that we know about Scorpio with more detail, but if I revisit that and you talk still on this call about the average content going up, is that just because of Scorpio something you had in your back pocket before that you obviously could not tell us about? Or do you still believe the retimer content in some way, shape or form will still be bigger on most of these platforms going forward? Especially for the third-party merchant suppliers.

Question: Ross Seymore - Deutsche Bank AG - Analyst : Thank you.

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Hey, thanks for squeezing me and I just wanted to follow up a clarification maybe. But for the Scorpio family being over 10% of revenues, is that largely from the P-Series or would you expect any X-Series production revenue in 2025? Given the longer I think designing cycle for the back end scale up networks.

Question: Quinn Bolton - Needham & Company, LLC - Analyst : Excellent. And then can you give us some sense? for the P-Series and the X-Series? on the retimer, I think the market sort of, generally looked at the retimer attach rate per GPU or per accelerator. Is there any framework you could provide for us for P-Series, X-Series would you look or expect a typical, you know, attach rate per GPU accelerator? Would that be 1 to 1? Would it be less than 1 to 1? Could it be higher than 1 to 1? Any, any thoughts on attach rates for P-Series and X-Series? Thank you.

Question: Mark Lipacis - Evercore ISI - Analyst : Hi, thanks for taking my question. A question on the diversification. If you think just longer term, you can diversify by your customer base and then by your product line. So, pick your time in the future three years out, five years out. What do you think your split will be between the merchant GPU player versus, the custom AI accelerator player? Like how your products will be attached to either type of solution. And then, let's just say three years out. You have [55] product lines is it, would you expect to have, I still have a [skew] to one or would you expect to have like 20% in each product line bucket or something like that if you could help us out, how are you thinking about diversification? Like three years out? I think that'd be helpful and then I had a follow up. Thanks.

Question: Mark Lipacis - Evercore ISI - Analyst : Got you very helpful and the follow up if I may-- maybe for Mike, you guys delivered a lot of upside to the outlook you originally provided. Can you help us understand the mechanics of how you're able to deliver that kind of upside? Is this, do you necessarily have to have the inventory on your balance sheet in order to meet that? Can you get an upside to an order and then have the chip [fab to a die] and then package assembled and test within a quarter. If you could just help us, think about how you met the upside and the potential to do that again going forward. Thanks.

Question: Mark Lipacis - Evercore ISI - Analyst : Very helpful. Thank you.

Question: Suji Desilva - Roth Capital - Analyst : Hi, Jitendar, Sanjay, Mike congrats on the strong quarter here on the mix of revenues. I'm not really sure where tourist is this year, but looking ahead to next year, does that, I'm curious how much that grows and helps diversify the products. Is it going to roughly a third kind of plus or minus? Is that too high? Just to get a sense of how areas and tourist diversify 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. NOVEMBER 04, 2024 / 9:30PM, ALAB.OQ - Q3 2024 Astera Labs Inc Earnings Call

Question: Suji Desilva - Roth Capital - Analyst : Okay. That's helpful. Thanks. And then just trying to understand the share situation on a in Gen 5. Clearly, you are very strong here. Is it the expectation that Gen 6, you guys maintain a similar share, they will be competitive share across that or just, what's the thoughts on Gen 6 share? Prairies versus a very strong Gen 5 share.

Question: Suji Desilva - Roth Capital - Analyst : It's very help College Centre. Thanks guys.

Question: Richard Shannon - Craig Hallum - Analyst : Well, thanks guys taking my questions. Maybe one for, I guess for either to Jitender or Sanjay regarding COSMOS, maybe you can talk about any competitive response you are seeing from others who are, getting in this market, either from the time or switch side or both. And it seems like their press releases have alluded to capabilities in this direction. Obviously, your first to market move is it seems to have a lot of stickiness. Plus, I'm sure you are not standing still and moving forward here, maybe you can talk about what you are seeing there from a competitive response, and how you are, trying to maintain that that barrier to switching place.

Question: Richard Shannon - Craig Hallum - Analyst : Okay, wonderful. Thanks for all that detail. My follow-on question. Well, I would love to ask you another question, the Scorpio Line, which is obviously very interesting product announced that maybe I will ask one on the Leo product line in that general area here. I guess maybe, you know, kind of looking back from say the beginning of the year or a year ago when Hypersscaler were looking at CXL and trying to examine the use cases that made sense. Want to get your sense of whether you think that they're developing and getting certainty on them and the pace and the time frame that you originally thought you obviously talked about it a design, I think ramping by, mid next year, is that kind of the time frames you expected back then or maybe just kind of talk about the hyperscaler experiences and figuring out those use cases.

Question: Richard Shannon - Craig Hallum - Analyst : Wonderful. Thanks for that detail and congratulations on the great number's guys. Thank you.