Astera Labs Inc Q4 2024 Earnings Call Summary

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

Question: Harlan Sur - JPMorgan - Analyst : Good afternoon, and congratulations on the strong results and execution. The one big inflection in accelerated compute in AI, as you mentioned, is the ramp of numerous AI ASIC SPU programs like you've got you an EPU, a Google, Trainium at Amazon, MTI at Meta, also multiple new programs in the not-too-distant future. It looks like these customer and program ramps are growing actually faster than the overall merchant GPU market. So the question is, what percentage of your business last year came from merchant GPU AI systems versus ASIC-based systems. And where do you expect that mix to be, say, exiting this year? I mean, ASIC programs seem to be on a faster growth trajectory. You have a very, very strong attach here across your products as you guys mentioned. I'm just wondering if the team agrees with me on this view.

Question: Harlan Sur - JPMorgan - Analyst : I appreciate that. And on the balance sheet, inventories were up almost 80% sequentially in the December quarter. That's an all-time high for the team. I think it's up 60% versus the average inventory level over the last four quarters. Is the significant step-up reflective of a strong multi-quarter shipment profile across the overall portfolio or maybe reflective of a step in more of your board level solutions, or is it kind of a combination of both? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 10, 2025 / 9:30PM, ALAB.OQ - Q4 2024 Astera Labs Inc Earnings Call

Question: Blayne Curtis - Jefferies - Analyst : Hey, good afternoon. Thank you for taking my question. I had two. I was just kind of curious, you mentioned the strength in Taurus. I don't know if you're going to tell as to how maybe big that was in December. And then, Mike, I wanted to ask on gross margin. I know it's a mix of hardware, and you're seeing strength for at least your basic customer there with multiple products. I'm just kind of curious as you think about '25 as Scorpio ramps, how that mix shifts and what the impacts are on the shape of gross margin for this year?

Question: Blayne Curtis - Jefferies - Analyst : And then I was just kind of curious if you could -- now that you're a quarter removed from launching Scorpio. Just kind of comment on the design momentum you've had in terms of the number of engagements. And I'm just kind of curious in terms of from a competitive landscape-wise, for scale up outside of NVLink? What else is out there that you're seeing that you're competing against with those products?

Question: Joseph Moore - Morgan Stanley - Analyst : Great. Thank you. I know there's a lot of attention on the DeepSeek innovations that we saw a couple of weeks ago. Can you talk about what you've seen, how you would position that with regards to other innovations that we've seen? Do you see it as inflationary to the long-term opportunity in AI? Just would love to get your perspective on this.

Question: Joseph Moore - Morgan Stanley - Analyst : It's very helpful. And then for my follow-up, you talked about Leo ramp in the second half of the year. I know you're seeing quite a bit of interest in kind of memory bandwidth boosting kind of capabilities. Can you help us size how important that could be in the second half?

Question: Tore Svanberg - Stifel - Analyst : Thank you, and congrats on the strong results. I had a question on Scorpio. I think you said you still expect it to be more than 10% of revenues in calendar '25. Obviously, that number is now higher. Is that going to be predominantly the P-Series, or are you going to get some contribution already from X-Series in calendar '25?

Question: Tore Svanberg - Stifel - Analyst : Great. And as a follow-up on the Taurus, could you just talk a little bit about the revenue profile there? How diversified is it by the customer and use case? And how do you think about that business first versus second half? Because obviously, if it is more diversified in nature, then obviously, maybe second half will be even greater than first half. But yes, just some profile of that revenue base right now.

Question: Tom O'Malley - Barclays - Analyst : Hey, guys. Thanks for taking my questions. My first was in your prepared remarks, you mentioned that over time, Scorpio would become your biggest product line. I don't think you've mentioned that before. Perhaps you could talk about the timeframe the thinking about that product line taking over? Is this some that we should be seeing potentially as early as 2026. And is that a function of just Scorpio growing faster than you had originally thought or perhaps areas coming down to some extent, just understanding why you made that comment in the preamble.

Question: Tom O'Malley - Barclays - Analyst : Super helpful. And then my follow-up was just, I think it was Mike's commentary, on one of the first questions here on the call. You talked about kind of the year 2025 on the Aries side. talking about how in the first half of the year, you would see more internal AI efforts followed by the second half of the year being more merchant GPU. That comment was a bit surprising to me given we're going through a big product transition now at the large customer of yours. So is there any change in the way that you see the ramp of 2025 versus where you did before? I would have anticipated maybe the merchant GPU being a bit stronger earlier in the year? Just any reason behind those comments that caught me a little off guard.

Question: Ross Seymore - Deutsche Bank - Analyst : Hi, guys. Thanks. A couple of questions. First one is a little bit higher level. And it's on diversification. You guys talked from a product diversification point of view with Scorpio being over 10% of your revenues going forward. But there's also an admittedly concentrated batch of hyperscalers, there's also the customer concentration. So whether it be on the customer side or the product side or both? Anyway, you can give us a little bit of framework of how 2024 ended, and how you think 2025 will differ from a diversification lens?

Question: Ross Seymore - Deutsche Bank - Analyst : That's very helpful. Mike, one for you. You mentioned earlier about the gross margin, why it was down a little bit below your guide in the fourth quarter, it stays flat in the first. It sounds like you said stayed flat in the second as well. Does that kind of hardware module mix shift in the second half? It sounded like from what you said that does go back away from the hardware side to a little bit more towards the chip level. Was I hearing that correct, or any sort of update on that would be helpful.

Question: Quinn Bolton - Needham - Analyst : Hey, guys. I wanted to come back to Joe's question on DeepSeek. And obviously, one of the benefits is greater deployment of AI models probably means a shift towards inferencing. Do you guys see any entrancing side, the need for clusters that are as large as we've historically seen on the training side. And if we don't -- if we see greater adoption of sort of more inferencing clusters, but of smaller size. Is that a positive or a negative for the connectivity TAM?

Question: Quinn Bolton - Needham - Analyst : Got it. That's very helpful. And then second question is just on the Scorpio P family. You mentioned that, that growth really driven by the sort of custom versions of merchant GP-based platforms. Wondering, do you guys have engagements for Scorpio P on the ASIC platforms as well?

Question: Atif Malik - Citi - Analyst : Hi. Thank you for taking my question. My first question is on co-packaged optics. Jitendra, Sanjay, there's a bit of discussion in terms of its timing. Can you share your thoughts on the volume of that and what impact it could have on your retimer and PCI opportunity?

Question: Atif Malik - Citi - Analyst : Great. And Mike, can you talk about how should we think about OpEx for the 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. FEBRUARY 10, 2025 / 9:30PM, ALAB.OQ - Q4 2024 Astera Labs Inc Earnings Call

Question: Suji DeSilva - Roth Capital Partners - Analyst : Hi, Jitendra, Sanjay, Mike. First question, just to be clear on the customer focus. I know it's almost entirely hyperscale. I'm just curious if you've been approached by trying to engage the emerging AI companies versus the large established, or if that doesn't fit in your business model?

Question: Suji DeSilva - Roth Capital Partners - Analyst : Okay. Appreciate the color there. And then my other question is on UALink. I'm just wondering what you think the biggest challenges or timing impacts of cutting over from Ethernet, PCIe, UALink? And most importantly, for Astera, what's the shared content uplift implication, maybe UALink gaining traction?

Question: Richard Shannon - Craig-Hallum Capital Group LLC - Analyst : Hi, guys. Thanks for taking my question as well. Will ask a question to kind of the competitive dynamics here, kind of going in between your retimer and P-Series switch products. I guess, obviously, you have a really strong position with retimers. Coming into the market in the P-Series, we've got another competitor who's very strong there. And while you've got COMOS, the software barriers are switching there, switches are generally thought of as more of a secure kind of a chip. And so I'm wondering how the competitive dynamics play out here. Do we see kind of an attach rate similar to what you're seeing in the P-Series to the areas anytime soon?

Question: Richard Shannon - Craig-Hallum Capital Group LLC - Analyst : Okay. Excellent. My second question is on the Scorpio X-Series. Wondering if you can kind of give us a picture looking forward here about the size of the scale-up domains that hyperscalers are looking to do. I can't remember the exact number what NVIDIA does for theirs today, but I imagine it's going to go up quite a bit here. And to what degree does the size play into your commentary about the Scorpio eventually being your largest product line at the time.