Q2 2026 Astera Labs Inc Earnings Call Transcript
Key Points
- Record Q2 revenue of $392.4 million, up 27% sequentially and 104% year-over-year, driven by broad-based strength across the product portfolio.
- Scorpio AI Fabric switches achieved volume production, with Scorpio expected to become the largest product family in Q3, one quarter ahead of expectations.
- Strong growth in Aries signal conditioning products, with PCIe 6 revenue now representing over 50% of total company revenue, up from one-third in Q1.
- Expansion into new markets with Taurus smart cable modules for 800G Ethernet and new 200G per lane retimers/re-drivers, doubling the Taurus portfolio market opportunity to over $4 billion by 2030.
- CXL momentum with a new design win for Leo memory controllers at a US hyperscaler, with volume shipments expected in 2027 for both standard and custom solutions.
- Optical connectivity strategy on track, with high-density fiber attach solutions and NPO chipsets targeted for 2027 production, and CPO-enabled Scorpio switches for 2028 and beyond.
- Strong operating leverage with non-GAAP operating margin expanding to 39.1% in Q2, and expected to reach approximately 43% in Q3.
- Robust cash position of $1.25 billion, up $68.5 million sequentially, driven by strong cash flow from operations.
- Diversifying customer base with over 10 customers engaged on Scorpio-X, including new cloud and enterprise opportunities.
- Software platform Cosmos now enables in-network compute and Hypercast, delivering up to 2x improvement in collective performance, increasing customer stickiness.
- Gross margin expected to decline to approximately 72% in Q3 from 73.7% in Q2, due to product mix shifts toward lower-margin switching and module revenue.
- Heavy reliance on a single lead hyperscaler for Scorpio-X volume production ramp, though additional customers are expected by year-end.
- China revenue remains in the single digits as a percentage of total revenue, limiting growth potential in that market.
- CXL revenue is still in early stages, with meaningful volume shipments not expected until 2027, creating uncertainty in near-term contribution.
- Optical products are still in development, with initial volume production not expected until 2027, posing execution risks.
- Operating expenses are rising sequentially (up 10% in Q2, and expected to increase further in Q3), reflecting continued investment in R&D and market expansion.
- The transition to PCIe 6 and Scorpio may lead to margin pressure as new products ramp, with a wide range of margins across use cases.
- Potential supply chain and manufacturing risks as Scorpio-X ramps to volume production, especially with multiple configurations and customers.
- Competitive pressures in the AI fabric market, with UALink and other protocols potentially disrupting PCIe-based solutions.
- Forward-looking guidance assumes continued strong demand, but any slowdown in hyperscaler AI infrastructure spending could impact growth.
Good afternoon. My name is Holly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Astera Labs Q2 2026 earnings conference call. (Operator Instructions)
I will now turn the call over to Leslie Green, Investor Relations for Astera Labs. Leslie, you may begin.
Thank you, Holly, and good afternoon, everyone, and welcome to the Astera Labs second-quarter 2026 earnings conference call. Joining us on the call today is Jitendra Mohan, Chief Executive Officer and Co-Founder; Sanjay Gajendra, President and Chief Operating Officer and Co-Founder; and Desmond Lynch, Chief Financial Officer.
Before we get started, I would like to remind everyone that certain comments made in this call today may include forward-looking statements regarding, among other things, expected future financial results, strategies, and plans future operations and the markets in which we operate.
These forward-looking statements reflect management's current beliefs,
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