Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Alpha & Omega Semiconductor Ltd (NASDAQ:AOSL) reported fiscal Q2 revenue of $173.2 million, in line with guidance.
• The communications and industrial segments outperformed initial forecasts, with sequential growth in graphics cards, quick chargers, PC desktops, and power tools.
• AOSL's strategic shift from a component supplier to a total solutions provider is enabling new opportunities and market share gains.
• The computing and communication segments each grew more than 25% in calendar 2024, driven by market share gains and BOM content growth.
• AOSL is positioned as an industry leader in smartphone battery PCM, contributing the largest incremental dollar growth in 2024.

Negative Points

• Seasonal declines were observed in gaming notebooks, tablets, and wearables, impacting overall performance.
• Non-GAAP gross margin decreased to 24.2% from 25.5% in the previous quarter, indicating margin pressure.
• The consumer segment saw a significant sequential revenue decline of 28.8%, driven by seasonality and pullbacks in wearables.
• The March quarter is expected to see a low teen sequential decline in the communications segment due to seasonality.
• Gross margin is expected to decline further in the March quarter due to decreased license and engineering service revenue and increased manufacturing costs.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with AOSL.

Q: Can you provide more detail on the performance versus expectations in the AI Accelerator market? Was the issue related to an AOSL product or the pace of platform ramp-up? A: The transition from our customer's old program to the new one is ongoing. We have been shipping into accelerator cards throughout 2024, and as they launch new projects, we are starting to ship new models, which will continue to grow throughout the current calendar year. - Steven Chang, CEO

Q: There were reports about thermal issues with AOSL products. Can you comment on whether these issues were accurate and if they have been resolved? A: We do not comment on specific articles about our designs at customers due to respect for our customers. However, we continue to be a main contender in upcoming data center designs, and we expect the program to launch mid-year. - Steven Chang, CEO

Q: How do you view the AI opportunity, and when will you have a better indication of your content and potential revenue from this area? A: The potential for our business in data centers is much larger than graphics due to higher power requirements. We are targeting a mid-year launch, and while the share is still to be determined, we are working closely with customers. - Steven Chang, CEO

Q: How do you see the gross margin profile evolving over the next year, especially with new product ramps? A: We expect product mix to improve, and gross margin should recover from the March quarter low point. By the June quarter, we anticipate returning to December quarter levels. - Ivan Leong, CFO

Q: Can you discuss the impact of tariff issues and how they are affecting your business? A: The tariff issues have led to some demand pull-ins, but the impact is not huge. We are guiding computing to be slightly down, and there is still uncertainty about future trade impacts. - Steven Chang, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.