Q2 2025 Astera Labs Inc Earnings Call
Rebecca: Good afternoon. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Astera Labs' second quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After management remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I will now turn the call over to Leslie Green, investor relations for Astera Labs. Leslie, you may begin.
To Lesley green investor relations for a sterile Labs Leslie. You may begin.
Leslie Green: Thank you, Rebecca. Good afternoon, everyone, and welcome to the Astera Labs' second quarter 2025 earnings conference call. Joining us on the call today are Jitendra Mohan, Chief Executive Officer and Co-Founder; Sanjay Gajendra, President, Chief Operating Officer and Co-Founder; and Mike Tate, 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.
Leslie Green: These forward-looking statements reflect management's current beliefs, expectations, and assumptions about future events, which are inherently subject to risks and uncertainties that are discussed in detail in today's earnings release and in the periodic reports and filings we file from time to time with the SEC, including the risks set forth in our most recent annual report on Form 10-K and our upcoming filing on Form 10-Q. It is not possible for the company's management to predict all risks and uncertainties that could have an impact on these forward-looking statements or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement.
Thank you, Rebecca. Good afternoon, everyone, and welcome to the Astera Labs Second Quarter 2025 Earnings Conference Call. Joining us on the call today are Jitendra Mohan, Chief Executive Officer and Co-Founder; Sanjay Gajendra, President, Chief Operating Officer, and Co-Founder; and Michael Tate, 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, expectations, and assumptions about future events, which are inherently subject to risks and uncertainties that are discussed in detail in today's earnings release and in the periodic reports and filings we file from time to time with the SEC, including the risks set forth in our most recent annual report on Form 10-K.
Leslie Green: In light of these risks, uncertainties, and assumptions, the results, events, or circumstances reflected in the forward-looking statements discussed during this call may not occur, and actual results could differ materially from those anticipated or implied. All of our statements are made based on information available to management as of today, and the company undertakes no obligation to update such statements after the date of this call, except as required by law. Also, during this call, we will refer to certain non-GAAP financial measures, which we consider to be an important measure of the company's performance. These non-GAAP financial measures are provided in addition to and not as a substitute for financial results prepared in accordance with US GAAP.
And our upcoming filing on form 10q. It is not possible for the company's management to predict all risks and uncertainties that could have an impact on these 4 looking statements, or the extent to, which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statement in light of these risks on certain
Certainties and assumptions the results events or circumstances reflected in the forward-looking statements discussed during this call may not occur and actual results could differ materially from those anticipated, or implied. All of our statements are made based on information available to management as of today and the company undertakes. No, obligation to update such statements after the date of this call, except as required, by law.
Leslie Green: A discussion of why we use non-GAAP financial measures and reconciliations between our GAAP and non-GAAP financial measures is available in the earnings release we issued today, which can be accessed through the investor relations portion of our website. And with that, I would like to turn the call over to Jitendra Mohan, Chief CEO of Astera Labs. Jitendra?
Jitendra Mohan: Thank you, Leslie. Good afternoon, everyone, and thanks for joining our second quarter conference call for fiscal year 2025. Today, I'll provide an overview of our Q2 results, followed by a discussion around our rack scale connectivity vision. I will then turn the call over to Sanjay to walk through Astera Labs' near and long-term growth profile. Finally, Mike will give an overview of our Q2 2025 financial results and provide details regarding our financial guidance for Q3. Astera Labs delivered strong results in Q2, with all financial metrics coming in favorable to our guidance. Quarterly revenue of $191.9 million was up 20% from the prior quarter and up 150% versus Q2 of last year. Growth within the quarter was driven by both our signal conditioning and switch fabric product lines, establishing a meaningful new revenue baseline for the company to build upon.
Also, during this call, we will refer to certain non-gaap Financial measures which we consider to be an important measure of the company's performance. These non-gaap Financial measures are provided in addition to, and not as a substitute for financial results prepared in accordance with us. Gaap, a discussion of why we use non-gaap Financial measures and reconciliations between our gaap and non-gaap financial measures is available in the earnings release, we issued today which can be accessed through the investor relations portion of our website. And with that I would like to turn the call over to gjendra Moen. She a CEO of aera. Lab gjendra. Thank you, Leslie. Good afternoon everyone and thanks for joining us. Second quarter conference call for fiscal year 2025.
Today, I'll provide an overview of our Q2 results followed by a discussion around our rack scale connectivity vision.
I will then turn the call over to Sanjay to walk through a sterile labs near and long-term growth profile.
Finally, Mike will give an overview of our Q2, 2025 Financial results and provide details regarding our financial guidance for Q3
Srl has delivered strong results in Q2 with all Financial metrics coming in favorable to our guidance.
Quarterly revenue of 1, 191.9 million was up, 20% from the prior quarter and of 150% versus Q2 of last year.
growth within the quarter was driven by both our signal conditioning and switch fabric, product lines, establishing a meaningful new Revenue, Baseline for the company to build upon
Jitendra Mohan: This quarter, we achieved a key milestone with our market-leading Scorpio P-series switches, supporting PCIe 6 scale-out applications, ramping into volume production to support the deployment and general availability of customized rack scale AI system designs based on merchant GPUs. Strong demand for our PCIe 6 solutions helped to drive material top-line upside during the quarter. Scorpio exceeded 10% of total revenue, making it the fastest ramping product line in the history of Astera Labs. Furthermore, we continue to see strong activity and engagement across both our Scorpio P-series and X-series PCIe fabric switches, and we are pleased to report that we won new designs across multiple new customers during the quarter. We remain on track for Scorpio to exceed 10% of total revenue in 2025, while becoming the largest product line for Astera Labs over the next several years.
This quarter, we achieved a key Milestone with our Market leading. Scorpio PCD switches supporting PCI 6. Scale out applications, ramping into volume production to support the deployment and general availability of customized rack scale. AI system designs based on Merchants gpus
strong demand for our PCI 6 Solutions, help to drive material Topline upside during the quarter.
Scorpio exceeded 10% of total revenue, making it the fastest ramping product line in the history of Sr labz.
Further more, we continue to see strong activity and engagement across. Both our Scorpio P series and X Series pcie fabric switches and we are pleased to report that we won New Designs across multiple new customers during the quarter.
We remain on track for Scorpio to exceed 10% of total revenue in 2025 while becoming the largest product line for a sterile Labs over the next several years.
Jitendra Mohan: Our Aeries product family grew during the quarter and continues to diversify across both GPU and custom ASIC-based systems for a variety of applications, including scale-up and scale-out connectivity. Additionally, our first-to-market Aeries 6 solutions supporting PCIe 6 began volume ramp during the quarter within rack scale merchant GPU-based systems. Our Taurus product family demonstrated strong growth driven by AEC demand, supporting the latest merchant GPUs, custom AI accelerators, as well as general-purpose compute platforms. LEO continues to ship in pre-production quantities as customers expand their development rack clusters to qualify new systems leveraging the recently introduced TXL-capable data center CPU platforms. In addition to strong financial and operational performance during Q2, we continue to expand our strategic relationships across both customers and ecosystem partners as the industry pushes forward with innovative new technologies.
Our Aries product family grew during the quarter and continues to diversify across both GPU and custom Asic, based systems for a variety of applications, including scale up and scale out connectivity.
Additionally, our first two markets, 86 Solutions and PCI, began ramping volume during the quarter within rack scale. Merchant GPU-based systems.
Merchant GPUs, custom accelerators, as well as general-purpose compute platforms.
You continue to ship in pre-production quantities as customers expand their development, rack clusters, to qualify new systems leveraging the recently introduced TXL-capable data center CPU platforms.
Jitendra Mohan: First, we broadened our collaboration with NVIDIA to support NVLink Fusion, providing additional optionality for customers to deploy NVIDIA AI accelerators while leveraging high-performance scale-up networks based on NVLink technology. Next, we announced a partnership with Alchip Technologies to advance the silicon ecosystem for AI rack scale infrastructure by combining our comprehensive connectivity portfolio with their custom ASIC development capabilities. Within the CXL ecosystem, industry progress continues, with SAP recently highlighting their collaboration with Microsoft, featuring Intel Xeon 6 processors to optimize SAP HANA database performance by utilizing CXL memory expansion. Lastly, we joined AMD on stage during their Advancing AI 2025 keynote presentation as a trusted partner to showcase UALink, which is the only truly open memory semantic-based scale-up fabric purpose-built for AI workloads. To continue the relentless pursuit of AI model performance, data center infrastructure providers are beginning a transformation to what we call AI Infrastructure 2.0.
In addition to strong financial and operational, performance during Q2, we continue to expand. Our strategic relationships across both customers and ecosystem Partners as the industry pushes forward with Innovative new technologies.
First, we brought on our collaboration with Nvidia to support and willing Fusion providing additional optionality for customers to deploy. Nvidia AI accelerators while leveraging high performance, scale up networks, based on unwilling technology.
Next we announced a partnership with alip Technologies to advance the Silicon ecosystem. For AI rack scale, infrastructure by combining our comprehensive connectivity portfolio with their custom Asic development capabilities.
Within the cxl, ecosystem, industry progress continues with sap recently highlighting their collaboration with Microsoft featuring Intel's x16 processors to optimize sap. Hana database performance by utilizing cxl memory expansion.
lastly, we joined AMD on stage during their advancing AI, 2025 keynote presentation, as a trusted partner to Showcase UA link, which is the only truly open Memory, semantics based scale of fabric purpose, built for AI workloads,
Jitendra Mohan: We define this AI Infrastructure 2.0 transition as the proliferation of open, standards-based AI rack scale platforms that leverage broad innovation, interoperability, and a diverse multi-vendor supply chain. This transition is in its early stages, and we are strategically crafting our roadmaps to help lead these secular connectivity trends over the coming years. The transition to AI Infrastructure 2.0 is especially significant at the rack level, as modern AI workloads demand ultra-low latency communication between hundreds of tightly integrated accelerators over a scale-up network. Astera Labs is well-positioned to support this infrastructure transformation as an anchor solution partner with expertise across the entire connectivity stack. First, we support a variety of interconnect protocols, including UALink and PCIe for scale-up, Ethernet for scale-out, and CXL for memory.
To continue the Relentless pursuit of AI model performance data center infrastructure providers are beginning a transformation to what we call AI infrastructure 2.0?
We Define this area infrastructure 2.0 transition as the proliferation of Open Standards based AI rack, scale platforms that leverage broad Innovation interoperability and a diverse multi. Vendor supply chain.
This transition is in its early stages and we are strategically crafting, our road maps to help lead these secular connectivity Trends over the coming years.
The transition to AI infrastructure 2.0, especially significant at the rack level, is modern AI workloads. Demand for ultra-low latency communication between hundreds of tightly integrated accelerators over a scale of network.
Estab is well positioned to support this infrastructure transformation as an anchor solution partner with expertise across the entire connectivity stack.
Jitendra Mohan: We are very excited about the momentum behind the UALink scale-up connectivity standard, which exemplifies the open ecosystem approach by combining the low latency of PCIe and the fast data rates of Ethernet to deliver best-in-class end-to-end latency and bandwidth. Next, we provide a broad suite of intelligent connectivity products to address the entire rack across both purpose-built silicon and hardware solutions, all featuring our Cosmos software for best-in-class fleet monitoring and management. Lastly, our deep partnerships across the entire ecosystem continue to expand as we work closely with ASIC and GPU vendors to align features, interoperability, and roadmaps to solve the rack scale connectivity challenges of tomorrow. In summary, Astera Labs has demonstrated strong momentum in our business, and the prospects for continued diversification and scale are driving our roadmaps and R&D investment.
First, we support a variety of interconnect protocols, including ulink and pcie for scale up, ethernet for scale out and cxl for memory.
We are very excited about the momentum behind the ulink. Scaleup connectivity standard, which exemplifies the open ecosystem approach by combining the low latency of pcie and the fast data, rates of ethernet to deliver best-in-class, end-to-end latency and bandwidth.
Next, we provide a broad Suite of intelligent connectivity products to address the entire rack across both purpose-built, silicon and Hardware Solutions, all featuring our Cosmos software for best-in-class Street monitoring and management.
Lastly, our deep Partnerships across the entire ecosystem, continue to expand, as we work closely with Asic and GPU vendors to align features, interoperability and road maps to solve the rack scale connectivity, challenges of tomorrow.
Jitendra Mohan: We are in the early stages of the AI Infrastructure 2.0 transformation, which Astera Labs is uniquely positioned to help proliferate over the coming years. Scale-up connectivity for rack scale AI infrastructure alone will add close to $5 billion of market opportunity for us by 2030, and we remain committed to supporting our customers as they choose the architectures and technologies that best suit their AI performance goals and business objectives. With that, let me turn the call over to our President and COO, Sanjay Gajendra, to outline our vision for growth over the next several years.
In summary, Sr labz is demonstrated strong momentum in our business and the prospects for continued diversification and scale are driving our road maps in R&D investment.
We are in the early stages of the AI Infrastructure 2.0 transformation, which has started. Astera Labs is uniquely positioned to help proliferate over the coming years.
Scale of connectivity for rack scale, AI infrastructure alone will add close to 5 billion dollars of Market opportunity for us by 2030 and we remain committed to supporting our customers as they choose the architectures and technologies that best suit their AI performance goals and business objectives.
Sanjay Gajendra: Thanks, Jitendra, and good afternoon, everyone. Today, I want to provide an update on our recent execution, followed by an overview of the meaningful market opportunities and growth catalysts that Astera Labs will address within the forthcoming transition to AI Infrastructure 2.0. Our goal is to deliver a purpose-built connectivity platform that includes silicon, hardware, and software solutions for rack scale AI deployments. To achieve this goal, our approach has been to increase our addressable dollar content in AI servers by rapidly expanding our product lines to provide a comprehensive connectivity platform and capture higher-value sockets that include smart cable modules, gearboxes, and fabric solutions. We also see increasing attach rates driven by higher-speed interconnects in platforms deployed by customers who are collectively investing hundreds of billions of dollars on AI infrastructure annually.
With that, let me turn the call over to our president and CEO Sanjay gajendra to outline our vision for growth over the next several years.
Thanks to Indra and good afternoon, everyone.
Today, I want to provide an update on our recent execution followed by an overview of the meaningful Market opportunities and growth Catalyst that Esther Labs will address within the forthcoming transition to AI infrastructure 2.0.
Our goal is to deliver a purpose-built connectivity platform that includes silicon hardware and software solutions for rack scale. AI deployments.
To increase our addressable dollar content in AI servers by rapidly expanding our product clients to provide a comprehensive connectivity platform and capture higher value sockets. That includes smart cable, modules, gear boxes and fabric Solutions.
Sanjay Gajendra: Starting in Q2 of 2025, Astera Labs executed the next step in its high-growth evolution by ramping our PCIe Scorpio fabric switches and AD6 retimers into volume production. This latest wave of growth has further diversified our overall business, as we now have three product lines contributing about 10% of total sales. During this transition, our silicon dollar content opportunity has expanded into the range of multiple hundreds of dollars per AI accelerator, which has effectively established a new revenue baseline for the company. Looking ahead, we are excited about the opportunities enabled by scale-up interconnect topologies. Given the extreme importance of scale-up connectivity to overall AI infrastructure performance and productivity, we see Scorpio X-series solutions as the anchor socket within next-generation AI racks. We are engaged with over 10 unique AI platform and cloud infrastructure providers who are looking to utilize our fabric solution for their scale-up networking requirements.
We also see, increasing attach rates driven by higher speed interconnects in platforms deployed by our by customers who are collectively investing hundreds of billions of dollars on AI infrastructure annually.
Starting in Q2 of 2025, Esther Labs executed the next step in its high growth evolution by ramping. Our pcie Scorpio fabric switches and 863 times into volume production. This latest wave of growth has further Diversified our overall business. As we now have 3 product lines contributing about 10% of total sales.
During this transition, our silicon dollar content opportunity has expanded into the range of multiple hundreds of dollars per AI accelerator which has effectively established a new Revenue Baseline for the company.
Looking ahead. We are excited about the opportunities enabled by scale. Up interconnect topologies.
Given the extreme importance of scale up connectivity to overall AI infrastructure performance and productivity. We see Scorpio X Series Solutions as the anchor socket with the Next Generation AI racks.
Sanjay Gajendra: We look for Scorpio X-series to begin shipping for customized scale-up architectures in late 2025, with a shift to high-volume production over the course of 2026. With the ramp of Scorpio X-series for scale-up connectivity topologies next year, we expect our overall silicon dollar content opportunity per AI accelerator to significantly increase. Overall, we expect this to be another step up from a baseline revenue standpoint. Also, given the size of the scale-up connectivity opportunity, we expect our Scorpio X-series revenue to quickly outgrow Scorpio P-series revenue. In 2026 and beyond, cloud platform providers and hyperscalers will begin to deploy next-generation platforms as the industry transitions to AI Infrastructure 2.0. We believe the fastest path to this transformation lies in purpose-built solutions developed within open ecosystems with a multi-vendor supply chain.
We are engaged with over 10 unique, AI platform and Cloud. Infrastructure providers who are looking to utilize our fabric solutions, for their scale up, networking requirements.
We look for Scorpio X Series to begin shipping for customized scale up architectures. In late, 2025 with a shift, to high volume production over the course of 2026.
With the ramp of Scorpio X Series for scale up connectivity topologies next year.
We expect our overall silicon dollar content opportunity per AI, accelerator to significantly increase.
Overall, we expect this to be another step up from a baseline Revenue standpoint.
Also given the size of the scale up connectivity opportunity. We expect our Scorpio X Series Revenue to quickly outgrow. Scorpio P series Revenue.
Sanjay Gajendra: For Astera Labs, this transformation will be the catalyst for the next wave of overall market opportunity and revenue growth. Our expertise and support for major interconnect protocols, including PCIe, Ethernet, CXL, and UALink, puts us in an excellent position to participate in these next-generation design conversations. UALink represents the cleanest and most optimized scale-up strategy for AI accelerator providers, given its robust performance potential, open ecosystem, diverse supply chain, and purpose-built approach. Early industry momentum has been very encouraging, with multiple hyperscalers and several compute platform providers looking to incorporate UALink into their accelerator roadmap and engaging with RFPs as an indication of strong interest. As a leading promoter of UALink, Astera Labs is committed to developing and commercializing a broad portfolio of UALink connectivity solutions, ranging from AI fabrics to signal conditioning solutions and other I/O components.
In 2026 and beyond, cloud platform providers and hyperscalers will begin to deploy next-generation platforms as the industry transitions to AI Infrastructure 2.0. We believe the fastest path to this transformation lies in purpose-built solutions developed within open ecosystems with a multi-vendor supply chain.
For estab, this transformation will be the Catalyst for the next wave of overall Market opportunity and revenue growth. Our expertise and support for major interconnect protocols including pcie ethernet cxl and UA link. Puts us in an excellent position to participate in these next Generation design conversations.
You will link represents the cleanest and most optimized. Caleb strategy for AI accelerator providers given its robust performance, potential open, ecosystem, diverse, supply chain, and purpose-built approach early industry. Momentum has been very encouraging with multiple hyperscalers and several cam
Ute platform providers are looking to incorporate UV link into their accelerator roadmap and are engaging with RFPs as an indication of strong interest.
Sanjay Gajendra: Proliferation of UALink in 2027 and beyond will represent a long-term growth vector for Astera Labs. In conclusion, we are proud of our execution over the past several years, demonstrating strong and profitable revenue growth, diversification of customers and applications, and exposure to a broadening range of AI infrastructure applications and use cases. We believe this momentum is in its early stages as we fully embrace an industry transition to AI Infrastructure 2.0, which will expand our opportunity across even more customers and platforms. Over the next several years, we look to build upon this newly established baseline of business as we partner tightly with our customers and the broader ecosystem to deliver and deploy best-in-class rack scale solutions to fuel the next wave of AI evolution.
As a leading promoter of UA link after a Labs is committed to developing and commercializing a broad portfolio of UA link connectivity Solutions. Ranging from AI Fabrics to Signal conditioning Solutions, and other IO components.
Proliferation of UA Link in 2027 and Beyond will represent a long-term growth Vector for a labs.
Identification of customers and application and exposure to a broadening range of AI infrastructure applications and use cases.
Sanjay Gajendra: With that, I will turn the call over to our CFO, Mike Tate, who will discuss our Q2 financial results and our Q3 outlook.
Mike Tate: Thanks, Sanjay. And thanks to everyone for joining the call. This overview of our Q2 financial results and Q3 guidance will be on a non-GAAP basis. The primary difference in Astera Labs' non-GAAP metrics is stock-based compensation and its related income tax effects. Please refer to today's press release available on the investor relations section of our website for more details on both our GAAP and non-GAAP Q3 financial outlook, as well as a reconciliation of our GAAP to non-GAAP financial measures presented on this call. For Q2 of 2025, Astera Labs delivered quarterly revenue of $191.9 million, which was up 20% versus the previous quarter and 150% higher than the revenue in Q2 of 2024. During the quarter, we enjoyed revenue growth from both our Aeries and Taurus product lines, supporting both scale-up and scale-out PCIe and Ethernet connectivity for AI rack-level configurations.
We believe this momentum is in its early stages. As we fully Embrace and Industry transition to AI infrastructure 2.0 which will expand our opportunity across even more customers and platforms over the next several years, we look to build upon this newly established Baseline of business as we partner tightly with our customers and the broader ecosystem to deliver and deploy best-in-class rack scale, solutions to fuel the next wave of AI. Evolution with that, I will turn the call over to our CFO, Mike gate who will discuss our Q2 Financial results and our Q3 Outlook
Thanks Sanji and thanks to everyone for joining the call. This overview of our Q2 Financial results in Q3 guidance, will be on a non-gaap basis.
The primary difference in the sterile lab's non-gaap metrics is stop based compensation and its related to income tax effects.
Please refer to today's press release available on the investor relations section of our website for more details on both our GAAP and non-GAAP Q3 financial outlook, as well as a reconciliation of our GAAP to non-GAAP financial measures presented on this call.
For Q2 of 2025, Astera Labs delivered quarterly revenue of 191.9 million, which was up 20% versus the previous quarter and 150% higher than the revenue and Q2 of 2024.
Mike Tate: Scorpio smart fabric switches transitioned to volume production in Q2 with our P-series product line for PCIe 6 scale-out applications deployed within leading GPU customized rack scale systems. LEO CXL controllers shipped in pre-production volumes as customers continued to work towards qualifying platforms ahead of volume deployment. Q2 non-GAAP gross margin was 76% and was up 110 basis points from March quarter levels, with product mix remaining largely constant across higher volumes. Non-GAAP operating expenses for Q2 of $70.7 million were up roughly $5 million from the previous quarter as we continued to scale our R&D organization to expand and broaden our long-term market opportunity. Within Q2 non-GAAP operating expenses, R&D expenses were $48.9 million. Sales and marketing expenses were $9.4 million, and general and administrative expenses were $12.4 million. Non-GAAP operating margin for Q2 was 39.2%, up 550 basis points from the previous quarter.
During the quarter, we enjoyed Revenue growth from both our Aries and Taurus, product lines supporting both scale up and scale out pcie and ethernet connectivity. For AI rack level configurations,
Scorpio Smart. Fabric switches transition to volume production in Q2 with our P series product line for PCI 6, scale out applications deployed within leading GPU customized rack scale systems
Leo cxl controller, shift and pre-production volumes as customers. Continue to work towards qualifying platforms. Ahead of volume deployment, Q2 non-gaap growth margin was 76% and was up 110 basis points from March quarter levels with product mix remaining, largely con constant across higher volumes.
Non-gaap operating expenses for Q2 of 70.7 million were up roughly million dollars from the previous quarter, as we continue to scale. Our R&D organization to expand and broaden, our long-term Market opportunity,
Within Q2 non-gaap operating expenses R&D expenses. Were 48.9 million sales and marketing expenses were 9.4 million and general and administrative expenses were 12.4 million.
Mike Tate: Interest income in Q2 was $10.9 million. Our non-GAAP tax rate for Q2 was 9.4%. Non-GAAP fully diluted share count for Q2 was 178.1 million shares, and our non-GAAP diluted earnings per share for the quarter was 44 cents. Cash flow from operating activities for Q2 was $135.4 million, and we ended the quarter with cash, cash equivalents, and marketable securities of $1.07 billion. Now turning to our guidance for Q3 of fiscal 2025, we expect Q3 revenues to increase to within a range of $203 million and $210 million, up roughly 6% to 9% from the second quarter levels. For Q3, we expect Aeries, Taurus, and Scorpio to provide growth in the quarter. For Aeries, we are seeing growth from a number of end customer platforms where we support scale-up and scale-out connectivity. Taurus growth is driven by new designs going into volume production for scale-out connectivity.
Non-gaap operating margin for Q2 was 39.2% of 550 basis points from the previous quarter.
Interest income in Q2 was 10.9 million.
Our non-gaap tax rate for Q2 was 9.4%.
Non-gaap fully diluted share count for Q2 was 178.1 Million shares and our non-gaap diluted earnings per share for the quarter was 44 cents.
Cash flow from operating activities for Q2 was 135.4 million and we ended the quarter with cash cash equivalents and marketable securities of 1.07 billion dollars.
Now, turning to our guidance for Q3 of fiscal 2025.
We expect Q3 revenues to increase to within a range of 203 million. And 210 million up roughly 6 to 9% from the second quarter levels.
For Q3, we expect Aries, Taurus and Scorpio to provide growth in the quarter. For Aries. We are seeing growth from a number of End customer platforms where we support scale up and scale out connectivity.
Mike Tate: Scorpio will primarily be driven by the continued deployment of our P-series solutions for scale-out applications on third-party GPU platforms. We expect non-GAAP gross margins to be approximately 75%, with a mix between our silicon and hardware module businesses remaining largely consistent with Q2. We expect third-quarter non-GAAP operating expenses to be in the range of approximately $76 million to $80 million. Operating expense growth in Q3 is driven by the continued investment in our research and development function as we look to expand our product portfolio and grow our addressable market opportunity. Interest income is expected to be $10 million. Our non-GAAP tax rate should be approximately 20%.
Taurus growth is driven by new designs going into volume production for scale out connectivity.
Scorpio will primarily be driven by the continued deployment of our P series solutions for scale out applications on third-party GPU platforms.
We expect non-gaap growth margins to be approximately 75% with a mix between our silicon and Hardware module businesses, remaining largely consistent with Q2.
We expect third quarter, non-gaap operating expenses to be in the range of approximately 76 million to 800 million.
Research and development function as we look to expand our product portfolio and grow our addressable Market opportunity.
Interest income is expected to be 10 million.
Mike Tate: The increase in our non-GAAP Q3 tax rate reflects the impact of the recent change in the tax law passed in July, with an expectation that our full-year non-GAAP tax rate for 2025 to now be approximately 15% following this tax law change. Our non-GAAP fully diluted share count is expected to be approximately 180 million shares. Adding this all up, we are expecting non-GAAP fully diluted earnings per share of a range of 38 cents to 39 cents. This concludes our prepared remarks, and once again, we appreciate everyone joining the call. And now we will open the line for questions. Operator?
Our non-gaap tax rate should be approximately 20%, the increase in our non-gaap, Q3 tax rate, reflects the impact of the recent change in the tax law passed in July with an expectation that our full year non-gaap tax rate for 2025 to now via approximately 15% following this tax law change.
Our non-gaap fully diluted, share count is expected to be approximately 180 million shares.
Adding this all up, we are expecting non-gaap fully diluted earnings per share of a range of 38 cents to 39 cents.
This concludes our prepared remarks. And once again, we appreciate everyone joining the call and now we will open the line for questions, operator.
Rebecca: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Harlan Sewer with JP Morgan. Your line is open.
At this time, I would like to remind everyone that in order to ask a question, please press star, then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Harland sewer with JP Morgan, your line is open.
Harlan Sur: Good afternoon. Congratulations on the very strong results. You know, within your Scorpio family of switching products, it was good to see the strong ramp of Scorpio P this past quarter. Within the same portfolio, it looks like the team is qualified and set to ramp its Scorpio X-series for XPU to XPU ASIC connectivity. You talked about 10 platform wins. What's been the biggest differentiator? Is it performance, i.e., latency, throughput? Is it fully optimized with your signal conditioning products? Is that a consideration? And how much does the familiarity with Cosmos software play a role? And you guys have always called this an anchor product, which pulls in more of your solutions alongside your Cosmos software suite. Is this how it's playing out with your ASIC XPU customers you lead with Scorpio X, and you've been successful at driving higher attach rates with your other products?
Hey, good afternoon, congratulations on the very strong results, you know, within your Scorpio family of switching products. It was good to see the strong ramp of Scorpio ped this past quarter within the same portfolio looks like the team is qualified and set to ramp this Scorpio X Series. For xpu to xpu Asic connectivity. You talked about 10 platform wins? What's been the biggest differentiator? Is it is it performance? IE latency throughput. Is it fully optimized with your signal conditioning products? Is that a consideration? And how much does the familiarity with Cosmos software? Uh, play a role. And you guys have always called this an anchor product, which pulls in more of your Solutions, alongside your Cosmos software suite is, is this how it's playing out with your basic? Xpu customers, you lead with Scorpio ex and you've been successful at driving higher attached with your other products.
Jitendra Mohan: Yeah, Pardon, thank you so much for the question, and you are absolutely right. The success that we have enjoyed so far is rooted on primarily, I would say, three things. First is just our closeness to our customers. So over this time period, we have earned the kind of a trusted partner status with our customers, so we get a ringside view of what their plans are, what it is that they're planning to deploy, and when. The second part of that is really our execution track record. We have shown time and again that our team executes with purpose, and we deliver to our promises. So with both of these, we get the first sort of, you know, call for developing new products for going into new product platforms at our customers. And that's where the Cosmos software suite comes in.
Jitendra Mohan: Cosmos, for the audience here, is our software suite that unites all of our products together. And this is how we allow our products to be customized, optimized for unique applications, as well as collect a lot of very rich diagnostics information that allows our customers to really see how their connectivity infrastructure is operating. So with the use of Cosmos, we can customize our products to deliver higher performance, which translates to sometimes lower latency, sometimes higher throughput, sometimes different diagnostics features for our customers. And as a result of that, we've been able to use Scorpio as an anchor socket in these applications because this is something that gets designed upfront, and then we figure out signal conditioning opportunities with our Aeries and Taurus products in these platforms.
If I don't, uh, thank you so much for the question and you're absolutely right. Um, the success that we have enjoyed so far, is rooted on primarily? I would say 3 things, um, first is just our closeness to our customers. So over this time period, we weren't the kind of a trusted partner status with our customers. So we get a ringside view of what their plans are. Um, what it is that they're planning to deploy and when, uh, the second part of that is really our execution track record. We have shown time and again, uh, that, that our team executes with purpose and we deliver to our promises. So, with both of these, we get the first sort of, you know, uh, call for developing new products for going into new product platforms that our customers. Um, and that's where the cosmos, uh, uh, software suite comes in Cosmos,
Uh, for the audience here is our our software suite that unites all of our products together. And this is how we allow our products to be customized optimized for for Unique applications, as well as collect a lot of very rich Diagnostics information. That allows our customers to really see how their uh incorrect activity. Infrastructure is operating. So with the use of Cosmos, we can customize our products to deliver higher performance, which translates to sometimes lower latency, sometimes higher throughput. Sometimes different diagnostic features for our customers, um, and as a result of that, we've been able to, to use Scorpio as an anchor socket, uh, in these applications because this is something that, that gets designed
Jitendra Mohan: And the Scorpio X in particular, the Scorpio X in particular, because the customers use kind of derivatives of PCI Express, we have been able to customize Scorpio X to deliver this lower latency and higher throughput.
Signed in up front. And then we figured out signal conditioning opportunities, uh, with our Aries and Taurus products in these uh, platforms.
and the, the quantum X in particular,
The Scorpio X in particular because the customers use kind of derivatives of PCI Express. We have been able to customize Scorpio ex to deliver this lower latency and higher throughput.
Harlan Sur: Thank you for that. Very insightful. And for my second question, you know, just over the past 90 days, we've heard a lot of focus and announcements on scale-up networking connectivity. On UALink, as you mentioned, right, the team did the Wall Street teach-in back in May. Obviously, the team is a key member of the UALink consortium. AMD, you know, recently fully endorsed UALink as its scale-up networking architecture of choice for all future generations of its rack scale solutions. And we know of at least one other ASIC XPU vendor that's going to be moving to UALink as well. Beyond this, like, what's been the reception and interest level on UALink? And can or will the Astera team speed up its time to market on UALink-based products, or is the timing still to sample products next year with volume deployments in calendar '27?
Beyond this, what's been the reception and interest level on UA Link? Can or will the Astera team speed up its time to market on UA Link-based products, or is the timing still at a sample product stage? Next year, with volume deployment in calendar 2027?
Sanjay Gajendra: Yeah, Harlan, this is Sanjay here. Thank you for the question. To your point, absolutely, we see a tremendous amount of interest with UALink. There are obviously the technical advantages that you get with low latency and familiarity with how the transport layer works based on its roots, which is PCIe. Also, the fact that it supports memory semantics natively is also a strong reason why customers are liking that interface. The big upside, of course, is the physical layer, which now has been upgraded to support up to 200 gig on the Ethernet side. So there are several technical reasons that are going in favor of UALink. So customers that were using PCIe or PCIe-like fabrics see this as a natural progression in order to support the AI infrastructure needs going forward. Now, what we'll also note is that, you know, it's not just about technical stuff.
Sanjay Gajendra: It's about ecosystem and the broad availability of components that are required for scale-up. And that's, again, where UALink shines in the sense that it's truly an open standard. It's truly a multi-vendor supply chain. And those are additional reasons why customers tend to gravitate towards UALink. And we do have, like I noted, several customers. We're counting 10 plus right now that are looking at leveraging some of the open standards, whether it's PCIe in the short term, a combination of PCIe and UALink in the midterm, and transitioning perhaps to a broader UALink deployment in 2027 and later. So overall, I think the momentum is shifting positively, and we are excited to be in the middle of it and driving the adoption of open and scalable supply chain in the market.
Yeah. Um, Harland this is Sanjay here. Thank you for the question. Um um. To your point. Absolutely. We see tremendous amount of Interest with UL link. There are obviously the technical advantages that you get with low latency and familiarity with um how the the transport layer Works based on um its roots which is pcie. Also the fact that it supports memory, semantics natively is also a strong reason why um, customers are are liking that interface. The big uh, upside of course is the physical layer which now has been upgraded to support up to 200 gig on the ethernet side. So, there are several technical reasons that are going in favor of UL link. So customers that were using pcie or pcie like Fabrics. See this as a natural progression in order to support the uh the AI infrastructure needs going forward. Now what will also note is that um you know, it's not just about technicals
Up. It's about ecosystem and the broad availability of components that are required for scale up, and that's again where you willing shines in the sense that it's truly a open standard. It's truly a multi-, vendor, um, uh, supply chain, and those are additional reasons. Why customers, uh, tend to gravitate towards your link and we do have like a noted, um, several customers. Uh, we're counting 10 plus right now that are looking at leveraging, some of these Open Standards, whether it's PC in the short, term combination of pcie in UA Link in the midterm and transitioning. Perhaps to a broader, you willing deployment in 2027 and later. So, overall I think the momentum um, is shifting a positively and we are excited to be in the middle of it and driving the adoption of open, uh and and scalable uh, supply chain in the market.
Harlan Sur: Great. Thank you.
Great. Thank you.
Rebecca: Your next question, counseling line of Ross Seymour with Deutsche Bank. Your line is open.
Ross Seymore: Hi, guys. Thanks for letting me ask a couple of questions and congrats on the strong results and guidance. Maybe to no surprise, I wanted to stay on the Scorpio family. The diversity of engagements is also interesting to me. And as far as you're talking about it as an anchor tenant, I just wondered if you could go into a little bit of the profile of the types of customers, how it's changed from your initial customer, and then perhaps how much incremental business and interest those customers are showing in other products as they realize as well it's an anchor tenant. Sort of how are you leveraging that Scorpio relationship to bring in more business? Any sort of illustrations of that would be helpful.
Your next question comes from the line of Ross Seymour with Georgia Bank. Your line is open.
Hi guys. Thanks for let me ask a couple questions and congrats on the strong results and guidance. Uh maybe to no surprise, I wanted to stay on the Scorpio family. The the diversity of engagements is also interesting to me and and as far as you're talking about it as an anchor tenant, I just wondered. If you could go into a little bit of the, the profile of the types of customers, how it's changed from your initial,
Customer. And then, perhaps how much incremental business and interests? Those customers are showing in other products as they realize as well. It's an anchor, tenants sort of how are you leveraging that scorpio relationship to bring in more business? Any sort of illustrations of that would be helpful.
Sanjay Gajendra: Yeah, absolutely. Again, thank you for that question. So just to kind of remind, we have two product series within Scorpio. One is the Scorpio P-series that just started ramping to production to support some of the third-party GPUs that are ramping. And the P-series is designed for scale-out connectivity, very broad use case from interconnecting GPUs to custom NICs to storage and things like that. So Scorpio P-series, we have a broad base of customers that are leveraging that solution, designing in, going to production, deep in technical evaluations, and so on. So that would be a broad play for us with PCIe-based scale-out interconnect and storage type of interconnect. Scorpio X-series, which is designed for scale-up networking to interconnect the GPUs and accelerator. This, we see, like you noted, as an anchor socket because that is truly the socket that holds all the GPUs together.
Yeah, absolutely again, thank you for that question. Um, so just to kind of remind we have 2 product CDs within Scorpio. Uh, 1, uh, is the Scorpio P series that just started ramping into production to support, uh, some of the um um, third-party gpus that are ramping and the PCS is designed for scale out connectivity, very broad, use case, from interconnecting gpus to custom, mix to storage and things like that. So Scorpio P series, we have a broad base of customers that are uh that are leveraging that solution designing in going to production you know, deep in technical evaluations and so on. So that would be a broad play for us. Uh with pcie based scale out, interconnect and storage type of interconnect, Scorpio X Series, which is designed for scale up networking to interconnect the gpus and accelerator. This uh, we see like you noted as an anchor
Sanjay Gajendra: And today, like we noted, we have 10 plus customers that we are engaging when it comes to scale-up networking using Scorpio X-series. And this is also pulling in the rest of our products, both because of the advantages that Cosmos brings to the table by unifying all of our products, plus at the same time, the fact that someone is using a fabric solution and they would need a gearbox or a retimer or other controller type of products. Those are all playing into having that first call with a customer or having that early access at an architectural stage, which translates into an opportunity for us where we can not only offer the fabric device, but also the surrounding components that come along with it as a connectivity platform.
The fabric device, but also the surrounding components that come along with it as a connectivity platform.
Ross Seymore: Thanks for that, Cutler. And I guess as my second question, one for Mike, and I think the first one's going to be pretty quick, so I might have a clarification in there as well. The gross margin is beaten, and you're staying solidly above your 70% long-term target. So I guess the question is, is there anything that slows down your trajectory to the 70%? And the clarification would be the tax rate at 20%. Is that this year, but not next year? Which is the number we should think of going forward, the 15, the 20, or the 10 you used to be? Thank you.
Mike Tate: Okay. Thanks, Ross. I'll start with the taxes. The 20% is specifically to Q3 because that was the quarter that the tax law changed, so we had to catch up for the previous two quarters. For Q4, you should expect it to normalize around 15%. And then, you know, longer term, with this new tax law in place, it's probably in the around the 13% range. For the gross margins, when we have an inflection up in revenues like we did, you do have the benefit of higher revenues over fixed operating costs. So that was the incremental benefit for us. We do expect to see some pretty good growth from our hardware modules going into the back half of this year into 2026.
Thanks for that color. And I guess as my second question, uh, one for Mike, and I think the first one's going to be pretty quick. So I might have a clarification in there as well. The gross margin is beating and you're staying solidly above your 70% long-term target. So I guess the question is, is there anything that slows down your trajectory to the 70%? And the clarification would be the tax rate at 20% is that this year but not next year, which is the number we should think of going forward, the 15, the 20, or the 10 you used to be. Thank you.
Okay, I, I thanks Russ. I'll start with the taxes. Um, the 20% is specifically to Q3, um, because that was the quarter that the tax law changed. So we had to catch up for the previous 2 quarters, uh, for Q4 you expect it to normalize around, 15% and then, you know, longer term um, with this new tax law in place is is probably in the around the 13% range.
Mike Tate: So, you know, as we make it through 2026, we still encourage people to think of our long-term target model at 70% as something that we'll be delivering.
Ross Seymore: Thank you.
Um, for the gross margins. Um, when we have a deflection up in revenues, like we did, you, you do have the benefit of higher revenues over fixed operating costs. So that, that was the incremental benefit for us, we do expect to see uh, some pretty good growth from our Hardware modules, going into the back half of this year into 2026. So, um, you know, as we make it through 2026, we still encourage people to think of our long-term Target Model 70%, um, as as something that will be delivering,
Thank you.
Rebecca: Your next question comes from the line of Blaine Curtis with Jefferies. Your line is open.
Ross Seymore: Hey, guys. I'll echo the congrats on the results. I guess I want to ask on the Scorpio products. I mean, I think 10% in the June quarter was ahead of what many people were looking at. So maybe you could just help us with the shape of that product. I mean, you still said 10% for the year. I'm assuming it's greater than 10%, but I'm sure it's much greater than that. I mean, can you help us a little bit with, as you look to September, you know, you have $15 million of growth, how to think about Aeries versus Scorpio, and if any kind of thoughts on how to guide us to model this Scorpio product line this year?
Your next question comes from the line of Blaine Curtis with Jeffrey's. Your line is open. Hey guys, I'll Echo the congrats on the results. Um, I guess I want to ask on the Scorpio product. I mean
I think 10% in the June quarter was ahead of what many people were looking at. So maybe you can just help us with the shape of that product. I mean, you still said, 10% for the year, I'm assuming it's or greater than 10% but I'm sure it's much greater than that. I mean, can you help us a little bit with as you look to September, you know you have 15 million dollars of growth how to think about areas for Scorpio. And if you any kind of
thoughts on how to guide us to model this Scorpio uh product line this year.
Mike Tate: Yeah, this is Mike. Yeah, for Q2, the Scorpio P launched into volume production a little ahead of what we anticipated, so it provided the upside in the quarter. From this base level, now it continues to grow in Q3 and Q4. But we have more P-series designs kind of coming into play that will layer on top of it. That's more in 2026. For the X-series, we do have pre-production volumes here, but really that starts to go into high volume production during the course of 2026 and layering even more growth. Ultimately, what we called out is the X-series is going to grow relatively bigger than P-series. So it's a very exciting opportunity, just given the dollar value of the design opportunities are much higher than the P-series, just given the use cases of the scale-up connectivity. So both will grow.
Yeah, this is Mike. Um, yeah, for Q2 the Scorpio P launched uh, into volume production, a little ahead of what we anticipated. So provided the upside in, in the quarter, um, from this space level. Now it is it continues to grow in Q3 and Q4. Um, but we, we have more P series designs kind of, uh, coming into play though, later on on top of it, but that's more in 2026, uh, for the X Series. Um, we we do have pre-production volumes here but really that starts to go into high volume production during the course of 2026 and Larry, even more growth. Um, ultimately, what we called out is, the X Series is going to be grow grow to be bigger than P Series. So it's a very exciting opportunity just given the dollar value of the design opportunity.
Mike Tate: We did reiterate that it will exceed 10% of our revenues for the year, which is quite an accomplishment for the first year out of a product line. It is poised to be our largest product line of the company as we make it through the following two years.
Ross Seymore: Thanks. And I just want to ask, I think in terms of the scale-up opportunity, clearly you were clear that X will be more material next year, kind of pre-production this year. Just want to ask this because there was a lot of rumors out there in terms of, are there any opportunities for scale-up with Scorpio P or maybe in short, are you going to be shipping to anything material this year for scale-up versus the scale-out you already talked about?
Opportunities are much higher than the piece or you just given the use cases of the scale of connectivity. Um, so both both will will grow. We did, we did reiterate that it will exceed 10% of our revenues for the year, which is quite an accomplished for the first year out of a product line. Um, it is poised to be our largest product line of the company, um, as, as we make it through the following 2 years.
Thanks and I just want to ask. Um, I think in terms of the scale up opportunity, clearly you were clear that acts will be more material next year, kind of pre-production this year.
Just want to ask this because there was a lot of rumors out there in terms of. Are there any opportunities for scale up with Scorpio or maybe insured? Are you going to be shipping to anything material this year for for scale up versus the scale out? You already talked about?
Mike Tate: The scale-up this year is predominantly pre-production volumes. And you know, these systems are pretty complex that they're shipping into, so we like to try to be conservative on how we, you know, telegraph those going forward. But the volume opportunities, scale-up connectivity for switching is a much bigger dollar opportunity for us as we look forward. But those designs really will start to enter into full volume production during the course of 2026, so not a driver in the next couple of quarters.
Ross Seymore: Thanks, Mike.
The the the scale up this year is predominantly pre-production volumes. Um, and you know, these systems are pretty complex that they're shipping into. So we like try to be conservative on how we, you know, Telegraph those going forward. But the, the volume opportunities, uh, ski scale up connectivity for switching is a much bigger dollar, uh, um, opportunity for us as we as we look forward. Um, but those designs really will start to enter into full volume production during the course of 2026. So, not in the, you know, not not a driver in the next couple quarters.
Thanks Mike.
Rebecca: Your next question comes from the line of Joe Moore with Morgan Stanley. Your line is open.
Your next question comes from the line of Joe Moore with Morgan Stanley. Your line is open
Harlan Sur: Great. Thank you. I wonder if you could talk about UALink versus other architectures and I guess your involvement with NVLink Fusion. Are you agnostic to those various solutions? Are you more favorable towards open source or proprietary? Just kind of walk us through the potential outcomes for you with these battles that are being fought.
Proprietary just kind of walk us through the the potential outcomes for you with these these battles that are being fought.
Jitendra Mohan: Yeah, yeah, Joe, this is Jitendra. Happy to do that. So let's start with NVLink just because NVLink is perhaps the most widely deployed scale-up architecture that's available today. And we are very happy to be part of the NVLink Fusion ecosystem. So if you look at the history of NVLink, it really is a fabric that is built ground up for AI. It uses memory semantics to make sure that all of the GPUs can be addressed as if they are one large GPU. It has low latencies. It does add Ethernet-based servers to get the higher speeds. And of course, NVIDIA has popularized that with their NVL72 deployment. If you go from there to, let's say, UALink, you find many similarities. UALink also has its genesis in PCI Express. It is a memory semantics-based protocol.
Jitendra Mohan: It uses lossless networking, you know, several other technical advancements that are suitable for AI workloads. And then the whole protocol is really custom-built for optimizing the throughput for AI type of traffic. So I think it does offer several advantages over other more proprietary protocols, some of which happen to be Ethernet-based and some are completely proprietary as well. The other advantage of UALink is it's open. It's an open ecosystem. We know that many hyperscalers are part of the promoter board members, as well as many vendors, frankly, who are working to deploy solutions for this UALink. And as a result, we expect to see a very vibrant ecosystem of vendors and customers with the UALink. And I think that'll be a defining characteristic and why we believe UALink will be adopted widely over time.
Yeah, yeah, I do, this is jetra happy to do that. Um, so let's start with Envy link, just because Envy link is perhaps the most widely deployed scale of architecture that's available today. Uh, and we are very happy to be, you know, part of the Envy link, Fusion ecosystem. So, if you look at the history of Envy link, it really, uh, is uh, fabric that is built. Ground up for AI. It uses memory semantics to make sure that all of the gpus uh can be addressed as you know as if they're 1 large GPU. Um it has a low latency is it does add Ethernet based service to get the higher speeds. Um and of course, Nvidia has popularized that with their nvl 72 deployment. Um, if you go from there to, let's say u a link, uh, you find many similarities, your link also has this Genesis in, in PCI Express. It is a memory semantics based protocol.
It uses lossless networking, you know, several other technical advancements that are suitable for AI workloads. And then, the whole protocol is really custom built for, for optimizing the throughput for AI type of traffic. Um, so I think it does offer a several advantages over other more, proprietary protocols, uh, some of which happen to be ethernet based and and some are completely proprietary as well. Uh, the other advantage of U link is it's open. Uh, it's an open ecosystem. Uh, we know that many hyperscalers are, are part of the, the, uh, um, the the promoter board member,
Jitendra Mohan: And as promoter members of UALink consortium ourselves, we are very happy to both participate in this standard and not only participate, but come up with a full portfolio of solutions that includes switches, retimers, cables, and what have you to enable our customers to build a full UALink. So to answer the question, the other question that you asked, with UALink, we have a lot of dollar content opportunity. But at the same time, we will continue to service our customers who are today using PCI Express, and we have a huge opportunity there, as well as Ethernet for scale-out applications, for cabling applications, and over time, also with NVLink Fusion.
Members, as well as many vendors frankly who are working to deploy solutions for this. You will link. And as a result, we expect to see a very vibrant, ecosystem of Provider of vendors and, and customers with the ulink and I think that will be its defining characteristic and why we believe ulink will be adopted widely uh, over time. And as a promoter members of ulink, Consortium ourselves. We are very happy to both participate in this, uh,
Standard and not only participate with come up with a full portfolio of solutions that includes switches uh, retailers cables. And what have you to enable our customers to build a full U link? So, to answer the question, the other question that you asked, will you link? We have a lot of dollar content opportunity, but at the same time we will continue to service our customers who are today using PCI Express. And we have a huge opportunity there, um, as well as ethernet for scale out applications for cabling applications. And over time also within Fusion,
Ross Seymore: That's very helpful. Thank you. And then I get the question a lot. If you guys can size your exposure to merchant GPU platforms versus ASIC, I know there's probably a little bit higher content opportunity for you on the ASIC side, but any sense for what that split looks like and where that may be going over time?
That's very helpful. Thank you. And then I get the question a lot. Um, if you guys can size your exposure to Merchants GPU platforms versus async, I know there's probably a little bit higher content opportunity for you on the A6 side. But any sense for what that split looks like and where that may be going over time.
Jitendra Mohan: Yeah, so we do address both of these opportunities. Our opportunity on the merchant GPU platform comes when our customers customize the rack designs. This is the opportunity for both our Aeries and Scorpio P-series that Sanjay and Mike touched upon earlier. We saw a lot of ramp happening with that, you know, this last quarter. In addition to that, we are also shipping the Taurus Ethernet cables for scale-out applications. But when you go to the scale-up, that becomes a very big opportunity for us just because of the density of interconnects when you're trying to connect all of these GPUs together. And when that network happens to be based on PCI Express, we have an even larger attach rate, which drives our dollar content on these XPU platforms into several hundreds of dollars per XPU.
Jitendra Mohan: So over time, we do see the Scorpio X family as our largest revenue contributor and largely deployed on XPUs.
Um, yeah, just so we do address both of these opportunities. Um, our opportunity on the merchant GP GPU platform comes when our customers customize, uh, the rack designs. Uh, this is the opportunity for both our Aries and Scorpio PCS, uh, that Sanjay and Mike touched upon earlier, we saw a lot of ramp happening with that, uh, you know, this last quarter in addition to that, we are also shipping the Taurus. Uh, ethernet cables for scale out applications. But when you go to the scale up, that becomes a very big opportunity for us just because of the density of interconnect, when you're trying to connect all of these gpus together and when that Network happens to be based on PCI Express, we have an even larger attach rate which drives our dollar content on these xpu platforms into several hundreds of dollars per xpu. So over time we do see the the uh Scorpio X family is our largest revenue contributor uh and largely deployed on on xus.
Ross Seymore: Great. Thank you very much.
Great, thank you very much.
Rebecca: Your next question comes from the line of Tom O'Malley with Barclays. Your line is open.
Ross Seymore: Hey, guys. Thanks for taking my question. You mentioned that you were engaged with 10 plus customers on the XSwitch side. Could you just give us a picture of how many of those are engaged on PCIe today and how many of those are engaged on the UAL side? And if you're engaged with one on PCIe, are you often engaged with one on UAL as well? Can you maybe talk about that split right now?
Your next question comes from the line of Tom Ali with Barclays. Your line is open.
Hey guys, thanks for taking my question. You you mentioned that you were engaged with 10 plus customers on the X switch side? Could you just give us a picture of how many of those are engaged on pcie today and how many of those are engaged on the Yule side? And if you're engaged with 1 on pcie, are you often engaged with 1 on Yule as well? Can you maybe talk about that split right now?
Sanjay Gajendra: Yeah, so this is Sanjay here. So what we can note is that the 10 plus opportunities that we highlighted, these are both hyperscalers as well as AI platform providers. And these are all today based on PCIe. So these are nearer-term opportunities that we're tracking. Having noted that, like Jitendra highlighted, UALink is a standard and open standard that contemplates the requirements of scale-up networking, you know, in terms of speed and other capabilities going forward. So many of these customers that we're engaging with today with PCIe are also looking at UALink. Some of them might continue to stay with PCIe. Some of them will transition to UALink in the midterm. But longer term, as UALink ecosystem develops and matures, we do expect that UALink will continue to be a solution that both the merchant GPU as well as custom accelerator providers would standardize on.
Um, customers that were engaging with today with pcie are also looking at UL link. Some of them might continue to stay with pcie, some of them will transition to ulink in the midterm but longer term as, um, you will link ecosystem, develops and matures, we do expect that you will link will continue to be a solution that, um, both the, um, uh, Merchant GPU as well as custom accelerator provides with standardized on.
Ross Seymore: Helpful. And then as my follow-up, I'm curious, and there's been obviously a lot of news articles intra-quarter about switching attach rates with XPUs and then also general-purpose silicon. So if you look at the large guy in the market in a 72 array, there's, you know, nine switch trays, a couple of switches per. So like a 25% switching attach rate to a single XPU or general piece of silicon in that instance. Like when you're ramping an XPU with a custom silicon customer, can you maybe walk us through like specifically with the XSwitch if that attach rate is higher or lower or what's the reason for that? That'd be super helpful. Thank you.
Helpful. And then, then as my follow-up, I, I'm curious and there's been obviously, a lot of news articles intra quarter about switching, attach rates with XP use. Um, and then also general purpose silicon. So if you look at the large guy in the market, uh, in a 72 array, there's there's, you know, 9 switch trays, a couple switches per, so like a 25% switching, attach rate to a single xpu or general piece of silicon in that instance. Like when you're ramping an xpu, with a, with a, a custom silicon, customer can you, maybe walk us through like specifically with the X switch, if that attach rate is higher or lower or what's the reason for that. Um, that would be super helpful. Thank you.
Sanjay Gajendra: Yeah, so obviously we don't comment on individual platforms and customer deployment scenarios. But in general, the Scorpio switches, X-series switches, interconnect GPUs, and there are, depending on the platform, there are different configurations for a number of GPUs in a pod. So within Astera and the product portfolio that we are developing, it's designed in a way that it addresses a variety of different use cases, and the attach rate varies. So it probably will be a broad answer to your question. But in general, we have the engagements, we have the design wins. Now it's a matter of all of these platforms getting qualified and ramping to production. With due course, of course, as they get into production, we'll be able to add more color on how that's shaping our revenue and our growth.
Yeah, so the obviously we don't comment on individual platforms and customer deployment scenario, but in general, the Scorpio switches exceed, the switches interconnect, gpus and there are, depending on the platform. There are different configurations, uh, for number of gpus in a port.
So, within esta and the product portfolio, that we are developing, is designed in a way that it addresses, a variety of different use cases and the attached rate varies, so it probably will be a broad answer to your question. But in general uh we have the the engagements we have the design wins. Now, it's a matter of all of these platforms getting qualified and ramping to production with due course. Of course, as they get into production will be able to add more color on how that um shaping uh, our revenue and our growth.
Rebecca: Your next question comes from the line of Tory Sandberg with Stifel Financial Corp. Your line is open.
Your next question comes from the line of Tori Sandberg with stifel financial Corp. Your line is open.
Harlan Sur: Yes, thank you. And let me add my congratulations as well. I guess my first question is on you talked about this new revenue base. I mean, you now have three product lines in production that obviously doubled your revenue base. Now you're talking about Infrastructure 2.0 and Scorpio series or X-series really, you know, sort of creating a new revenue level. So I mean, should we sort of infer with that that, you know, it will double the sort of run rate again as X-series starts to ramp? Is that the way we should look at it?
Yes, thank you. And let me add my congratulations as well. Um, I guess my first question is on you talked about this new Revenue base. Uh, I mean, you now have 3 product lines in production that obviously doubled your Revenue base. Now you're talking about, um, infrastructure 2.0 and Scorpio series X Series really, you know, sort of creating a new Revenue level. So, I mean, should we should we sort of infer with that as that, you know, you will double the sort of run rate, again, as X Series starts to to ramp, is that the way we should look at it?
Sanjay Gajendra: Yeah, great question. But I always like to make this correction. It's not retimer, it's retimer, just to keep our engineering folks happy. But you make a great point. And that's exactly we believe is the beauty of our business model where we have approached the business in a series of growth steps. We started the journey being on all the NVIDIA-based platforms with the PCIe retimers, which got the company off the ground from a revenue growth standpoint. The second step that we hit was to expand our PCIe retimer and Ethernet retimer business to go after custom ASICs. So this transition happened in Q3 of last year. Now where we are is our third step in that growth journey where we have ramped up our Scorpio.P-series,
Rebecca: PCIe-based switch products, along with our 86 retimers. So that's going on all the, you know, third-party NVIDIA-based GPU platforms that are ramping. The fourth step that we are highlighting as part of the call today is the Scorpio X series, which is designed for scale-up networking. And that transition is currently underway in the sense that we are still in pre-production. And like we highlighted, throughout 2026, we expect that wave to transition to high-volume production, providing us a new baseline for revenue. And these are, of course, higher-value sockets, meaning the dollar content with the Scorpio X series switches is significantly higher than what we have done so far. So you could expect that to play into the overall revenue projections that we would have as we get towards 2026. And the fifth step that we called out as part of the communication is the UL Link.
Yeah, great question. But I always like to make this correction is not retimer. It's retimer. Uh, just to keep it, uh, keep our engineering folks happy. Um, but uh, you make a great point. And that's exactly we believe is is the, uh, is the is the beauty of our business model where we have approached the business in a series of of of of growth steps. We started the journey being on all the Nvidia based platforms. Uh with the pcie Rhett timers uh which um got the company of the ground from a revenue growth standpoint. The Second Step that we hit was to uh expand our pcie re-timer and ethernet re-timer business to go after custom Asics. So this transition happened in Q3 of last year now. Where we are, is our third step in that growth Journey where we are. Uh, ramped up our, uh, Scorpio P series, uh, pcie, uh,
Based switch products along with our 863 timers. So that's going on all the um uh all the, you know, third-party Nvidia based GPU platforms, that are ramping um the fourth step that we are highlighting as part of the call today is a Scorpio X Series which is designed for scale up networking. And that transition is currently underway in the sense that we are still in pre-production and uh, like we highlighted
Rebecca: That is going to be a growth story in 2027. And that is a greenfield application for us with a much broader deployment of scale-up networking, along with a variety of other products that we intend to develop for UL Link. And that is going to be the fifth step that we are executing towards.
UA link that is going to be a growth story in 2027 and that is a Greenfield application for us with a much broader deployment of scale up uh networking along with a variety of other products that we intend to develop for UA link. And that is going to be the fifth step that we are executing towards.
Sanjay Gajendra: Yeah, thank you for walking through all that, Sanjay. I really appreciate it. And as my follow-up, and related to UL Link, it does feel like the standard is sort of regaining a lot of traction. I'm just curious why that is. Is it because of AI moving more into inferencing? Is it because of the 128-gig version? It just feels like there's been a little bit of a change in the last few months. So any color you can add on that would be great.
Yeah, thank you for walking through all that sanj. I really appreciate it and as my follow-up um and related to UL link it. It does feel like the standard is sort of regaining, a lot of traction. Um, I'm just curious why that is, is it because of, uh, AI moving more into inferencing, is it? Because of the 128 gig version, uh, it it just feels like there's been a little bit of a change in the last few months. So any caller you can add on. That would be great.
Jitendra Mohan: If you don't mind, could you repeat your question? We didn't quite get the question that you asked.
Sanjay Gajendra: Yeah, I was asking about UL Link sort of regaining a lot of traction. At least that's the way it feels to us. And I'm just wondering why that is. Is it because of AI moving more towards inferencing? Is it because of the 128-gig version? Or is there anything else that's going on there?
Jitendra Mohan: Yeah, thank you for clarifying that, Uri. So UL Link is gaining actually a lot of traction. If you just, as a reminder, UL Link was only introduced, the specification was only introduced towards the end of Q1 of this year. So since then, it has gained a tremendous amount of traction. We've got, you know, AMD talked about it very recently in Taipei as part of the OCP summit. And several of the hyperscalers are very closely engaged in figuring out what their roadmap intercepts will look like for UL Link, for all the reasons that we talked about earlier in the call. I will also say that the majority of these engagements are at 200 gigabits per second per lane rate and not at the 128.
If you don't mind, could you repeat your question? We didn't quite get, uh, the question that you asked. Yeah, I was asking about UA link sort of regaining, a lot of traction, at least. That's the way it. It feels to us. And I'm just wondering why that is, is it because of AI moving more towards inferencing? Is it? Because of the 128, the gig version, or is there anything else that's going on there?
Thank you for clarifying the toy. Yeah, so you're in evening is getting actually a lot of traction. Um, if you just for, as a reminder, you a link was only introduced. The specification was only introduced in towards the end of q1 of this year. So since then it is gained, tremendous amount of traction, uh, we've got uh, uh, you know, AMD talked about it very recently in Taipei as part of
The ocp summit. Um, and several of the hyperscalers are very closely engaged in figuring out what their road map, intercepts will look like for you willing for all the reasons that we talked about earlier in the call. I will also say that majority of these engagements are at 200 gigabit per second per Lane, uh, rate and not at the 128.
Sanjay Gajendra: Perfect. Thank you.
Perfect, thank you.
Mike Tate: Your next question comes from the line of Sebastian Naghi with William Blair. Your line is open.
Your next question comes from the line of Sebastian Najee with William Blair. Your line is open.
Leslie Green: Yeah, good afternoon. Thank you for taking the questions. You know, a lot of the focus is rightfully on the AI tailwinds. But could you maybe comment on what you're seeing in non-AI adoption and, in particular, what you might be seeing on Gen 5 PCIe adoption and general-purpose servers? And could that be a meaningful contributor to ARI's growth going forward?
Uh yeah, good afternoon. Thank you for taking the questions. Um I know a lot of the focus is rightfully on the AI Tailwind but could you maybe comment on what you're seeing in in? Non AI adoption? And in particular, which might be seeing on Gen 5, pcie, adoption and general purpose servers? And could that be a meaningful? Contributor, to Aries growth going forward.
Sanjay Gajendra: Yeah, absolutely. Thanks for highlighting that. We always overlook the general compute nowadays. But to your point, that's a transition that we're tracking. AMD released their Venice CPU, which does support PCIe Gen 6 as well. So we do see that sort of playing out in terms of design opportunities and a new set of production ramps happening for our 80s product line, both on the retimer class devices as well as other sockets that we develop, whether it is the Taurus modules or gearbox devices. So in general, those are additional opportunities for us to grow our business. And we are tracking those things as part of our overall outlook. And let's not forget Leo products, which are our CXL controllers. These are designed for memory expansion for CPUs in particular. So finally, we have CPUs that support CXL technology and are ready for deployment.
Yeah, absolutely. Uh, thanks for highlighting that. We always overlooked the general compute nowadays. Um, but to your point, um, that's the transition that we're tracking. Um, AMD released their Venice, um, CPU, which does support PCI Gen 6 as well. So, we do see that, um, sort of a playing out, uh, in terms of design opportunities and, and, and a new sort of, uh, uh, production ramps happening for our 80s product line. Both on the, uh, read timer class devices as well as other sockets, that we develop.
Sanjay Gajendra: So we are excited about the opportunities that we're tracking between all the three product lines: 80s, Taurus, and Leo, going into the general compute use cases.
Whether it is the Taurus modules or gearbox devices. So, in general, um, those are, um, additional opportunities for us to grow our business and we are tracking those things as part of our overall. Um, uh, overall Outlook. And let's not forget Leo products, which are our cxl controllers. These are designed for memory expansion, for CPUs in particular. So, finally, we have CPUs that support cxl, um, uh, uh, technology and ready for deployment. So, we are, um, excited about the opportunities that we're tracking between all the 3 product line, Aries, Taurus, and Leo going into the, uh, General compute use cases
Leslie Green: Great. OK, that's really helpful. And if I could, a second question. I want to ask about the use of Ethernet and scale-up going forward. You have Broadcom positioning itself to address both the scale-out and scale-up part of the network with its latest generation of Ethernet chips. And I'm wondering, how do you see scale-up Ethernet potentially eating into that PCIe part of the market where Astera has such a strong position?
Great. Okay, that's that's really helpful. And if I could a second question, I want to ask about the uh the use of ethernet and scale up going forward, you have broadcom positioning itself to address both the scale out and scale up part of the network, with its latest generation of ethernet chips. And I'm wondering, how do you see scale up ethernet potentially eating into that pcie part of the market, where Astera has such a strong position?
Jitendra Mohan: It is Jitendra. Maybe I'll take this question. So if you look at our customers today, they are deploying the scale-up network with the technologies that are available to them, which is NVLink for NVIDIA designs, of course, PCI Express for several of the customers that we touched upon earlier in the call. And some of the customers are also using Ethernet. And largely, this has to do with the availability of the switching infrastructure. The two protocols, PCI Express as well as NVLink, are basically kind of custom-built for memory access, for memory semantics. So you can use that to make your multiple GPUs in a cluster look like one large GPU. Ethernet is a fantastic protocol, but it was never designed for scale-up. It was designed for kind of large-scale internet traffic, and it is very, very good at that.
Jitendra Mohan: However, because of the availability of the switches, some of the customers have tried to run RDMA and other proprietary protocols over Ethernet to do scale-up. And in that scenario, it does suffer from higher latencies and throughput. Now, I think what you are referring to is scale-up Ethernet, where Broadcom has tried to actually borrow several of the same features that are present in PCI Express and UL Link, such as memory semantics, lossless networking, et cetera, and put them on top of Ethernet. At that point, it looks something quite different from Ethernet. And so the switching infrastructure, as well as the XPU infrastructure, has to evolve for somebody to use that. But I believe that the real differentiation between the two has to do with the openness of the ecosystem. The SUV is still dominated by Broadcom.
Scale internet traffic, and it is very, very good at that. However, because of the availability of the switches, some of the customers have tried to run RDMA and other proprietary protocols, over ethernet to do scale up.
Jitendra Mohan: Whereas if you look at UL Link, it's a very open ecosystem, very vibrant ecosystem with multiple vendors working on products and multiple hyperscalers looking to really take their destiny in their own hands and relying on UL Link over time.
And in that scenario, it does suffer from higher latencies and and throughput. Now, I think what you are referring to is scale up ethernet where, uh, uh, broadcom is trying to actually borrow several of the same features that are present in PCI Express in ulink uh such as memory, semantics, uh, lossless networking Etc, and put them on top of ethernet. At that point, it looks something quite different from ethernet. And so the, the switching infrastructure as well as the exper infrastructure has to evolve for somebody to use that. Uh, but I believe that the, the differentiate, the real differentiation between the 2 has to do with the openness of the ecosystem. Uh, the SUV is still, you know, dominated by broadcom. Um, whereas, uh, if you look at U link, it's a very open ecosystem. Very vibrant ecosystem with multiple vendors working on products and multiple hyperscalers, looking to really take their Destiny in their own hands and, and, you know, relying on ulink over time.
Leslie Green: Great. That's really helpful. Thank you so much. And congrats on the quarter.
Great. That's that's really helpful. Thank you so much, and congrats on the quarter.
Jitendra Mohan: Thank you.
Thank you.
Mike Tate: Your next question comes from the line of Quinn Bolton with Nedham & Company. Your line is open.
Your next question comes from the line of Quinn Bolton with Needham and Company. Your line is open
Leslie Green: Hey, Jitendra. I just wanted to follow up on that question about SUE. Broadcom introduced their Tomahawk Ultra switch recently with a 250 nanosecond latency, which seems like it significantly reduces the latency problems that traditional Ethernet has had. Can you give us some sense? How does that 250 nanosecond latency for SUE compare to what you're able to achieve on PCI Express and UL Link? And then I've got a follow-up.
Agent sender. I just wanted to follow up on that. Uh question about Sue broadcom introduced. Their Tomahawk Ultra switch recently with a 250 nosec latency which which seems like it's significantly reduces the latency problems. That traditional ethernet has had. Can you give us some sense? How does that 250 nanosecond latency for Sue, compared to what you're able to achieve on PCI Express and UA link? And then I've got a follow-up.
Jitendra Mohan: Yeah, so we are able to achieve even lower latencies with some of the products that we have and the other products that we have in development. But again, it comes back to designing something that is purpose-built for AI. It is not about just the point-to-point latency. If you look at the end-to-end latency in the system, we believe that UL Link and indeed PCI Express today is going to be lower latency. And the second point about that is utilization of bandwidth. Even though over time, the current offering from Broadcom uses 100 gigabits per second per lane, but over time, every standard will migrate towards 200 gigabits per second per lane. Both UL Link, Ethernet, as well as NVLink is already there today. However, how efficiently you use that raw data rate varies from protocol to protocol.
Jitendra Mohan: UL Link has been designed to be extremely efficient with that and really achieve very high utilization of the data pipe that is available. So on a technical basis, I do think that UL Link will be superior to other protocols. But again, not to sort of mention this yet again, but the big advantage of UL Link is in its openness, that it's an open standard that our customers, the hyperscalers, can build their infrastructure once and then ideally plug in whichever GPU or XPU they want that supports an open, interoperable ecosystem like UL Link.
Yeah, so we are able to achieve even lower latency is uh with some of the, the products that we have, and and the other products that we have in development, but again, it comes back to, uh, designing. Something that is purpose built for AI. It is not about just the point-to-point latency. If you look at the end-to-end latency in the system, we believe that ulink and indeed PC Express today is going to be lower latency and the second point about that is utilization of bandwidth even though over time the the the current offering from broadcom uses 100 gigabit per second per Lane. But over time every standard will migrate towards 200 gigabit per second per Lane. Both you will link ethernet as well as envelope is already there today. Um, however, how efficiently you use that raw data rate? Depends, uh, varies from protocol to protocol ulink, has been designed to be extremely efficient uh, with that and and really achieve very high utilization of the
Data pipe. That is that is, uh, available. So on a technical basis, uh, I do think that ulink will be superior to other protocols, um, but again, you know, not to sort of mention this yet again, but the the, the big advantage of ulink is in its openness. That is an open standard that our customers, the hyperscalers can build their infrastructure once and then ideally plug in whichever GPU or xpu. They want that supports an open interoperable. Ecosystem? Like ulink.
Leslie Green: Got it. My follow-up question, I think in the script you guys talked about an expansion in the opportunities with Taurus. And I'm kind of wondering if you could expand on that. Is that, are you seeing sort of adoption of higher per lane speeds on that Taurus product and adoption of 800-gig cables? Are you seeing adoption beyond your lead customer in Taurus? Just any additional color you could provide on Taurus would be helpful. Thank you.
Got it. My follow up question. Um, I think in the script you guys um, talked about um, you know
An expansion in the opportunities, uh, with tourists, and I'm kind of wondering if you could expand on that. Is that are you seeing sort of adoption of of higher perlane speeds on on that tourist product and Adoption of 800 gig cables? Are you seeing, um, you know, uh, adoption, uh, beyond your lead customer and tourists just just any additional color you could provide on tourists, uh, would be would be helpful. Thank you.
Sanjay Gajendra: Yeah, so like you correctly said, and what we have shared in the past as well, is that we expect broader adoption of AACs when the Ethernet data rate transitions to 800 gig. That's starting to happen. We expect most of the deployments to be ramping up in volume in 2026. And to that standpoint, again, we're tracking and we're engaged with the customers that are deploying it. One point to keep in mind is that our business model for AACs is designed for scale. In other words, we develop these cable modules that fit into the cable assemblies of existing cable vendors. And there are a variety of them that service the data center market. So our business model is to go after the RAM and not necessarily the initial few volumes that might be deployed. So to that standpoint, we're tracking and we're engaged with the right customers.
Yeah. So um like you correctly said uh and what we have shared in the past as well is that we expect broader adoption of um a c's uh when the ethernet data rate transitions to 800 gig that's starting to happen. We expect most of the deployments to be uh ramping up in volume in uh 2026. Um and to that standpoint. Again we're tracking and we're engaged with
Sanjay Gajendra: And as the volume starts ramping, we do expect to have a significant diversification and growth in our Taurus module business. But most of this, we are modeling it in 2026 versus this year.
Forest module business, but most of this, we are modeling it in 2026 versus this year.
Leslie Green: Got it. So it sounds like the volume this year continues to be more 50 gig per lane. And then you see that diversification in 2026 as 100 gig per lane becomes more sees wider adoption.
Got it. So it sounds like the volume this year continues to be more 50 gig per lane and then you see that diversification in 2026 is 100 Gig per line becomes more uh, you know, seize wider adoption.
Sanjay Gajendra: Exactly. And our business model, like I noted, is designed for that multi-vendor cable supply chain. And we do believe that's the right strategy. And that's what hyperscalers look for. The initial POCs, limited volume deployment, they might go with one vendor. But very quickly, each one of these hyperscalers do want to have the diversity and as well as the supply chain capacity to drive volume. And that has essentially been our focus when it comes to a business model on the AAC side.
Exactly and our business model. Like a noted is designed for that multi-. Vendor cable, uh, supply chain, and we do believe that's the right strategy, and that's what hyperscalers look for. The initial PC is limited volume deployment. You know, they might go with 1 vendor but very quickly each 1 of these hyperscalers do want to have the diversity and and and as well as the supply chain capacity to drive volume and that is uh essentially being our focus when it comes to a business model on the aec side.
Leslie Green: Got it. Thank you.
Got it. Thank you.
Mike Tate: Your next question comes from the line of Papa Silla with CITI. Your line is open.
Your next question comes from the line of Papa Sila with City. Your line is open.
Jitendra Mohan: Thank you for taking my question. And great, great thank you and congrats for the great results. I guess my first question is kind of following your announcement of a partnership with a high kind of performance AAC leader recently. I guess, can you touch a little bit more on the kind of extent of that collaboration? Is it more at the chip level in terms of the IO chip type of kind of partnership? Or is it more at the kind of device level with your ARIES and Scorpio portfolio?
Thank you for taking my question and, uh, great. Great. Thank you. And congrats for the great result. My I guess my first question is kind of following your, your announcement of a partnership with a high kind of performance basic leader. Uh, recently I I guess, can you touch a little bit more on the kind of extent of that collaboration? You did more at a chip chip level
In terms of the IoT type of partnership, or is it more other kind of device-level with your areas and Scorpio portfolio?
Sanjay Gajendra: Yeah, so I'll answer that question by sort of sharing our vision and goal that we are executing towards. So our vision is to provide a purpose-built connectivity platform for AI infrastructure that includes silicon products, hardware products, and software products. Of course, the focus for us has been on the connectivity side of the AI rack. When you think of an AI rack, there are other components that go, which primarily include the compute nodes, whether it's based on third-party merchant GPUs and CPUs or custom ASICs that Alchip and others develop for hyperscalers. So what we are a strong believer in is that the AI rack, the way it's defined today, is not scalable in the sense that it's more proprietary.
Sanjay Gajendra: As the industry transitions to what we are calling AI Infrastructure 2.0, the entire AI rack has to be based on an open, scalable, multi-vendor type of approach. And to that standpoint, what we're doing is not only developing the connectivity products for addressing the various aspects of an AI rack, whether it's scale-up or scale-out and other connectivity. At the same time, we are partnering with third-party GPU vendors. We talked about the announcement that we did with AMD. We're also engaging with custom ASIC providers, including Alchip, so that at the end of the day, the hyperscalers, who are our common customers, get a rack that is well tested, interoperable, the software is all consistent, and so on to ensure that it delivers the highest level of performance. So that is the scope of the collaboration that we are having with Alchip and other providers.
Yeah, so I'll answer that question by sort of, uh, sharing our vision and goal that we're executing towards. So, our vision is to provide purpose-built connectivity platform for AI infrastructure, that includes, uh, silicon products, Hardware products and software products. Um, of course, the focus for us has been on the connectivity. Um, side of the AI rack, um, when you think of an AI rack, there are other components that go. Which primarily includes the compute notes, whether it's based on third-party merchants gpus and CPUs or um, custom A6 that alche and others develop for hyperscalers. So what we are, um, a strong believer in is that the AI rack the way it's defined. Today is not scalable in the sense that it's more proprietary, as the industry transitions to what we are calling AI infrastructure 2.0.
Sanjay Gajendra: And over time, you'll see us announce more partnerships as we seek to establish the open rack that we believe is critical for deploying AI at scale.
Um, the entire AI rack has to be based on a open, scalable multi- vendor type of um type of approach and to that standpoint. What we're doing is not only developing the connectivity products for addressing the various aspects of an AI rack. Whether it's scale up or scale out and other connectivity. Uh, at the same time we are partnering with, um, you know, third-party GPU vendors. We talked about the announcement that we did with um, AMD. We're also uh, engaging with custom basic providers, including Al chip. So that end of the day, the hyperscalers who are our common customers, get a, a rack that is, well tested interoperable. The software is all consistent and so on to ensure that it delivers the highest level of performance. So that is the scope of the collaboration that we're having with Al chip and other providers. And over time, you'll see us announce more partnership.
As we seek to establish the open rack that we believe is critical for deploying AI at scale.
Jitendra Mohan: Got it. No, that's very helpful. And if I can squeeze just one more, and this might be more for my on the growth margin. It seems like over the last two quarters, especially since the Scorpio announcement, kind of growth margin keeps going up. But I'm in the September quarter, we are guiding it to 75%, which at the very least, at the midpoint, seems to be kind of down a little bit. I'm just curious on just any additional color on that because it seems like by all indications, Scorpio will continue to go up. And the mix trend we are seeing currently, it seems to be kind of moving in the same direction in September as well. So we were just kind of curious on that guide down in growth margin in September quarter. Yeah.
Got it now. That's that's very helpful and if I can squeeze just 1 more and this might be more for for my on the growth margin, it seems like over the last 2 quarters especially since the Scorpio announcement. Kind of gross margins keeps going up, but I'm in the September Court, we are getting it to 75% which at the very least at the midpoint
Seems to be kind of down a little bit. I'm I'm just curious on just any additional color on that because it seems like by all indications Scorpio will continue to go up. Um, and the mix Trend, we are seeing currently. It seems to be kind of moving in the same direction in September as well. So we were just kind of curious on that guy down in gross margin in September.
Jitendra Mohan: We do see growth from Scorpio, but we also see good solid growth in Taurus as well during the quarter. So you know Taurus as a module, it's hardware. So it carries a little bit lower growth margin to stay on silicon. So you'll see that dynamic play out to a smaller extent in the quarter. And you know as we move into 2026, we still want to have people thinking of us going towards a longer-term model, 70%.
As we move move into 2026, we still.
How are people thinking it was going towards your longer term model 70%.
Your next question comes from the line of <unk>.
Mike Tate: Your next question comes from the line of Suji De Silva with Roth Capital. Your line is open.
<unk> <unk> with Roth capital Your line is open.
Leslie Green: Hi, Jitendra, Sanjay, Mike, congrats on the strong quarter here. Maybe you could give us a framework on the retimer content for a link that's for scale-out versus scale-up. Maybe it's similar, but maybe there's some differences. I'd be curious to understand what the unit opportunities might be and how they might be different.
Alright, you Tangela Sanjay Mike Congrats on the strong quarter here, maybe you could give us some framework on the re timer content for a link that's for scale out versus scale up maybe it's similar but maybe there's some differences I'd be curious to understand what the unit opportunities might be there might be different.
Yes so.
Jitendra Mohan: Yeah, so when you look at the retimers, you know the contrast with the switches is the following, which is the switches get designed in right at the inception of the architecture stage. You know customers will think about how they're going to connect either their GPU to other GPUs in a scale-up or the GPU to NICs or storage as part of that scale-out system. So once the switch is designed in and as the rack starts to get put together, then we look at the question of reach. And sometimes you find that you need retimers in a link. Other times, actually, you don't need retimers in the link. Sometimes the retimers go on the board as a kind of a chip-down format. At other times, they are better suited to be put in cables in an AAC format.
When you look at the retirement.
Contrast, with the switches is the following which is.
The switches get designed in right at the inception of the architectural states customers will think about how we're going to connect either their GPU to other gpus and our scale up all the GPU to makes a storage as part of that scale out system.
Once the switching as designed and as that starts to get put together when we look at the question of reach and sometimes you find that you need repayments in a link other times actually you don't need the diamonds in the link sometimes <unk> go on the board as a kind of a chip down format at other times they are better suited to be put in cables in in <unk>.
AAC format.
Jitendra Mohan: The good news with us, with Astera, is that we provide this full portfolio of devices for our customers to choose from, from switches to gearboxes to chip-down retimers to retimers in active electrical cables. So they can look at one company, one Astera, to figure out their entire all the solutions at the rack level.
Good news with us with <unk> is that we provide the full portfolio of devices for our customers the tools from from from switches to gearboxes to chip down re timers to retailers and inactive electrical cables. So they can look at one company one is tara to figure out their entire the all of the solutions at the rack level.
Okay.
Leslie Green: OK. And Jitendra, neither one would be higher than the other necessarily, just to be clear.
Okay, just turn on either one would be higher than the other necessarily just to be clear.
Can you repeat that.
Jitendra Mohan: Can you repeat that?
Leslie Green: Neither one would be higher than the other, scale-up versus scale-out, necessarily.
Neither won't be higher than the other scale up versus scale out necessarily.
Yes, it really depends upon the system architecture and scale up there are many many more links in scale out. However, it is prohibitive from a power standpoint to put repayments at all the links. So typically you will see the linked that are short of where you are able to go from the switch to the GPU over a shorter distance with Lotte.
Jitendra Mohan: Yeah, it really depends upon the system architecture. In scale-up, there are many, many more links than there are in scale-out. However, it is prohibitive from a power standpoint to put retimers in all the links. So typically, you will see the links that are shorter, where you are able to go from the switch to the GPU over a shorter distance, will not use retimers. But the links that are longer will potentially use retimers. Sometimes we have scale-up domains that exceed one rack. So you might have two racks side by side that are part of a scale-up domain, and in which case you end up with cable solution and you need retimers in the scale-up in those scenarios.
Regardless with the links that are longer we will potentially use D dimer, sometimes we have scalable domains that.
Exceed one rack. So you might have to react side by side that is part of a scale up demand and in which case you end up with cable solution and the unions the damage in the scale up in those scenarios.
Leslie Green: Helpful. Thanks. And then my follow-ups on Scorpio X, you talked about 10 customer engagements. I'm wondering if that implies multiple programs per customer, if they're going to think about using you standard in their platforms. Any color on how those are kind of shaping up would be helpful in programs versus customers.
Helpful. Thanks, and then my follow Up's on Scorpio actually you talked about 10 customer engagements I'm wondering if that implies multiple programs per customer if they're going to think about using your standard and their platforms any color on how those are kind of shaping up would be helpful and programs versus customers.
Yes, the 10 plus been noted a unique customers.
Sanjay Gajendra: Yeah, so 10 plus we noted are unique customers. Now, within each customer, there are multiple opportunities that we're tracking. Some of them are design wins, and some of them are ramping to production. Some of them are design ins going through qualification. Some of those are early engagement. So in general, we are very pleased with the amount of traction that we're seeing for our Scorpio family.
Within each customer there are multiple opportunities that we're tracking some of them are design wins and some of them are ramping to production. Some of them are designed in scoring to qualification. Some of those are in early engagement. So in general we are very pleased with the amount of traction that we've seen.
In total the Scorpio family.
Excellent. Thanks, Sanjay thanks, everybody.
Leslie Green: Excellent. Thanks, Sanjay. Thanks, everybody.
Thank you.
Jitendra Mohan: Thank you. Thanks.
There are no further questions at this time I will turn the call back over to Leslie Green for closing remarks.
Mike Tate: There are no further questions at this time. I will turn the call back over to Leslie Green for closing remarks.
Jitendra Mohan: Thank you, everyone, for your participation today and questions. And please refer to our investor relations website for information regarding upcoming financial conferences and events. Thanks so much.
Thank you everyone for your participation today and questions and please refer to our Investor Relations website for information regarding upcoming financial conferences and events. Thanks, So much.
This concludes today's conference call you may now disconnect.
Mike Tate: This concludes today's conference call. You may now disconnect.
Okay.
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