AOSL earnings call transcript, November 5, 2026

Please go ahead.

These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We have no obligations to update the information provided in today's call. Now, I'll turn the call over to our CEO, Stephen Chang. Stephen?

Welcome to Alpha and Omega's Fiscal 2027 First Quarter Earnings Call. We'll begin with a high-level overview of our results and then discuss performance across our end market segments. We delivered September quarter revenue of $177.8 million, up 4.3% sequentially and down 2.6%. Year-over-year, slightly above the midpoint of our guidance. Non-GAAP gross margin improved to 25.2%, compared with 23.7% in the June quarter, and our non-GAAP loss narrowed to $0.07 per share. Our results reflect the accelerating momentum in AI infrastructure, even as traditional PC and consumer markets face increasing headwinds. Advanced computing revenue, which includes AI servers and graphics cards, increased more than 50% sequentially and 80% year over year, reaching nearly 23% of total company revenue ahead of our expectations. Importantly, AI and server applications accounted for nearly 90% of advanced computing revenue and approximately 20% of total company revenue. Compared with just 5.5% a year ago. This rapid expansion underscores the tangible progress we are making in transforming AOS into a higher performance power semiconductor company. While elevated memory costs and growing component shortages continue to weigh on traditional PC demand, contributing to a sharper than expected decline in that market. Consumer electronics also remain weak. Despite these headwinds, strong growth in AI and servers, along with increased shipments of premium smartphone battery protection solutions, power tools, DC fans, and power supplies helped offset much of the weakness in our traditional markets and

supported sequential revenue growth and improved gross margins. With that, let me cover our September quarter segmented results and preliminary outlook for December. Starting with computing. September quarter revenue was 83.2 million, down 2% sequentially and 14.3% year over year, representing 46.8% of total revenue. The headline results masks a significant shift in mix. Led by our strong AI and server business, advanced computing grew more than 50% sequentially, nicely ahead of our guidance for growth of more than 40%, while traditional PC-related revenue declined approximately. 30% sequentially. We are seeing growing adoption of our power solutions across AI infrastructure, including robust medium-voltage MOSFETs for intermediate bus converter applications. These opportunities broaden our BOM content and customer relationships as our portfolio evolves towards... ...higher performance solutions. Within advanced computing, AI and server-related revenue grew more than 65% sequentially and more than 250% year-over-year. We continue to expand our presence across major cloud and hyperscale ecosystems, supported by targeted... ...investments in manufacturing capacity, product development, and customer qualifications. These efforts are broadening our opportunities across... ...increasingly complex power conversion architectures and position us for sustained growth. Looking ahead to the December quarter, we expect advanced computing to reach another quarterly revenue record, led by continued strength in AI and server applications.

However, worsening demand for traditional PCs compounded by elevated memory costs and broad... ...component shortages is expected to more than offset this growth. As a result, we anticipate total computing revenue will decline mid to high single digits sequentially. Turning to the consumer segment, September quarter revenue was down $16.1 million, down 22.9% sequentially. and 31.4% year over year, representing 9.1% of total revenue. Results were slightly better than our guidance, with broad-based declines led by lower shipments in home appliances, gaming, and wearables. Gaming continued to reflect the maturity of the current console cycle, while wearable demand also remained soft. For the December quarter, our planning assumption suggests consumer revenue will be flattish sequentially, although the outlook varies by application. Next, let's discuss the communication segment. September quarter revenue was $37.8 million, up 15%. Sequentially and 15.8% year over year, representing 21.3% of total revenue. Results were above our guidance for growth of approximately 10%. The sequential increase was primarily driven by a strong. In battery protection solutions for our tier one US smartphone customer. Battery PCM revenue increased more than 50% sequentially, benefiting from new flagship smartphone production ramps. Our differentiated battery protection technologies continue to address increasing charging currents and higher performance.

platforms driving higher bomb content per device. Looking ahead, we see additional content expansion opportunities as smartphone designs evolve, particularly with the growing adoption of foldable and multi screen devices. that incorporate multiple batteries, each requiring dedicated protection circuitry. However, these gains were partially offset by softer demand in other regions, particularly China, where rising memory costs are pressuring smartphone affordability. And prompting some manufacturers to reduce component specifications and overall bomb costs. For the December quarter, we expect communications revenue to grow mid-teens sequentially, driven by continued momentum in our premium smartphone. programs, particularly battery PCM. Finally, power supply and industrial revenue was $38.7 million, up 29.2% sequentially and 38.8% year-over-year, representing 21.8% of total revenue. Results were in line with our guidance for sequential growth of nearly 30%, driven by strength across power supplies, power tools, motor control, and DC fans. We are particularly encouraged by the recovery in power tools. We're improving end market demand and increased business where the major customer are contributing to growth. DC fans also achieved record quarterly revenue, reflecting a substantially higher underlying revenue run rate compared with last year. It is supported in part by increasing cooling requirements in AI servers and data centers, further expanding our participation in the AI infrastructure ecosystem beyond traditional computing power conversion. In the December quarter, we expect power supply and industrial revenue to grow higher.

as single digits sequentially, primarily driven by strong e-mobility demand for electric motorcycles and scooters in emerging markets. We also expect ACDC power supplies and power tools to remain resilient, supported by continuing demand across their respective end markets. In closing, our September quarter results demonstrate meaningful progress in AOS's transformation towards higher performance, higher content applications. Advanced Computing now represents... ...nearly half of our computing segment, and growing demand for AI infrastructure is creating additional opportunities in adjacent applications such as server cooling and power supplies. This momentum helped offset continued weakness in traditional PCs and consumer electronics. More importantly, the richer product mix is showing up in... Our margins. Non-GAAP gross margin improved 150 basis points sequentially. Our expanding participation in high-performance AI power applications, particularly differentiated medium voltage MOSFETs, is improving the quality of our revenue and contributing to a more attractive margin profile. Turning to the December quarter, which is typically a seasonally softer quarter for us, we anticipate a more balanced and resilient demand profile to drive counter-seasonal growth. We expect total revenue to be up slightly sequentially and up approximately 10%. year-over-year, despite significant weakness in traditional PCs. Importantly, our growth story extends well beyond AI and advanced computing. We expect communications revenue to increase at mid-teen sequentially and more than 20% year-over-year, reflecting continued strength with our Tier 1 U.S.

Smartphone customer. Similarly, power supply and industrial revenue is expected to increase by high single digits sequentially and more than 50% year-over-year, supported by improving demand across applications, including power supply. Our tools and e-mobility. These trends demonstrate the increasing breadth of our growth drivers and the tangible progress of our business transformation as we leverage technology leadership, premier customer relationships, and total solution strategy. To capture opportunities across a more diversified portfolio of higher value markets while positioning us for further margin improvement as our business scales. At the same time, we remain mindful that market conditions are uneven. Elevated memory costs and other component constraints continue to weigh on traditional PC demand. And we do not expect a near-term PC recovery. Notwithstanding this headwind, we believe our expanding relationships across hyperscalers, ODMs, power supply manufacturers, and other ecosystem partners, combined with our disciplined investment... ...and growing BOM content position us well to capitalize on the long-term opportunities ahead. With that, I will turn the call over to Ifon for a discussion of our fiscal first quarter financial results and our outlook for December. Ifon.

The $4 million gain from this transaction was excluded from our non-GAAP EPS for the quarter. Moving on to cash flow. Operating cash flow was $5.6 million compared to negative. $10 million in the prior quarter and $10.2 million last year. IBIAS was $12.2 million for the quarter compared to $10.1 million last quarter and $19.4 million. for the same quarter a year ago. Now let me turn to our balance sheet. We completed the September quarter with a cash balance of $175.2 million compared to $180.8 million at the end of last quarter. Nitrate receivables increased by $10.5 million sequentially. Day sales outstanding were 26 days for the quarter. Compared to 23 days for the part quarter. Net inventory decreased by $5.1 million quarter over quarter. Average days in inventory were 133 days for the quarter compared to 138 days for the part quarter. CapEx for the quarter was $9.2 million compared to $14.9 million for the part quarter. We expect CapEx for the December quarter. to range from $12 million to $14 million. With that, now I would like to discuss December quarter guidance. We expect revenue to be approximately $180 million. plus or minus $10 million. Gap growth margin to be 25.1% plus or minus 1%. We anticipate the non-gap growth margin to be 25.7% plus. or minus 1%. Gap operating expenses to be $52 million plus or minus $1 million. Non-gap operating expenses are expected to be $46 million plus or minus.

Interest income to be $0.4 million higher than interest expense and income tax expense to be in the range of $1.1 million to $1.3 million.

Your first question comes from the line of Tori.

Tori Svonberg from Stifo. Your line is now open. Please go ahead.

Please go ahead.

There are no further questions.