Astera Labs Inc

05/06/2026 | Press release | Distributed by Public on 05/06/2026 04:01

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 2025 included in our Annual Report on Form 10-K filed with the SEC on February 20, 2026. As discussed in the section titled "Special Note about Forward-Looking Statements," this discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled "Risk Factors" and included elsewhere in this Quarterly Report on Form 10-Q and Annual Report on Form 10-K filed with the SEC on February 20, 2026.
Overview
Our mission is to innovate, design, and deliver semiconductor-based connectivity solutions that are purpose-built to unleash the full potential of cloud and AI infrastructure.
Building on years of experience with a singular focus on addressing connectivity challenges in data-centric systems, we have developed and deployed our Intelligent Connectivity Platform built from the ground up for cloud and AI infrastructure. Our Intelligent Connectivity Platform is comprised of semiconductor-based, high-speed, mixed-signal connectivity products that integrate a matrix of microcontrollers and sensors, and COSMOS, our software suite, which is embedded in our connectivity products and integrated into our customers' systems.
Our Intelligent Connectivity Platform provides our customers with the ability to deploy and operate high-performance cloud and AI infrastructure at scale, addressing an increasingly diverse set of requirements. We provide our connectivity products in various form factors, including Integrated Circuits ("ICs"), boards, and modules.
Our patented software-defined platform approach delivers critical connectivity performance, enables flexibility and customization, and supports observability and predictive analytics. This approach is designed to efficiently address the data, network, and memory bottlenecks, scalability, and other unique infrastructure requirements of our hyperscaler and system OEM customers.
Based on trusted relationships with the leading hyperscalers and collaboration with data center infrastructure suppliers, our platform is designed to meet our customers' unique cloud scale requirements. Our COSMOS software suite is foundational to our Intelligent Connectivity Platform and is designed to enable our customers to seamlessly configure, manage, monitor, optimize, troubleshoot, and customize functions in our IC, board, and module products.
Today, our connectivity solutions are at the heart of major AI platforms deployed worldwide featuring both commercially available Graphic Processing Units ("GPUs") and proprietary AI accelerators. We offer our customers four product families across multiple form factors including ICs, boards, and modules, shipping millions of devices across leading hyperscalers. Our products, which include Aries PCIe®/CXL® Smart DSP Retimers, Aries PCIe®/CXL® Smart Cable Modules™, Taurus Ethernet Smart Cable Modules™, Leo CXL Memory Connectivity Controllers, and Scorpio Smart Fabric Switches, are built upon industry standard connectivity protocols such as Peripheral Component Interconnect Express ("PCIe"), Ethernet, and Compute Express Link ("CXL"), to address the growing demand for purpose-built connectivity solutions that solve critical data, network, and memory bottlenecks inherent in cloud and AI infrastructure.
Since our inception, we have created and commercialized first-to-market PCIe, Ethernet, and CXL products. We have become a trusted partner and a proven supplier to our hyperscaler and system OEM customers. We have experienced strong growth since the commercial launch of Aries in 2020. Our revenue grew from $34.8 million in 2021, $79.9 million in 2022, $115.8 million in 2023, $396.3 million in 2024, and to $852.5 million in 2025. Our revenue was $308.4 million for the three months ended March 31, 2026, driven by a sizable increase in demand for our products.
Summary of Financial Highlights
Our revenue was $308.4 million for the three months ended March 31, 2026, compared to $159.4 million for the same period in 2025, representing an increase of 93% year over year.
Gross margin increased by 136 basis points ("bps") to 76.3% for the three months ended March 31, 2026, compared to 74.9% for the same period in 2025.
Operating income was $61.8 million for the three months ended March 31, 2026, compared to $11.3 million for the same period in 2025, representing an increase of 448% year over year.
Net income was $80.3 million for the three months ended March 31, 2026, compared to $31.8 million for the same period in 2025, representing an increase of 152% year over year.
Results of Operations
Comparison of the Three Months Ended March 31, 2026 and 2025
Revenue
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
Revenue $ 308,361 $ 159,442 $ 148,919 93 %
Total revenue increased $148.9 million, or 93%, for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to an increase in overall unit shipments driven by higher demand for our Scorpio, Aries, and Taurus products, as well as higher overall average selling prices resulting from an increased mix of hardware modules and Scorpio products.
Cost of Revenue, Gross Profit, and Gross Margin
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages and bps)
Cost of revenue $ 73,220 $ 40,031 $ 33,189 83 %
Gross profit 235,141 119,411 115,730 97 %
Gross margin 76.3 % 74.9 %
136 bps
Total cost of revenue increased $33.2 million, or 83%, for the three months ended March 31, 2026, compared to the same period in 2025, primarily due to higher overall unit shipments and a favorable shift in product mix.
Gross margin increased 136 bps to 76.3% for the three months ended March 31, 2026 compared to 74.9% for the same period in 2025. The increase was primarily driven by a favorable product mix.
Research and Development
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
Research and development
$ 125,634 $ 64,554 $ 61,080 95 %
Percentage of revenue
41 % 40 %
Research and development expense increased $61.1 million, or 95%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to a $29.3 million increase in overall spending to support our R&D initiatives, which includes hardware design, software license, and cloud hosting services costs, a $17.1 million increase in personnel-related costs and $10.2 million of non-cash stock-based compensation expenses resulting from a 90% increase in headcount, and $3.1 million increase in other operating costs to support our business expansion.
Sales and Marketing
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
Sales and marketing
$ 21,899 $ 21,702 $ 197 1 %
Percentage of revenue
7 % 14 %
Sales and marketing expense increased by $0.2 million, or 1%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to a $2.0 million increase in personnel-related costs resulting from a 55% increase in headcount and $0.3 million in other operating costs to support our business expansion, partially offset by a $2.4 million decrease in non-cash stock-based compensation expenses.
General and Administrative
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
General and administrative
$ 25,775 $ 21,870 $ 3,905 18 %
Percentage of revenue
8 % 14 %
General and administrative expense increased $3.9 million, or 18%, for the three months ended March 31, 2026 compared to the same period in 2025. The increase was primarily due to a $2.5 million increase in professional services fees associated with the continued development of our public company infrastructure, a $1.8 million increase in personnel-related costs resulting from a 57% increase in headcount, a $1.5 million increase in other operating costs to support our business expansion. The increase was partially offset by a $1.9 million decrease in non-cash stock-based compensation expenses.
Interest Income
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
Interest income
$ 11,581 $ 10,432 $ 1,149 11 %
For the three months ended March 31, 2026, interest income increased $1.1 million, or 11%, compared to the same period in 2025, primarily due to higher average balances of short-term investments and cash equivalents as a result of cash flow from operations.
Income Tax Benefit
Three Months Ended
March 31, 		Change
2026 2025 Amount %
(in thousands, except percentages)
Income tax benefit
$ (6,896) $ (10,102) $ 3,206 (32) %
The benefit from income tax decreased $3.2 million, or 32%, for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to a decrease in excess tax benefits related to equity compensation.
Non-GAAP Financial Measures
This Quarterly Report on Form 10-Q contains certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"), which we use to supplement the performance measures in our condensed consolidated financial statements, which are presented in accordance with GAAP. We refer to these measures as "non-GAAP financial measures." These non-GAAP financial measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income. We use these non-GAAP financial measures for financial and operational decision-making and as a means to assist us in evaluating period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, and non-GAAP net income provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.
Non-GAAP Gross Profit and Non-GAAP Gross Margin
We define non-GAAP gross profit as gross profit presented in accordance with GAAP, adjusted to exclude non-cash stock-based compensation expenses. The non-GAAP gross margin is non-GAAP gross profit divided by revenue. We have presented non-GAAP gross profit because we consider non-GAAP gross profit to be a useful metric for investors and other users of our financial information in evaluating our operating performance as it excludes the impact of non-cash stock-based compensation, a charge that can vary from period to period for reasons that are unrelated to our core operating performance. This metric also provides investors and other users of our financial information with an additional tool to eliminate the effects of items that may vary for different companies for reasons unrelated to core operating performance.
A reconciliation of our GAAP gross profit and GAAP gross margin, the most directly comparable GAAP financial measures, to non-GAAP gross profit and non-GAAP gross margin is presented below:
Three Months Ended
March 31,
2026 2025
(in thousands, except percentages)
GAAP gross profit $ 235,141 $ 119,411
Stock-based compensation expense
499 (38)
Non-GAAP gross profit $ 235,640 $ 119,373
GAAP gross margin
76.3 % 74.9 %
Stock-based compensation expense 0.2 -
Non-GAAP gross margin (1)
76.4 % 74.9 %
(1) Total may not sum due to rounding.
Non-GAAP Operating Income and Non-GAAP Operating Margin
We define non-GAAP operating income as operating income presented in accordance with GAAP, adjusted to exclude non-cash stock-based compensation expenses and acquisition-related costs. We define non-GAAP operating margin as non-GAAP operating income divided by revenue. We have presented non-GAAP operating income and non-GAAP operating margin because we consider them useful metrics for investors and other users of our financial information in evaluating our operating performance as it excludes the impact of non-cash stock-based compensation expense and acquisition-related costs, a charge that can vary from period to period or are one time charges for reasons that are unrelated to our core operating performance. These metrics also provide investors and other users of our financial information with an additional tool to eliminate the effects of items that may vary for different companies for reasons unrelated to core operating performance.
A reconciliation of our GAAP operating income and GAAP operating margin, the most directly comparable GAAP financial measures, to non-GAAP operating income and non-GAAP operating margin is presented below:
Three Months Ended
March 31,
2026 2025
(in thousands, except percentages)
GAAP operating income
$ 61,833 $ 11,285
Stock-based compensation expense
48,913 42,446
Acquisition-related costs (1)
983 -
Non-GAAP operating income $ 111,729 $ 53,731
GAAP operating margin
20.1 % 7.1 %
Stock-based compensation expense
15.9 26.6
Acquisition-related costs (1)
0.3 -
Non-GAAP operating margin (2)
36.2 % 33.7 %
(1) Acquisition-related costs include certain incremental expenses incurred to effect a business combination such as third-party costs: advisory, legal, accounting, valuation, and other professional fees.
(2) Total may not sum due to rounding.
Non-GAAP Net Income
We monitor non-GAAP net income for planning and performance measurement purposes. We define non-GAAP net income as net income presented in accordance with GAAP on our condensed consolidated statements of operations,
excluding the impact of non-cash stock-based compensation expenses, acquisition-related costs, and the related tax impact on the adjustments. We have presented non-GAAP net income because we believe that the exclusion of these charges allows for a more relevant comparison of our results of operations to other companies in our industry and facilitates period-to-period comparisons as it eliminates the effect of certain factors unrelated to our overall operating performance.
A reconciliation of our GAAP net income, the most directly comparable GAAP financial measure, to our non-GAAP net income is presented below:
Three Months Ended
March 31,
2026 2025
(in thousands)
GAAP net income
$ 80,310 $ 31,819
Stock-based compensation expense 48,913 42,446
Acquisition-related costs (1)
983 -
Income tax effect (2)
(20,137) (14,638)
Non-GAAP net income $ 110,069 $ 59,627
(1) Acquisition-related costs include certain incremental expenses incurred to effect a business combination such as third-party costs: advisory, legal, accounting, valuation, and other professional fees.
(2) Income tax effect is calculated based on the tax laws in the jurisdictions in which we operate and is calculated to exclude the impact of non-cash stock-based compensation expense and one-off discrete tax adjustments that are unrelated to our core operating performance. We no longer maintain valuation allowance for non-GAAP purposes due to our cumulative tax profits on a non-GAAP basis. For the three months ended March 31, 2026 and 2025, the non-GAAP tax rate was approximately 11% and 7%, respectively.
Liquidity and Capital Resources
Since our inception, we have financed our operations primarily through proceeds from equity issuances including net proceeds from our IPO, and cash generated from the sale of our products. As of March 31, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $1.2 billion. Our principal use of cash is to fund our operations, invest in research and development, fund capital expenditures for production equipment, acquisitions of businesses or technologies, and to support our overall growth.
We generated $74.6 million in cash flow from operating activities for the three months ended March 31, 2026 and a retained earnings of $90.6 million as of March 31, 2026. We believe that our current cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months and beyond. Our future capital requirements, however, will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, capital expenditures for production equipment, the continuing market acceptance of our products, and the use of cash to fund potential mergers or acquisitions. In the event that additional financing is required from outside sources, we may seek to raise additional funds through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be adversely affected.
Cash Flows
The following table summarizes our cash flows for the periods presented:
Three Months Ended
March 31,
2026 2025 Change
(in thousands)
Net cash provided by operating activities $ 74,598 $ 10,504 $ 64,094
Net cash used in investing activities $ (94,007) $ (3,940) $ (90,067)
Net cash provided by financing activities $ 82 $ 386 $ (304)
Change in Cash Flows from Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2026 was $74.6 million, compared to $10.5 million for the comparable period in 2025. The $64.1 million increase in operating cash inflows was a result of a $48.5 million increase in net income, higher non-cash charges of $12.3 million, and a favorable change of $3.3 million from changes in operating assets and liabilities. The higher non-cash charges of $12.3 million were primarily due to a $6.5 million increase in stock-based compensation expense, $2.6 million increase in depreciation and amortization, a $1.7 million increase in warrants contra revenue, and $1.3 million increase in accretion of discounts on marketable securities. The favorable change of $3.3 million in operating assets and liabilities was predominantly attributable to a $28.4 million favorable change in the prepaid expenses and other assets, and a $7.1 million favorable change in inventory. The favorable change was partially offset by (i) a $20.8 million unfavorable changes in accounts receivable due to higher product sales and the timing of customer payments, and (ii) a $11.4 million unfavorable change in accounts payables and accrued other liabilities primarily due to the timing of payments.
Change in Cash Flows from Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 was $94.0 million, compared to $3.9 million for the comparable period in 2025. The $90.1 million increase in cash used in investing activities was primarily due to a $65.0 million increase associated with the acquisition of a business, a $53.7 million decrease in proceeds from sales and maturities of marketable securities, and a $3.0 million increase in proceeds used in purchase of property and equipment, partially offset by a $34.2 million decrease in purchases of marketable securities.
Change in Cash Flows from Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2026 was $0.1 million, compared to $0.4 million for the comparable period in 2025. The $0.3 million decrease in cash provided by financing activities was primarily due to a decrease related to proceeds received from exercises of stock options.
Material Cash Requirements
Operating lease commitments. Our operating lease commitments primarily include corporate offices. For an additional discussion of our operating lease commitments, see Note 7 - Leases in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Purchase commitments. Our purchase commitments are primarily related to software licenses, cloud hosting services, or performance of certain services. For an additional discussion of our purchase commitments, see Note 8 in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
For an additional discussion of our Material Cash Requirements, see Note 8 - Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Indemnification Agreements
See Note 8 - Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Estimates
Our unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of unaudited condensed consolidated financial statements in accordance with GAAP requires us to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the period presented. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual
results, our future financial statement presentation, financial condition, results of operations, and cash flows could be affected.
There have been no material changes to our critical accounting policies and estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
For more information, see Note 1 - Nature of Business and Summary of Significant Accounting Policies in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Astera Labs Inc published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 06, 2026 at 10:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]