Alpha & Omega Q1 2027 Earnings Call Transcript

Alpha & Omega (NASDAQ:AOSL) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.

Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.

View the webcast at https://events.q4inc.com/attendee/796790198

Summary

Alpha & Omega Semiconductor reported Q1 fiscal 2027 revenue of $177.8 million, up 4.3% sequentially but down 2.6% year over year, slightly above guidance midpoint.

Non-GAAP gross margin increased to 25.2%, with a non-GAAP loss of $0.07 per share. Advanced Computing revenue grew over 50% sequentially and 80% year over year, driven by AI and server demand.

The company expects December quarter revenue to be approximately $180 million, plus or minus $10 million, with anticipated growth in Advanced Computing and Communications segments.

Traditional PC and consumer electronics markets faced headwinds due to elevated memory costs and component shortages, impacting demand.

Operational highlights include a $4 million gain from JV equity transactions and expectations for continued growth in AI infrastructure, server cooling, and power supply applications.

Management noted diversification in AI server business, growing design wins, and consideration for segmental reporting of AI and server revenues due to their increasing significance.

Full Transcript

OPERATOR

After today’s prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will hand the call over to Steven Peleo of Investor Relations. Please go ahead.

Stephen Polayo (Investor Relations Representative)

Good afternoon, everyone, and welcome to Alpha & Omega Semiconductor’s conference call to discuss fiscal 2027 first quarter financial results. I’m Stephen Polayo, Investor Relations Representative for Alpha & Omega. With me today are Stephen Chang, our CEO, and Yifan Liang, our CFO. This call is being recorded and broadcast live over the web. A replay will be available for seven days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows. Today, Stephen will begin with business updates including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the December quarter. Finally, we will have a Q&A session. The earnings release was distributed over the wire today, November 5, 2026 after the market close. The release is also posted on the company’s website. Our earnings release and this presentation include non-GAAP financial measures. We use these non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call we will make certain forward-looking statements including discussions of the business outlook and financial projections. 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 assume no obligations to update the information provided in today’s call. Now I’ll turn the call over to our CEO, Stephen Chang. Stephen.

Stephen Chang (Chief Executive Officer)

Thank you, Stephen. Welcome to Alpha & Omega’s fiscal 2027 first quarter earnings call. I will 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 Alpha & Omega into a higher performance power semiconductor company. Meanwhile, 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 remained 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 segment 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 mask 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 toward 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 broader 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 $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 assumptions suggest consumer revenue will be flattish sequentially, although the outlook varies by application.

Next, let’s discuss the communications 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 ramp in battery protection solutions for our tier-1 U.S. smartphone customers. 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 BOM 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 BOM 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, where improving end-market demand and increased business with a 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. This growth 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 high single digits sequentially, primarily driven by strong e-mobility demand for electric motorcycles and scooters in emerging markets.

We also expect AC-DC power supplies and power tools to remain resilient, supported by continued demand across their respective end markets. In closing, our September quarter results demonstrate meaningful progress in Alpha & Omega’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 to 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-teens 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 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 solutions 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 Yifan for a discussion of our fiscal first quarter financial results and our outlook for December. Yifan.

Yifan Liang (Chief Financial Officer)

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the September quarter was $177.8 million, up 4.3% sequentially and down 2.6% year over year. In terms of product mix, DMOS revenue was $137.2 million, up 21.1% sequentially and 26.4% over last year. IC revenue was $38.7 million, down 30.3% from the prior quarter and 46.8% from a year ago. Assembly Service and Other revenue was $1.9 million as compared to $1.7 million last quarter and $1.3 million for the same quarter last year.

Non-GAAP gross margin was 25.2% compared to 23.7% last quarter and 24.1% a year ago. The quarter-over-quarter increase was mainly impacted by better product mix. Non-GAAP operating expenses were $45.9 million compared to $45.3 million for the prior quarter and $41.4 million last year. The slight quarter-over-quarter increase was primarily driven by higher personnel-related expenses. Non-GAAP quarterly EPS was a $0.07 loss compared to a $0.13 loss per share last quarter and $0.13 earnings per share a year ago.

During the quarter, the majority shareholder of the JV company injected approximately $344 million of capital into the JV company, and the JV company used a portion of the proceeds to completely retire the equity interests of all shareholders whose interests were smaller than ours. As a result, we recognized a $4 million gain and our equity interest in the JV company decreased from 18.9% to 15.1%. 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. EBITDA 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. Net trade receivables increased by $10.5 million sequentially. Days sales outstanding were 26 days for the quarter compared to 23 days for the prior 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 prior quarter.

CapEx for the quarter was $9.2 million compared to $14.9 million for the prior 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. GAAP gross margin to be 25.1%, plus or minus 1%. We anticipate the non-GAAP gross margin to be 25.7%, plus or minus 1%. GAAP operating expenses to be $52 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $46 million, plus or minus $1 million. 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.

With that, we will now open the call for questions. Operator, please start the Q&A session.

OPERATOR

Thank you. We will now begin the question-and-answer session. Please limit yourselves to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

Your first question comes from the line of Tori Svanberg from Stifel. Your line is now open. Please go ahead.

Cam Tierney (Analyst)

Hi, guys. This is Cam Tierney on for Tori Svanberg at Stifel. Thanks for taking my question, and congrats on the strong results and guide here. I wanted to ask a little bit about what drove the gross margin beat and maybe talk a little bit about the contribution between utilization and pricing, and is advanced computing a component of that beat?

Yifan Liang (Chief Financial Officer)

Sure. Yeah, it’s good to see our gross margin continue to grow from the June quarter to the September quarter. And then, yeah, this 150 basis point improvement in the September quarter was mainly contributed by the better product mix. So the pricing played some role to a lesser extent. The overall pricing environment now continues to improve. It turned from a neutral position in the June quarter to, I would say, slightly favorable in the September quarter.

Cam Tierney (Analyst)

Yeah, perfect. And then just for my follow-up, it sounds like last quarter you kind of communicated that September would be a bit of a trough for the PC market. It sounds like maybe that it’s gotten worse looking out to the December quarter based on the implied guide, which isn’t surprising. But I just wanted to get a sense if you guys have a handle on when you think that market might bottom into next year.

Stephen Chang (Chief Executive Officer)

Sure. This is Stephen. Yes, like we commented on the call, we do see that there’s a sharper correction on the PC side due to the various constraints that that market is dealing with. So we saw the bulk of that drop happening in the September quarter. But we do think that these challenges will continue to persist in the near future and we continue to monitor closely. Fortunately, it’s not the only market that we’re participating in, but we are watching it closely, especially as it goes into kind of the lower season of the normal PC seasonality.

It’s still an important market for us. It’s very related to our business going into advanced computing, and so we’ll be carefully watching that as it goes forward.

Cam Tierney (Analyst)

All right, thank you.

OPERATOR

Your next question comes from the line of Tyler Burmeister of Lake Street Capital Markets. Your line is now open. Please go ahead.

Tyler Burmeister (Analyst)

Hey, guys, thanks for letting me ask some questions, and congrats on the strong quarter and the solid guide here. So first, it’s been asked before, but I’ll ask it again: with the AI and server business being so strong, do you guys have any updated plans on potentially breaking that out into its own segment, just to give investors a better view of that business and the underlying PC and broader compute segment business? Just an update on your thoughts there.

And then I’ll just add another one in quick. Any update on the 800-volt AI server opportunity? I think last time we talked you said first revenue could be in ’27. Just wondering what an update there might be. Thanks.

Stephen Chang (Chief Executive Officer)

Sure, thank you. I appreciate the comments. Yes, advanced computing, especially the AI portion, is definitely becoming a bigger portion of our business. We said in the call, I think advanced computing itself is 23% of September revenue and the AI portion alone is 20% of revenue. So it is a question that we are discussing currently — what the timing is or what is appropriate to do that. But it is something where we try to be more explicit in describing our business because it is a very important part, and it is a key reason why the margin is improving because of that weight there for the margin.

That was the first part of your question. The second question was on the 800 volts. We continue to work with the various partners in the ecosystem to continue to promote and design in our solutions. We don’t have a really major update at this point right now, just that we are progressing along with that, and it’s good to see again the power levels going up with 800 volts, and our entry into that middle-stage conversion positions us very well with our customers with our products — not only for medium voltage, but also going upwards into our bandgap solutions as well.

Tyler Burmeister (Analyst)

That’s great. I appreciate that color. And then on the PCs, maybe looking at it a little bit differently, it seems like you’re underperforming the TAM benchmarks, and not to ask you to comment on the market outlook, but do you think, going forward, or at what point in the future could we return to — whatever the market might be — you being able to at least be in line to outperform that market?

Stephen Chang (Chief Executive Officer)

Sure. I think from what we see in our place in the supply chain is there’s correction that happened. Our customers were building at a higher production level at the beginning — the first two quarters of the calendar year — and as we went into the September quarter, that’s when they saw that their demand, or their expected production, was going to drop. So it’s a correction that’s happening there that’s seen in our portion of the supply chain. We are watching closely at this, and we hope that our customers can resolve their shortage situations and then we can get back to a normal market. But for now we’re just watching carefully.

Tyler Burmeister (Analyst)

Understood, understood. And then last one for me, just on capital allocation — strong cash balance, and with the stock at the current levels down here, it sounds like a lot of obviously positive things going on. What are your thoughts about capital allocation and maybe a stock buyback in particular?

Yifan Liang (Chief Financial Officer)

Sure. Yes, our board also evaluates the capital allocations from time to time. At this point, with the buyback program, we still have about $10 to $12 million available with our existing buyback program. We’re watching the stock market, so we’ll see.

Tyler Burmeister (Analyst)

Understood. All right, that’s all for me. Appreciate it, guys.

OPERATOR

Thank you. Next question comes from the line of Patrick Muth with Needham & Co. Your line is now open. Please go ahead.

Patrick Muth (Analyst)

Hi, thank you for taking my question, and congrats on the solid results. This is Patrick Muth on for David Williams at Needham. First question is on customer diversification and demand visibility. How diversified has the AI server business become across customers and platforms, and are you guys beginning to receive longer-term demand forecasts or capacity commitments that improve your visibility into 2027?

Stephen Chang (Chief Executive Officer)

Yes. As we’ve spoken before, we are happy to see the diversification, and that’s both in terms of the application portions as well as from a customer base. Especially now we’re seeing the medium-voltage MOSFET, especially in the high-performance portion, really gaining traction. This is going into various types of end customers, from power supply makers to module makers. For right now we’ve been emphasizing especially the module makers, and they sell into their various end customers themselves.

So this provides a little more diversification than simply just going after one big opportunity. We are happy to see that part of the business grow. We are getting more visibility into it. Some areas we’re seeing more longer-term commitments, visibility, or forecasts. Other areas are still relatively new, too, so there’s no typical seasonality happening just yet because overall this AI program is something that’s really taken off in the beginning of this year until now.

Patrick Muth (Analyst)

Okay, great, thanks for that. And then maybe on the design wins as a follow-up: obviously advanced computing has been growing substantially faster than the overall business, but how much of that growth is coming from new platform design wins and expanding content versus increasing volumes on existing sockets?

Stephen Chang (Chief Executive Officer)

Oh, most of these sockets actually didn’t exist in terms of revenue this time last year. So the bulk of it, I would say, is relatively new for us as a company. That said, we are continuing to secure additional design wins to secure more business for the future. We are expecting that this business will continue to grow going into the next calendar year as we continue to ramp, as well as these programs gain further traction. Thank you.

OPERATOR

Just a reminder, if you would like to ask a question, please press Star one to raise your hand. To withdraw your question, press Star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. There are no further questions at this time. I will now turn the call back to Stephen for closing remarks.

Stephen Polayo (Investor Relations Representative)

Okay, great. Before we conclude, I’d like to highlight a few upcoming investor events our team will be participating in. First is the 30th annual UBS Global Technology and AI Conference on December 2nd in Scottsdale, Arizona. Then the Wolfe Research Virtual Small and Medium Cap Conference on December 3rd, and the 15th annual CEO Summit on December 15th in New York City. If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank.

This concludes our earnings call today. Thank you for your interest in Alpha & Omega, and we look forward to speaking with you again next quarter. Take care. Thank you. Thank you.

OPERATOR

This concludes today’s call. Thank you all for attending. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.