Astera Lab Continues Win Streak After Reporting Q3 Earnings

Core Insights - Astera Labs reported Q3 earnings that exceeded expectations, continuing its streak of outperformance, but the stock closed down 6.4% after initially rising in after-hours trading [3][5] Financial Performance - Revenue reached $230.6 million, surpassing the consensus estimate of $206.4 million by 11.7%, marking a 104% year-over-year increase and 20% sequential growth from Q2 [4][11] - Earnings per share (EPS) was $0.49, beating the estimate of $0.39 by $0.10, with a 113% year-over-year increase [4][11] - Operating income improved to $55.4 million from a loss of $8.9 million in the same quarter last year, representing a 723% increase [6][11] - Net income rose to $91.1 million from a loss of $7.6 million, a 1,300% increase [6][11] - Gross margin expanded to 76.2%, up 100 basis points year-over-year [6][11] Product and Market Dynamics - The Scorpio fabric switch portfolio, crucial for AI infrastructure connectivity, saw significant expansion with new platform design wins, becoming the fastest-growing product line in the company's history [7] - CEO Jitendra Mohan highlighted ongoing momentum in PCIe 6 and robust growth from Taurus Ethernet SCMs, indicating an accelerating AI infrastructure refresh cycle [8] Future Guidance - For Q4, management guided revenue between $245 million and $253 million, implying sequential growth of 6% to 10% at the midpoint, with gross margin expected to remain around 75% [9][10] - Non-GAAP EPS is projected to reach $0.51, suggesting sustained strength rather than a decline [9] Strategic Moves - Astera announced the acquisition of aiXscale Photonics, indicating a strategic bet on the importance of photonic interconnects for future AI infrastructure scaling [12] Market Reaction - The stock experienced volatility, opening down, peaking at a 6.7% gain, and ultimately closing down 6.4%, which may reflect profit-taking after a significant 280% increase from its 52-week low [12] - Analysts remain optimistic, with 14 out of 19 covering the stock rating it a buy or better, and a consensus price target of $189.11, indicating limited downside potential [13]