Why Is Astera Labs, Inc. (ALAB) Down 16.2% Since Last Earnings Report?

Core Viewpoint - Astera Labs, Inc. has shown strong performance in its latest earnings report, with significant revenue growth and earnings surpassing estimates, despite a recent decline in share price [1][2]. Financial Performance - For Q3 2025, Astera reported non-GAAP earnings of 49 cents per share, exceeding the Zacks Consensus Estimate by 25.64%, compared to 23 cents per share in the same quarter last year [2]. - Net revenues increased by 103.9% year over year to $230.58 million, also surpassing the Zacks Consensus Estimate by 11.53% [2]. - The non-GAAP gross margin was 76.4%, a decrease of 140 basis points year over year [5]. Operational Highlights - The company is ramping up production of its PCIe 6 product portfolio for customized rack-scale AI systems, with Scorpio P-Series fabric switches achieving multiple design wins across various AI platforms [3]. - Demand for the signal conditioning portfolio has been strong, driven by PCIe scale-up and Ethernet scale-out connectivity applications in custom ASIC platforms [4]. Expense Management - Research and development expenses rose by 55.8% year over year to $78.9 million [5]. - Sales and marketing expenses decreased by 16.7% year over year to $19.4 million, while general and administrative expenses decreased by 3.3% year over year to $22.1 million [5]. - The non-GAAP operating margin improved to 41.7%, compared to 32.4% in the year-ago quarter [5]. Balance Sheet - As of September 30, 2025, cash and cash equivalents and marketable securities totaled $1.13 billion, up from $1.07 billion as of June 30, 2025 [6]. Future Guidance - For Q4 2025, Astera Labs expects revenues between $245 million and $253 million, with a non-GAAP gross margin of approximately 75% [7]. - Earnings are projected to be around 51 cents per share for the fourth quarter [7]. Market Sentiment - Recent estimates for Astera Labs have trended upward, with a consensus estimate shift of 31.52% [8]. - The company holds a Zacks Rank 3 (Hold), indicating an expectation of in-line returns in the coming months [10]. Industry Context - Astera Labs operates within the Zacks Internet - Software industry, where another player, Meta Platforms, reported a revenue increase of 26.2% year over year, highlighting a competitive landscape [11].