Astera Labs files 10-Q: quarterly report (10-Q)

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 scal e , 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 module s, shipping millions of devices across leading hyperscalers . Our products, which include Aries PCIe ® /CX L ® Smart DSP Retimers, Aries PCIe®/CXL® Smart Cable Modules™, Taurus Ethernet Smart Cable Module s ™ , 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 $396.3 million in 2024 to $852.5 million in 2025. Our revenue was $1,285.7 million for the nine months ended September 30, 2026, driven by a sizable increase in demand for our products.

Summary of Financial Highlights

Our revenue was $584.9 million and $1,285.7 million for the three and nine months ended September 30, 2026, respectively, c ompared to $230.6 million and $581.9 million for the same periods in 2025, representing an increase of 154% and 121% year over year, respectively.

Gross margin decreased by 390 basis points (“bps”) to 72.3% and decreased by 220 bps to 73.5% for the three and nine months ended September 30, 2026, respectively, compared to 76.2% and 75.7% for the same periods in 2025, respectively.

Operating income was $179.1 million and $330.1 million for the three and nine months ended September 30, 2026, respectively, compared to $55.4 million and $106.5 million for the same periods in 2025, representing an increase of 223% and 210% year over year, respectively.

Net income was $182.9 million and $416.3 million for the three and nine months ended September 30, 2026, respectively, compared to $91.1 million and $174.2 million for the same periods in 2025, representing an increase of 101% and 139% year over year, respectively.

Results of Operations Comparison of the Three and Nine Months Ended September 30, 2026 and 2025

Revenue

Total revenue increased $354.3 million , or 154%, and $703.7 million, or 121%, for the three and nine months ended September 30, 2026, compared to the same periods 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 an increase in overall average selling prices resulting from an increased mix of hardware modules and Scorpio products, partially offset by lower average selling prices within certain other product families .

Cost of Revenue, Gross Profi t, and Gross Margin

Total cost of revenue increased $107.4 million , or 196% , and $199.0 million, or 141%, for the three and nine months ended September 30, 2026, compared to the same periods in 2025, respectively, primarily due to higher unit shipments and shift in product mix cost.

For an additional discussion of Warrants, s ee Note 9 - Common Stock Warrants in the notes to the unaudited condensed c onsolidated f inancial s tatements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Research and Development

Research and development expense increased $92.0 million , or 117% , for the three months ended September 30, 2026 compared to the same period in 2025. The increase was primarily due to a $32.6 million increase in personnel-related costs resulting from an 105% increase in headcount, a $27.7 million increase in non-cash stock-based compensation expenses, and a $24.3 million increase in overall spending to support our R&D initiatives, which includes hardware design, software licensing, and cloud hosting services costs.

Research and development expense increased $222.3 million, or 106% , for the nine months ended September 30, 2026 c ompared to the same period in 2025. The increase was primarily due to a $82.4 million increase in personnel-related costs resulting from a 103% increase in headcount, a $56.5 million increase in non-cash stock-based compensation expenses, and a $65.7 million increase in overall spending to support our R&D initiatives, which includes hardware design, software licensing, and cloud hosting services costs.

Sales and Marketing

Sales and marketing expense increased by $18.1 million , or 93%, for the three months ended September 30, 2026 compared to the same period in 2025. The increase was primarily due to a $10.3 million increase in non-cash stock-based compensation expenses and a $6.2 million increase in personnel-related costs resulting from a 63% increase in headcount.