Alpha and Omega Semiconductor Q2 Earnings Call Highlights

Key Points

• Alpha and Omega reported fiscal Q2 revenue of $162.3 million (down 11.1% sequentially, 6.3% YoY), with a non-GAAP gross margin of 22.2% and non-GAAP EPS loss of $0.16, while operating cash flow was negative and cash ended the quarter around $196.3 million.
• The company is shifting toward “application-specific total solutions” and will boost targeted R&D—about $20 million in 2026 (~25% higher R&D spend)—funded in part by monetizing its Chongqing JV (a ~20% stake sale aggregating $150 million, with roughly $15 million remaining to be received).
• For the March quarter management guided revenue of roughly $160 million ± $10 million and non-GAAP gross margin of about 21% ±1%, calling March a near-term low point with a rebound expected in June and reiterating a midterm target of $1 billion revenue and 30% non-GAAP gross margin.

Alpha and Omega Semiconductor NASDAQ: AOSL reported fiscal second-quarter 2026 revenue of $162.3 million, which the company said came in slightly above the midpoint of its guidance range. Revenue declined 11.1% sequentially and 6.3% year-over-year, reflecting seasonality across several end markets and continued inventory digestion in portions of advanced computing, executives said on the company’s Feb. 5 earnings call.

Non-GAAP gross margin was 22.2% and non-GAAP EPS was a loss of $0.16 per share. Management also highlighted continued capital returns, with approximately $13.9 million in share repurchases during the December quarter (728,000 shares) under the company’s $30 million authorization, leaving about $16 million available.

Strategy shift and investment priorities

CEO Stephen Chang said the company has been executing a multi-year strategy to move from being primarily a component supplier toward “application-specific total solutions,” with an emphasis on higher performance markets where the company can expand bill-of-materials (BOM) content and sustain higher margins.

As part of that effort, Chang said Alpha and Omega is increasing “critical” R&D investment in targeted areas rather than broad-based spending. CFO Yifan Liang later quantified that plan during Q&A, saying the company expects to spend about $20 million from proceeds of its Chongqing joint venture (CQJV) equity monetization on new R&D projects in calendar 2026, which he said translates to about a 25% increase in R&D expense for the year. Liang said the March quarter will reflect a lower step-up, with R&D costs expected to “inch up” in subsequent quarters.

To support investments while maintaining financial flexibility, the company reiterated its previously announced sale of roughly 20% of its equity interest in the Chongqing joint venture for an aggregate purchase price of $150 million payable in installments. Chang said the company continues to hold an 18.9% equity stake. He said the company received $94 million in the September quarter, $11 million in the December quarter, and $30 million subsequent to quarter-end, with $15 million remaining expected later in the calendar year.

End-market trends: AI, PCs, and smartphones

Management said demand in advanced computing remains an important area of focus, though Chang acknowledged in Q&A that the company’s AI opportunity tied to voltage regulator module (VRM) solutions directly powering GPUs has been “less than” original expectations. However, he said the AI opportunity is expanding beyond VRMs into medium-voltage MOSFETs used earlier in the power conversion chain, including applications such as hot-swap and 48-volt to 12-volt intermediate bus converters for AI data centers.

Chang also pointed to PC market uncertainty in calendar 2026 due to expected tightening in memory supply, but said the company is seeing increased BOM content on new platforms such as Intel’s Panther Lake as its total solution strategy gains traction. In communications, Chang said the company is seeing benefits from earlier investments in silicon and packaging for smartphone battery protection, aided by industry movement toward higher charging currents.

Segment performance and March-quarter outlook

Chang provided detail by end market and initial expectations for the March quarter, characterizing the March period as a near-term low point for revenue and margin, with a return to growth beginning in the June quarter and continuing into the peak season.

• Computing: December-quarter revenue rose 5.9% year-over-year but fell 17.1% sequentially, representing 49.6% of total revenue. Chang attributed the sequential decline to seasonality, a prior-quarter PC pull-in related to tariffs, and continued digestion in AI and graphics influenced by customers prioritizing data center GPUs over traditional graphics card platforms. For the March quarter, the company expects computing revenue to decline low single digits sequentially, with softness in PCs mostly offset by strength in AI data centers and growth in graphics cards and tablets.
• Consumer: Revenue declined 14.9% year-over-year and 18.3% sequentially, representing 11.8% of total revenue. The company cited seasonal declines in wearables and a year-over-year impact from gaming, with a smaller effect from home appliances. For March, management forecast mid-single-digit sequential growth, driven primarily by a recovery in gaming following a “sharp inventory correction” in the December quarter.
• Communication: Revenue increased 1.1% sequentially and was flat year-over-year, representing 20.4% of revenue. The company highlighted year-over-year growth with a Tier 1 U.S. smartphone customer driven by BOM content expansion, while describing China smartphone demand as uneven as it prioritizes U.S. business. For March, the company expects a mid-single-digit sequential decline due to typical seasonality from its Tier 1 U.S. customer, partially offset by sequential growth from China smartphone, while Korea is expected to remain relatively flat.
• Power supply and industrial: Revenue fell 22.5% year-over-year and 3% sequentially, representing 16.7% of total revenue. Chang said results were below expectations for mid- to high-single-digit sequential growth because quick charger demand was weaker than expected, partially offset by a rebound in power tools and e-mobility. For March, the company expects mid-single-digit sequential growth driven by quick chargers and DC fans, offset by softer power tools and e-mobility.

Financial results, cash flow, and guidance

Liang said non-GAAP gross margin decreased to 22.2% from 24.1% in the prior quarter, primarily due to higher input and operational costs. Non-GAAP operating expenses were $41.3 million, roughly flat sequentially, and non-GAAP EPS shifted to a loss of $0.16 per share compared with earnings of $0.13 per share in the prior quarter.

Operating cash flow was negative $8.1 million, which Liang said included $4 million of customer deposit repayments and $8.7 million of income taxes paid by one entity related to the gain on the CQJV equity sale. Cash and cash equivalents ended the quarter at $196.3 million, down from $223.5 million at the end of the September quarter. Liang noted days sales outstanding increased to 25 days from 21 days, while average days in inventory rose to 140 days from 124 days.

Capital expenditures were $15 million in the December quarter, up from $9.8 million in the prior quarter. Liang guided March-quarter CapEx to $15 million to $18 million, and said the higher spending reflects investments to prepare for calendar 2026 growth and new products.

For the March quarter, management guided to:

• Revenue: approximately $160 million ± $10 million
• GAAP gross margin: 20.2% ± 1%
• Non-GAAP gross margin: 21% ± 1%
• GAAP operating expenses: $52 million ± $1 million
• Non-GAAP operating expenses: $45 million ± $1 million

In Q&A, Liang attributed the expected sequential gross margin decline primarily to lower utilization during the Lunar New Year period, when production is typically reduced. He said the company expects margins to rebound in the June quarter, back toward the levels seen in the December 2025 or September 2025 quarters, and reiterated a midterm target model of $1 billion in revenue, 30% non-GAAP gross margin, and operating expenses at 20% of revenue.

Management also discussed pricing dynamics, with Liang saying December-quarter pricing was in line with historical trends and “a little bit better” than the September quarter, while March guidance assumes normal historical price erosion.

Looking further out, Chang said the company expects to see additional results from its strategy through calendar 2026, with a more meaningful acceleration in 2027 and beyond as new platforms and programs ramp.

About Alpha and Omega Semiconductor NASDAQ: AOSL

Alpha and Omega Semiconductor Limited NASDAQ: AOSL is a designer and supplier of power semiconductor components used in power management applications across a range of electronic systems. The company offers a broad portfolio of discrete and integrated power devices, including power MOSFETs, rectifiers, voltage regulators, and power management ICs. These products are optimized for high efficiency, compact form factors and thermal performance, catering to the growing demands of energy-sensitive applications in computing, consumer electronics, communications and industrial markets.

Since its founding in 2000, Alpha and Omega Semiconductor has leveraged in-house design expertise and strategic partnerships with manufacturing facilities to deliver scalable, high-volume production.

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