Alpha and Omega Semiconductor Q3 Earnings Call Highlights

Key Points

• Q3 results and June guidance: Alpha and Omega reported fiscal Q3 revenue of $163.8 million (up 0.9% sequential, down 0.5% YoY), non‑GAAP gross margin of 21.7% and a non‑GAAP EPS loss of $0.28, and guided June‑quarter revenue to about $168 million ± $10 million with non‑GAAP gross margin ~23% ±1%.
• Advanced computing-led recovery: Strength in AI, servers and graphics more than doubled advanced‑computing revenue sequentially (now ~25% of computing), and the company is expanding medium‑voltage MOSFET capacity (both internal and external) as customer design activity and backlog increase.
• Near‑term headwinds and margin drivers: Management flagged memory supply constraints and pricing pressures as growing risks for H2 calendar 2026—particularly in consumer markets—and said margin improvement will come more from product mix and new higher‑value products than from pricing alone.

Alpha and Omega Semiconductor NASDAQ: AOSL reported fiscal third-quarter 2026 revenue of $163.8 million, edging up 0.9% sequentially and down 0.5% year-over-year, as strength in advanced computing applications helped offset seasonal weakness in PCs and softness tied to memory-related headwinds. Management said results came in “slightly above the midpoint” of the company’s guidance range.

Non-GAAP gross margin was 21.7% and non-GAAP EPS was a loss of $0.28 per share. CEO Stephen Chang said the company believes the December and March quarters “represent a bottom for both revenue and gross margin,” and that the business is positioned for a “more constructive outlook going forward,” driven by mix improvements and higher-value applications.

Advanced computing momentum offsets PC softness

Chang attributed much of the quarter’s resilience to “strength in advanced computing, including AI, servers, and graphics cards,” while noting the PC market faced seasonality and “memory shortage headwinds.” He also said tablets posted strong sequential growth, and that communications revenue exceeded expectations due to growth at a “Tier 1 U.S. smartphone customer,” partially offset by weaker China demand.

Within the computing segment, March-quarter revenue increased 2.1% year-over-year and was essentially flat sequentially (down 0.1%), representing 49.1% of total revenue. Chang said advanced computing revenue “more than doubled sequentially and increased more than 40% year-over-year,” resulting in advanced computing representing 25% of computing segment revenue in the quarter.

Management highlighted traction for medium-voltage MOSFETs used in hot-swap applications and intermediate bus converters, citing increasing customer engagement and design activity. Chang said the company is shipping high-performance MOSFETs into intermediate bus converter applications that are “now moving into the build phase at some leading ODMs for major hyperscale customers.”

On the call, Chang said the company is expanding medium-voltage capacity and sees good visibility based on backlog. When asked about where capacity is being added, he said it is “a little bit of both” internal and external, with investments in internal capabilities and supply-chain diversification.

Segment performance: communications up; industrial and consumer mixed

Alpha and Omega broke out quarterly performance across four end-market segments and provided directional expectations for the June quarter.

• Computing: March-quarter revenue was up 2.1% year-over-year and down 0.1% sequentially. For the June quarter, Chang said the company expects computing revenue to increase low-to-mid single digits sequentially, driven by “strong AI and server demand,” with PC revenue “largely stable” and tablets declining due to seasonality and capacity allocation toward smartphones.
• Consumer: Revenue fell 9.8% year-over-year and increased 0.8% sequentially, representing 11.8% of total revenue. Chang said results were below expectations as recovery in gaming after a December-quarter inventory correction was offset by softness in home appliances. For June, the company expects consumer revenue to be “relatively flattish” sequentially.
• Communication: Revenue rose 18.7% year-over-year and 1.9% sequentially, representing 20.6% of revenue. Chang said growth was driven by strong year-over-year demand from a Tier 1 U.S. smartphone customer and BOM content expansion, partially offset by weakness in China. For June, the company expects a slight sequential decline but to “sustain the high year-over-year growth” seen in March.
• Power supply and industrial: Revenue declined 13.1% year-over-year and increased 5.3% sequentially, representing 17.4% of total revenue. Growth in quick chargers and DC fans offset continued sluggishness in solar, power tools, and e-mobility. For June, management expects mid-single-digit sequential growth, led by e-mobility momentum—particularly in India—along with continued strength in DC fans tied to data center and AI infrastructure build-outs.

Chang also discussed the company’s longer-term approach in gaming, saying it remains engaged with a leading customer on a next-generation platform and expects greater impact “beginning in 2028” as that platform ramps.

Memory constraints and pricing: mixed visibility into the second half

Chang said memory supply constraints and pricing pressures are expected to be “growing headwinds for the second half of calendar 2026,” particularly for consumer-facing markets such as PCs and smartphones. He told analysts that on the PC side, customers are seeing the impact of shortages, and the company is hearing “a lot of uncertainty about the second half” of PC forecasts.

In smartphones, Chang said the company is more exposed to premium-tier designs and expects that segment to be “a little more resilient” to memory-related pressures. He also pointed to rising charging currents as a driver of incremental BOM content, saying the company is introducing products aimed at higher-ASP sockets to help offset weakness in lower-end smartphone segments.

On pricing, CFO Yifan Liang said the March quarter saw “slower ASP erosion than the December quarter” and that the pricing environment “is improving.” However, he emphasized that margin improvement is expected to come more from product mix and new products than from pricing alone.

Margins, expenses, and cash flow

Liang said non-GAAP gross margin was 21.7%, down from 22.2% in the prior quarter and 22.5% a year ago. He attributed the sequential decline primarily to “lower utilization and higher operation costs.” Non-GAAP operating expenses were $44.3 million, up from $41.3 million in the prior quarter and $39.7 million a year ago, with the increase “mainly due to higher R&D expenses.”

Operating cash flow was negative $8.3 million, compared with negative $8.1 million in the prior quarter and positive $7.4 million in the year-ago period. Liang said working capital fluctuated by $14 million during the quarter. EBITDA (excluding equity method investment income and loss) was $5.9 million, down from $9.7 million in the prior quarter and $14.7 million a year ago.

The company ended the March quarter with $190.3 million in cash, down from $196.3 million at the end of the prior quarter. Liang said Alpha and Omega repurchased 214,000 shares for $4.2 million under its buyback program and repurchased 292,000 shares of employee RSUs vested during the quarter for $6.2 million.

June-quarter outlook calls for growth and margin recovery

For the June quarter, Liang guided to revenue of approximately $168 million, plus or minus $10 million. The company guided to GAAP gross margin of 22.3% plus or minus 1%, and non-GAAP gross margin of 23% plus or minus 1%.

Asked about what drives the sequential margin improvement implied in guidance, management said about half is expected to come from better utilization and half from improved product mix.

Liang also guided to GAAP operating expenses of $52 million plus or minus $1 million and non-GAAP operating expenses of $45.5 million plus or minus $1 million. The company expects interest income to be $1 million higher than interest expense and income tax expense of $1 million to $1.2 million. Capital expenditures are expected to be $15 million to $17 million in the June quarter, compared with $12.1 million in the March quarter.

In Q&A, Liang confirmed the company is seeing “some increases in input cost,” including certain materials and foundry subcontractor pricing, and said those dynamics are reflected in the June-quarter guidance as the company manages through product mix and pricing.

Management also highlighted upcoming investor conference participation, including the B. Riley Securities 27th Annual Institutional Investor Conference on May 20, Stifel’s 2026 Boston Cross Sector One-on-One Conference on June 3, and the Jefferies Semiconductor, IT, Hardware, and Communications Technology Conference on Aug. 26.

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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