Alpha and Omega Semiconductor NASDAQ: AOSL reported fiscal first-quarter revenue of $177.8 million as rapid growth in AI and server applications helped offset weaker demand for traditional PCs and consumer electronics.
Revenue for the September quarter rose 4.3% from the preceding quarter but fell 2.6% from a year earlier. The company’s non-GAAP loss narrowed to $0.07 per share from $0.13 per share in the June quarter; a year earlier, it reported non-GAAP earnings of $0.13 per share.
For the December quarter, management forecast revenue of $180 million, plus or minus $10 million. CEO Stephen Chang said the midpoint implies slight sequential growth in a period that is typically seasonally softer for the company.
AI Growth Offsets PC Weakness
Advanced Computing revenue, which includes AI servers and graphics cards, increased more than 50% sequentially and 80% year over year, reaching nearly 23% of total revenue. AI and server applications accounted for nearly 90% of Advanced Computing revenue and approximately 20% of company revenue, up from 5.5% of the total a year earlier.
Chang said AI and server revenue grew more than 65% sequentially and more than 250% year over year. The company expects Advanced Computing to reach another quarterly revenue record in December, although weakness in traditional PCs is expected to more than offset that growth.
Overall computing revenue was $83.2 million in the September quarter, down 2% sequentially and 14.3% from a year earlier. Traditional PC-related revenue fell approximately 30% from the preceding quarter. Management expects total computing revenue to decline by a mid- to high-single-digit percentage sequentially in December.
Chang attributed the PC weakness in part to elevated memory costs and broader component shortages. During the question-and-answer session, he said the bulk of the decline occurred in September but that the challenges were likely to persist in the near term.
Asked whether Alpha and Omega would report AI or Advanced Computing as a separate segment, Chang said the company was discussing the timing internally and would try to be more explicit in describing the business. He also said most of the AI-related product sockets generating revenue did not exist in the company’s revenue base at the same time last year.
Smartphone and Industrial Demand Support Outlook
Communications revenue rose 15% sequentially and 15.8% year over year to $37.8 million, driven primarily by battery protection solutions for a tier-one U.S. smartphone customer. Chang said battery protection circuit module revenue increased more than 50% sequentially as new flagship smartphones entered production.
The company expects communications revenue to grow by a mid-teens percentage sequentially in the December quarter. Chang also noted weaker demand in China, where rising memory costs are pressuring smartphone affordability and leading some manufacturers to reduce component specifications and costs.
Power supply and industrial revenue increased 29.2% sequentially to $38.7 million, with demand from power supplies, power tools, motor control and DC fans contributing to the growth. Chang said DC fans reached record quarterly revenue, supported partly by cooling requirements in AI servers and data centers. The company expects the segment to grow by a high-single-digit percentage sequentially in December, primarily on demand for electric motorcycles and scooters in emerging markets.
Consumer revenue was $16.1 million, down 22.9% sequentially and 31.4% year over year. Management expects it to be roughly flat sequentially in the December quarter.
Margins Improve as Product Mix Shifts
Non-GAAP gross margin rose to 25.2% from 23.7% in the June quarter. CFO Yifan Liang attributed most of the 1.5-percentage-point improvement to a better product mix, with pricing playing a smaller role. Liang said the overall pricing environment moved from neutral in June to slightly favorable in September.
For the December quarter, Alpha and Omega forecast non-GAAP gross margin of 25.7%, plus or minus one percentage point, and non-GAAP operating expenses of $46 million, plus or minus $1 million.
The company ended September with $175.2 million in cash and generated $5.6 million in operating cash flow during the quarter. Liang also said the company’s interest in a joint venture declined to 15.1% from 18.9% after its majority shareholder injected capital and the venture retired smaller shareholders’ interests. Alpha and Omega recognized a $4 million gain from the transaction, which was excluded from non-GAAP earnings.
Asked about capital allocation, Liang said the existing share repurchase program had approximately $10 million to $12 million available. He said the board evaluates capital allocation from time to time and that the company would watch the stock market.
About Alpha and Omega Semiconductor (NASDAQ:AOSL)
Alpha and Omega Semiconductor Limited NASDAQ: AOSL is a semiconductor company that designs, develops and supplies power management products. Its portfolio includes power MOSFETs, power integrated circuits, transient voltage suppressors, insulated-gate bipolar transistors and other power semiconductor devices used to manage, convert and protect electrical power.
The company's products are used in applications including personal computers, servers, telecommunications equipment, consumer electronics, industrial systems, automotive equipment and power supplies.
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