Earnings

Alpha And Omega Says AI Is About 20% Of Revenue Versus 5.5% A Year Ago, And Weighs Reporting It Separately

CEO Stephen Chang said the AI mix is a key reason margins are improving, even as traditional PC revenue fell about 30% from the prior quarter.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Alpha And Omega Says AI Is About 20% Of Revenue Versus 5.5% A Year Ago, And Weighs Reporting It Separately

Alpha and Omega Semiconductor, which designs power chips used in PCs, servers, smartphones and appliances, said AI and server products now make up approximately 20% of revenue, up from 5.5% a year ago. CEO Stephen Chang told analysts on the company's earnings call Thursday that management is discussing when to report that business separately.

A fast-growing slice of the business

Chang said AI and server applications accounted for nearly 90% of advanced computing revenue, which itself reached nearly 23% of the total, ahead of the company's expectations. Within advanced computing, AI and server revenue grew more than 65% from the prior quarter and more than 250% from a year earlier.

Asked by a Lake Street analyst whether investors could get a clearer view of AI, Chang said the company is discussing "what the timing or what is appropriate" for that, and "will try to be more explicit in describing our business." He called AI "a very important part."

A Needham analyst asked how much of the growth came from new designs. Chang said "Most of these sockets actually didn't exist in terms of revenue this time last year." He added that the company is getting longer-term commitments or forecasts in some areas, while others are still new.

Margins rise while PCs slump

September-quarter revenue was $177.8 million, up 4.3% from the June quarter and down 2.6% from a year earlier, slightly above the midpoint of guidance. CFO Yifan Liang said adjusted gross margin rose to 25.2% from 23.7% in the June quarter, mainly on better product mix, with pricing playing a smaller role. The adjusted loss narrowed to 7 cents a share from 13 cents.

Chang said the AI mix is "a key reason why the margin is improving."

Traditional PC revenue fell about 30% from the prior quarter. Chang blamed elevated memory costs and component shortages, said the bulk of the drop came in the September quarter, and said he does not expect a near-term recovery. Computing revenue was $83.2 million, down 2% from the prior quarter.

December guidance and the next stage

The company guided December revenue to about $180 million, plus or minus $10 million, with computing down mid to high single digits from the prior quarter. Management expects communications to grow in the mid-teens and power supply and industrial revenue to rise high single digits.

Liang said about $10 million to $12 million remains under the company's existing buyback program, adding that the board reviews capital allocation from time to time. Cash ended the quarter at $175.2 million.

Management is scheduled to appear at the UBS Global Technology and AI Conference in Scottsdale, Arizona, on December 2.

Sources

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