Alpha and Omega Semiconductor - Earnings Call - Q4 2025

Executive Summary

• Q4 FY2025 revenue was $176.5M, up 7.2% q/q and 9.4% y/y, landing at the high-end of guidance; non-GAAP gross margin improved to 24.4% on richer Power IC mix, while GAAP results were impacted by a $76.8M impairment tied to the planned CQJV equity sale.
• Versus consensus, AOSL beat on both revenue ($176.5M vs $170.0M*) and EPS ($0.02 vs -$0.01*), continuing a three-quarter streak of top-line upside as AI/graphics, tariff-driven PC pull-ins, and wearables outperformed.
• Guidance for Q1 FY2026 (Sep-25): revenue $183M ±$10M; GAAP GM ~23.8% (non-GAAP ~24.4%); GAAP opex ~$47.5M (non-GAAP ~$41.0M); net interest +$0.5M; tax $1.0–$1.3M, signaling sequential growth led by PCs, smartphones, and wearables.
• Strategic catalysts: monetization of CQJV stake ($150M cash inflow expected in installments) to fund growth/M&A, and resolution of BIS investigation ($4.25M settlement), reducing legal overhang.

What Went Well and What Went Wrong

What Went Well

• Computing strength: Segment rose to 52.6% of revenue, +17.9% q/q and +29.7% y/y, driven by AI/graphics at record levels and PC pull-ins amid tariff uncertainty. “Our fiscal Q4 results came in at the high-end of our guidance, led by strength in Computing as A.I. and graphics revenue reached record levels… as well as continued momentum in wearables” — CEO Stephen Chang.
• Power IC mix: Power IC revenue reached $68.7M (+25.8% q/q, +30.2% y/y) and ~40% of product revenue, benefiting margins and diversified end-market exposure (graphics, AI, gaming, PCs).
• Legal/strategic clarity: BIS matter resolved with $4.25M payment; CQJV partial sale ($150M) strengthens liquidity and supply flexibility; management emphasized reinvestment into technology/capacity and potential M&A.

What Went Wrong

• GAAP net loss widened to -$77.1M due to the $76.8M CQJV impairment; GAAP opex rose to $52.9M, including elevated legal costs and SB compensation; EBITDAS fell to $10.5M q/q.
• Communications and PS&I underperformed guidance: Communications -5.2% q/q (China smartphone softness); PS&I -9.8% q/q (power tools, e-mobility weakness), though quick chargers increased.
• Cash metrics tightened: Operating cash flow was -$2.8M (refund of customer deposits) and cash & equivalents declined to $153.1M; DSO lengthened to 15 days; CapEx elevated to $14.3M.

Transcript

Speaker 5

Good afternoon and thank you for attending the Alpha and Omega Semiconductor fiscal Q4 2025 earnings call. My name is Jason, and I'll be the moderator today. All lines are being muted during the presentation portion of the call, with an opportunity for questions and answers at the end. I'd now like to pass the conference over to your host, Steven Pelayo.

Speaker 3

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2025 fourth quarter. I am Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO, and Yifan Liang, our CFO. This call is being recorded and broadcast live over the web. A replay will be available for seven days following the call via the link in the Investor Relations section of our website. Our call will proceed as follows today. Steven will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the September quarter. Finally, we will have a Q&A session. The earnings release was distributed over the wire today, August 6, 2025, after the market close. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures.

We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We see no obligation to update the information provided in today's call. Now, I'll turn the call over to our CEO, Stephen Chang. Steven?

Speaker 5

Thank you, Steven. Welcome to Alpha and Omega Semiconductor's fiscal Q4 earnings call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q4 revenue results at the high end of our guidance due to better-than-expected demand in computing, mostly driven by tariff-related customer pull-ins for PCs and strong sequential growth in AI and graphics chips. Our consumer segment also saw strong sequential growth related to wearables and gaming. Overall, total June quarter revenue was $176.5 million. Non-GAAP gross margin was 24.4%. Non-GAAP EPS was $0.02. Total revenue increased 9.4% year-over-year and 7.2% sequentially. As previously noted, licensing revenue wound down in the March quarter. Excluding licensing and other revenue, our product revenue was up 13.7% year-over-year and 9% sequentially.

Power IC revenue increased 25.8% sequentially and 30.2% year-over-year to a record quarterly high and now represents nearly 40% of total product revenue. The richer mix of Power IC benefits gross margins and comes from graphics, AI, gaming, and PC markets. On July 14, we announced an equity transfer agreement with a strategic investor to sell approximately 20.3% of outstanding equity interests of Alpha and Omega Semiconductor's joint venture in Chongqing, China, for an aggregate cash consideration of $150 million. The sale is expected to provide Alpha and Omega Semiconductor with significant additional capital to continue investing in technology, equipment, and acquisition of assets complementary to our business operations to support key growth areas. In summary, uncertainties regarding macroeconomy and geopolitics continue. Nonetheless, we are delivering on our commitment and advancing our transformation from a component supplier to a total solution provider.

Our goal is to leverage premier customer relationships to expand market share and increase bond content with a broader portfolio. With that, let me now cover our segment results and provide some guidance by segment for the next quarter. Starting with computing, June quarter revenue was up 29.7% year-over-year and up 17.9% sequentially and represented the majority, or 52.6% of total revenue. These results were solidly ahead of our original expectation for mid-single-digit sequential growth and more than 15% year-over-year. As mentioned earlier, the upside was fueled by tariff-related pull-ins from our PC customers and robust sequential and year-over-year growth in power solutions for AI and graphics applications. Revenue from AI and graphics reached a record high in the June quarter, driven by strong initial shipments for a new AI program. However, we expect a digestion period in the September quarter as that initial demand is absorbed.

Meanwhile, design and activities for additional AI programs remain active and ongoing. In summary, we expect the computing segment to grow low single digits sequentially and mid-teens year-over-year in the September quarter. Sequential growth will be driven by PCs, with graphics and AI demand remaining relatively strong, though down from June's record levels. Tablet demand is expected to decline. Overall visibility remains limited given the uncertain macroeconomic backdrop and evolving trade policies. Turning to the consumer segment, June quarter revenue was down 5.8% year-over-year and up 23.9% sequentially and represented 15.1% of total revenue. The results were in line with our forecast, driven by strong promotional activity in gaming, as well as sequential growth from home appliances. Wearables were also better than expected. For the September quarter, we forecast a mid-single-digit sequential decline in the consumer segment, driven by gaming and home appliances, but offset by continued growth in wearables.

Next, let's discuss the communication segment. Revenue in the June quarter was down 1.7% year-over-year, down 5.2% sequentially, and represented 15.2% of total revenue. The June quarter results were below our guidance for flat sequential growth as a fall off from smartphones in China, more than offset growth from Korea and our tier one U.S. smartphone customers. Smartphone battery PCM revenue continues to outpace the overall market due to a combination of market share gains, a mix shift to higher-end phones, and generally higher charging currents, driving increased bond content. Looking ahead to the September quarter, we anticipate more than 10% sequential growth for the communication segment, primarily driven by our tier one U.S. smartphone customer as they prepare for their next phone launch. Demand from China's smartphone is also expected to grow sequentially, while Korea sustains the high level achieved in the June quarter.

Now let's talk about our last segment, power supply and industrial, which accounted for 16.8% of total revenue and was up 7.3% year-over-year and down 9.8% sequentially. The results were below our flat to slightly down sequential forecast, primarily due to weaker than expected demand from power tools and e-mobility. AC/DC power supplies and quick chargers for smartphones did increase sequentially, but it was not enough to offset the weakness elsewhere. As stated before, we are now seeing increases in quick chargers due to increased bond content, driven by higher charging currents. For the September quarter, we expect revenue to grow mid-single digits sequentially for the power supply and industrial segment, primarily driven by a slight pickup in e-mobility, offset by lower AC/DC power supplies.

In closing, we are pleased to report that June quarter results landed at the high end of our guidance, fueled by strong demand across AI and graphics, gaming, wearables, and tariff-related PC pull-ins. These results highlight the strength of our diversified portfolio and our ability to execute amid dynamic market conditions. Looking ahead to the September quarter, we expect further growth driven by PCs, smartphones, and wearables as we continue to be excited by the expanding opportunities in AI and graphics. The geopolitical and macroeconomic environment remains fluid as we actively monitor evolving trade policies, capture pull-in related opportunities, and collaborate with customers to minimize disruptions. Our business fundamentals remain strong, anchored by differentiated technology, a broadening product portfolio, and deep relationships with leading global customers. We believe calendar 2025 will be a year of growth, supported by expanding end market exposure, share gains, and rising bond content.

While near-term uncertainties persist, we remain focused on execution, innovation, and delivering sustainable value for our stakeholders. With that, I will now turn the call over to Yifan for a discussion of our fiscal fourth quarter financial results and our outlook for the next quarter. Yifan?

Speaker 4

Thank you, Steven. Good afternoon, everyone, and thank you for joining us. Revenue for the June quarter was $176.5 million, up 7.2% sequentially, and up 9.4% year-over-year. In terms of product mix, DMOS revenue was $107.3 million, up 0.4% sequentially, and 5.1% over last year. Power IC revenue was $68.7 million, up 25.8% from the prior quarter and 30.2% from a year ago. Assembly service and other revenue was $0.5 million as compared to $0.4 million last quarter and $1.4 million for the same quarter last year. We did not have any license and engineering services revenue this quarter as the related contract was completed in mid-February. This compares to $2.8 million in the prior quarter and $5.1 million in the same quarter last year. Non-GAAP gross margin was 24.4% compared to 22.5% last quarter and 26.4% a year ago. The quarter-over-quarter increase was primarily impacted by the mix improvement.

Non-GAAP operating expenses were $40.9 million compared to $39.7 million for the prior quarter and $39.3 million last year. The quarter-over-quarter increase was primarily due to higher R&D engineering expenses. Non-GAAP quarterly EPS was $0.02 compared to negative $0.10 per share last quarter and $0.09 per share a year ago. Moving on to cash flow. Operating cash flow was negative $2.8 million, including $2.7 million of repayment of customer deposits. By comparison, operating cash flow was $7.4 million in the prior quarter and $7.1 million last year. We expect to refund $5 million of customer deposits in the September quarter. EBITDA excluding impairment of equity investment for the quarter was $10.5 million compared to $15.2 million last quarter and $16 million for the same quarter a year ago. Now let me turn to our balance sheet.

We completed June quarter with a cash balance of $153.1 million compared to $169.4 million at the end of last quarter. Net trade receivables increased by $6.3 million sequentially. Day sales outstanding were 15 days for the quarter compared to 11 days for the prior quarter. Net inventory increased by $1.6 million quarter over quarter. Average days in inventory were 126 days for the quarter compared to 129 days for the prior quarter. CapEx for the quarter was $14.3 million compared to $8.1 million for the prior quarter. We expect CapEx for the September quarter to range from $11 million to $13 million. A few words about our joint venture in Chongqing, China. On July 14th, we signed an equity transfer agreement to sell 20.3% of the outstanding shares of CQ Davy for $150 million in cash, and we expect this deal to be completed in the next few months.

This transaction demonstrated our commitment to the ongoing value creation for our shareholders. With this sale, our ownership in CQ Davy will reduce to 18.9% from 39.2%. CQ Davy will remain as an important wafer and packaging supplier for AOS. After this transaction, the new investor plans to inject a significant amount of capital into CQ Davy to further expand its capacity. Based on the evaluation of this sale, we recorded an impairment charge of $76.8 million in the June quarter on the U.S. GAAP basis. This impairment charge partially reversed the $358.7 million net gain that we recorded back to December 2021 after we sold 3.2% equity interest in CQ Davy for $26.3 million cash. With that, now I would like to discuss September quarter guidance. We expect revenue to be approximately $183 million plus or minus $10 million. GAAP gross margin to be 23.8% plus or minus 1%.

We anticipate the non-GAAP gross margin to be 24.4% plus or minus 1%. GAAP operating expenses to be $47.5 million plus or minus $1 million. Non-GAAP operating expenses expected to be $41 million plus or minus $1 million. Interest income to be $0.5 million higher than interest expense, and income tax expense to be in the range of $1 million to $1.3 million. With that, we will now open the call for questions. Operator, please start a Q&A session.

Speaker 5

If you would like to ask a question, please press star followed by one on your telephone to be asked. For any reason you'd like to remove that question, please press star followed by two. Again, to ask a question, it is star one. Our first question is from David Williams with The Benchmark Company. Your line is open. David Williams, your line is open. Our next question is from Jeremy Kwan with Stifel. Your line is now open.

Speaker 2

Yes, good afternoon. Maybe if you could provide a little bit more color on the computing segment. Looks like, you know, that was very nice to see. It was quite strong, especially on the AI and graphics. Can you help us understand the digestion that you mentioned? Is that related to the tariff pull-ins more generally, or is that related to the strong initial shipment of the new AI program? Any color you can provide in terms of the AI contribution this quarter and how you see that going forward over the next couple of quarters would be very helpful.

Speaker 0

Hi, Jeremy. Certainly we're excited about our AI and graphics business. This is something that's been, you know, we've been building upon and expanding in our advanced computing area. In terms of the digestion portion, this is a reflection of one of the AI programs that we started shipping into in the last quarter that we ship into for a certain program, but we expect to take a little bit longer for that initial shipment to be digested. At the same time, we commented in the call that we are excited that there are additional programs that we continue to be designed into that will help with that digestion. At the same time, we already are seeing fresh orders as well, forecasts and backlog coming in for some of those new programs. Again, we are going after multiple types of projects here when it comes to AI.

This is in addition to what we're doing on the graphics side. On the graphics side, actually, we report also that is also fairly strong and I would say better than our original expectations with good share at the add-in card makers for the graphics cards. We're excited about both of our AI as well as graphics business.

Speaker 2

Great, that's very helpful. Can you help us quantify this maybe in qualitative terms, like how much your total AI is as a part of the consumer segment or maybe how much it drove growth in the current quarter? Maybe how you see that shaping out over the next, you know, maybe call it 12 to 18 months.

Speaker 0

Yeah, we tend to look at both graphics and AI together when it comes to, because this product is pretty similar when it comes to both the controller as well as the driver MOS that we're selling as a total solution. Those two together is somewhere in the neighborhood, maybe around 25% of computing these days.

Speaker 2

Great, that's very helpful. Maybe if I can ask a question on the gross margin, I understand that, you know, the richer mix kind of helped with the richer mix of the Power IC helped with gross margins this quarter. It's kind of maybe flat next quarter. You know, revenues are a little bit higher. Can you infer from that that maybe the Power IC mix shifts down a little bit here? Can you just help us understand kind of the dynamics near term and how you see this looking out again 12 to 18 months, especially as, you know, some of these newer, richer, higher value products continue to ramp? Thank you.

Speaker 4

Sure, Jeremy. Yes, in the June quarter, our gross margin improved quarter over quarter, I believe nicely. It was back up to the December 2024 quarter level, primarily because of the better mix. Keep in mind, in the June quarter, we did not have any license and engineering service revenue compared to the March quarter because that 24-month contract expired in mid-February. In terms of the September quarter guidance, flat compared to the June quarter on the market basically reflected similar product mix and similar production level. That's revenue. Yes, it was a little bit higher compared to the June quarter. We still have revenue, inventory, and also other inventory we purchased from third-party foundries and subcontractors to support. Overall, we see at this point, we see a flattish gross margin in the September quarter.

Speaker 2

Beyond the September quarter, how should we think about gross margins? Especially, you know, are you expecting the mix to continue increasing or to be more increasingly favorable? Just any kind of color you can provide on that would be helpful.

Speaker 4

Sure. I mean, we don't give a longer-term guidance. I mean, we only guide one quarter at a time. Overall, as our revenue continues to grow, I would expect, in the growth area, I would expect that we can expect to see a better product mix.

Speaker 2

Got it. One last question, if I could, just thinking about the sale or the transfer of a portion of your JV holdings, that $150 million, can you maybe rank order your priorities in terms of how you're thinking about CapEx, OpEx, maybe some M&A? Is there any thought as to shareholder returns? Any kind of indication about how you're thinking about that cash inflow.

Speaker 4

Sure. First of all, this $150 million cash deal we expect to be completed in the next few months, probably by the end of this calendar year. The first payment we can expect probably in the September quarter, and the rest of the money expected to come in in the December quarter. In terms of the use of cash, we definitely will invest in our business growth. We do see quite a bit of growth opportunities ahead of us. Yes, we'll invest in our technology, in our talents, and expanding our capacity. M&A is also on the plan, but that one depends on the opportunity. I'm sure our board will evaluate in terms of return on capital to investors. That's all on the plate.

Speaker 2

Great. Thank you very much.

Speaker 4

All right. Thank you.

Speaker 5

Our next question is David Williams with The Benchmark Company. Your line is now open.

Speaker 1

Thank you for my questions and apologize for the first issue there. I'm kind of following up on the last question on the JV. If you think about your balance sheet now, it feels like, and you talked about some of your utilization of third-party foundries, and that's provided some nice flexibility in the past. I wonder how you think about adding or bringing in additional capacity internal to help you drive the margin profile as you scale the business. Is that a place you want to be, or would you prefer to have this kind of even split between third-party and internal and the JV?

Speaker 4

Sure. This $150 million transaction definitely will bring in more capital to us and also increase some flexibility in terms of where we want to set up our supply. We'll continue to evaluate both internal production and purchasing from third-party foundries. It depends on our needs. After this transaction, our balance sheet definitely got strengthened. We would have quite a bit of liquidity and also we created quite a bit of value for our investors. If you look at this deal, in the past, we recorded $300 million on our balance sheet in this equity investment. Throughout the years, including this deal, we already realized about $176 million or so cash. We still own 18.9% even after this transaction. I would say that this deal definitely created a heck of value for our investors.

Speaker 1

Yeah, no doubt. If my memory serves me correct, you were $30 million to $35 million total, including equipment and some cash. Is that right?

Speaker 4

We invested $35 million cash plus some used assembly equipment.

Speaker 1

Yeah, that is a heck of a return. Congrats on that. Thanks for the color. As you think about your internal capacity and tariffs and the shipping, given how much of your customer base ends up in Asia, how do you think the tariffs are impacting your local manufacturing capacity? Is it a bigger challenge for you than maybe being outside of the country and moving outside largely? What is your exposure, do you think, to the tariffs on that side of the house?

Speaker 4

The direct impact from tariffs on us is not that significant since we don't ship a whole lot of products to the U.S. From that front, right now, okay, this geopolitical and trade tension does play some uncertainties here. We'll adjust our supply chain along with our customers. Basically, we want to support our customers. Wherever our customers are located, we want to support them.

Speaker 1

Great. Maybe, Steven, how do you, or maybe if you think about how your customers have been reacting, do you sense that there's more cautiousness out there in terms of the demand side and kind of where things lead? Do you feel like people are generally feeling better about the second half from the underlying demand side?

Speaker 0

I think that the answer is different depending on which market you're looking at. In terms of the tariff impact, we see that on the demand side more prominently than in the computing side when it comes to notebooks and desktops over there. We are still dealing with how to support the pull-in efforts with demand being pulled in by our customers in advance of any kind of policy change when it comes to tariffs. As of right now, our customers are still wanting to produce as much as they can and get things produced and onto a boat before the tariffs change. That's more prominently so in the PC market. We don't really see the tariff impact in other areas. Others are more other impacts. Of course, anything with AI is definitely still very hot.

Graphics still continues to be strong as well, too, since the graphics cards just launched at the beginning of this year. The AI programs are just starting up also. Those are still fresh new projects. Smartphones, we're heading into the peak season with the U.S. and the Korea smartphone maker also going into peak production. Those are seasonal effects that we're seeing now.

Speaker 1

Thanks so much for the help. Certainly appreciate it. Best of luck on the quarter.

Speaker 0

Thank you, David.

Speaker 5

It looks like there are no more questions, so I'll pass the call back over to the management team for closing remarks.

Speaker 3

Great. Before we conclude, I'd like to highlight a few upcoming investor events. The management team will be participating in the sixth annual Needham Virtual Semiconductor and Semicap one-on-one conference on August 21, the 2025 Evercore Semiconductor IT Hardware and Networking Conference on August 26, and the Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 27. Both of those are in Chicago, Illinois, as well as the Benchmark 2025 Tech, Media, and Telecom Conference on September 3, and PD Securities Technology Growth Cap Summit on September 4. Both of those are in New York City. If you wish to request a meeting, please contact the institutional sales representative at each sponsoring bank. This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to talking to you again next quarter.

Speaker 0

Thank you.

Speaker 4

Thank you.

Speaker 5

That concludes the conference. Thank you for your patience. Enjoy the rest of your day.