Sign in

You're signed outSign in or to get full access.

NI

NETLIST INC (NLST)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $42.234M, up 5.1% year over year and slightly above Wall Street ($42.0M), while EPS was ($0.02) and missed the ($0.01) consensus; gross profit rose to $1.838M and net loss improved to ($7.010M) from ($9.405M) YoY . Revenue Consensus Mean $42.000M*, EPS Consensus Mean ($0.01); actual revenue $42.234M and EPS ($0.02) — bold revenue beat and EPS miss versus estimates .
  • Management highlighted “strong demand for DDR5 memory” and materially lower operating expenses; nine‑month OpEx down 38% ($17.0M) YoY, nine‑month net loss improved 45% YoY .
  • Strategic/legal: Netlist filed an ITC complaint on Sep 30 seeking exclusion orders against Samsung, Google and Super Micro across DDR5 and HBM, reinforcing the IP enforcement narrative into 2026 .
  • On the call, management indicated Q4 revenue is expected to be slightly higher than Q3, pointing to ongoing AI/DDR5 demand and product qualifications .

What Went Well and What Went Wrong

What Went Well

  • DDR5 demand drove sequential revenue resilience, with Q3 net sales up to $42.234M and gross profit at $1.838M; nine‑month gross profit nearly doubled YoY to $4.530M .
  • Operating discipline: nine‑month operating expenses fell 38% ($17.0M) YoY; nine‑month net loss improved 45% YoY, supporting cash burn moderation .
  • CEO emphasized positioning to “capitalize on the transition to next generation memory through its product offering and its IP assets including new patents covering DDR5 and HBM,” underscoring strategic differentiation .

What Went Wrong

  • EPS missed consensus by $0.01 despite revenue beat; net income margin remained negative, reflecting gross margin still low single digits and ongoing IP legal costs* .
  • Working capital deficit widened to ($14.5M) and stockholders’ deficit to ($13.292M), with accounts payable of $37.283M — a balance sheet constraint despite demand tailwinds .
  • Litigation remains a double‑edged sword: while reinforcing IP, it sustains legal fee burden (Q3 IP legal fees $5.035M) and uncertainty on timing of monetization .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$40.186 $28.975 $41.706 $42.234
Gross Profit ($USD Millions)$1.142 $1.300 $1.392 $1.838
Net Loss ($USD Millions)($9.405) ($9.487) ($6.078) ($7.010)
EPS ($USD)($0.04) ($0.03) ($0.02) ($0.02)
Weighted Avg Shares (Millions)258.025 272.379 275.751 292.557

Margins (S&P Global)

MetricQ4 2024Q1 2025Q2 2025Q3 2025
Gross Margin %0.741%*4.4866%*3.3376%*4.3519%*
EBITDA Margin %(10.0714%)*(9.2113%)*(6.4642%)*(4.842%)*
EBIT Margin %(10.3865%)*(9.4564%)*(6.6345%)*(5.0078%)*
Net Income Margin %(37.094%)*(32.742%)*(14.5734%)*(16.598%)*

Values retrieved from S&P Global.*

Estimates vs. Actual (Q3 2025)

MetricConsensus# of EstimatesActualSurprise
Revenue ($USD Millions)$42.000*1*$42.234 +$0.234M ( +0.6% )*
EPS ($USD)($0.01)*1*($0.02) —$0.01 miss*

Values retrieved from S&P Global.*

Balance Sheet Snapshot (oldest → newest)

Metric ($USD Millions)Dec 28, 2024Jun 28, 2025Sep 27, 2025
Cash & Cash Equivalents$22.507 $18.438 $10.544
Restricted Cash$12.100 $10.600 $10.300
Accounts Receivable (net)$1.671 $1.322 $4.154
Inventories$2.744 $8.781 $17.565
Total Assets$41.839 $41.445 $56.343
Accounts Payable$42.307 $33.373 $37.283
Revolving Line of Credit$1.230 $1.105 $3.437
Deferred Revenue$0.040 $10.318 $26.974
Total Current Liabilities$47.060 $48.013 $69.420
Total Liabilities$47.887 $48.403 $69.635
Stockholders’ Deficit($6.048) ($6.958) ($13.292)
Working Capital Deficit($15.0) ($8.2) ($14.5)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2025None“Slightly higher than Q3”Introduced directional commentary (no formal range)

No formal quantitative guidance was issued for margins, OpEx, OI&E, tax rate, segments, or dividends in Q3 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
AI/DDR5 DemandQ1: “memory market poised for growth driven by HBM and DDR5 for AI” . Q2: revenue improvement “driven by healthy demand for DDR5 memory modules for AI and data centers” .CEO: “strong demand for DDR5” and “new patents covering DDR5 and HBM”; call commentary points to product qualifications (e.g., Lightning DDR5 DEM) supporting growth .Strengthening demand narrative.
Legal/RegulatoryQ2: district court order finalizing $445M damages vs. Micron .Sep 30 ITC complaint seeking exclusion orders vs Samsung/Google/SMCI across DDR5/HBM; reiteration of enforcement strategy on call .Escalated enforcement; potential catalysts.
OpEx DisciplineQ1: OpEx $11.067M . Q2: OpEx $7.639M (-31% QoQ) .Q3: OpEx $8.988M; nine‑month OpEx down 38% YoY ($17.0M) .Sustained reductions YoY; modest QoQ increase.
Liquidity/Balance SheetQ1: cash & equivalents $14.430M; restricted $11.150M . Q2: cash $18.438M; restricted $10.600M .Q3: cash $10.544M; restricted $10.300M; working capital deficit ($14.5M) .Liquidity tighter; WC deficit widened.
Gross Margin TrajectoryQ1: GP $1.300M; margin ~4.49%* . Q2: GP $1.392M; margin ~3.34%* .Q3: GP $1.838M; margin ~4.35%* .Gradual improvement but still low single-digit*.

Values retrieved from S&P Global where marked.*

Management Commentary

  • “Third quarter performance reflects strong demand for DDR5 memory and reduced operating expenses. Netlist is well positioned to capitalize on the transition to next generation memory through its product offering and its IP assets including new patents covering DDR5 and HBM.” — C.K. Hong, CEO .
  • On legal enforcement tone: management pursued ITC remedial orders to block infringing Samsung memory products at U.S. borders, underscoring confidence in IP portfolio .
  • Call participants included CEO Chuck Hong and CFO Gail Sasaki; Q&A featured ROTH Capital’s Sujeeva De Silva .

Q&A Highlights

  • Revenue trajectory: management indicated Q4 revenue expected to be “slightly higher” than Q3, reflecting continued DDR5 demand and expanding qualifications .
  • Product/AI cycle: commentary emphasized custom memory solutions and Lightning DDR5 DEM as positioned to benefit from AI‑driven compute growth .
  • Legal timetable and impact: discussion reinforced enforcement momentum (district court damages vs. Micron, new ITC complaint) and strategic objective to compel licensing/adherence to IP .

Estimates Context

  • Q3 2025 results versus S&P Global consensus: revenue beat (+0.6%), EPS miss ($0.01). Consensus coverage was thin (one estimate), implying higher potential forecast error and greater sensitivity to operational/legal developments*.
  • With management’s indication of slightly higher Q4 revenue, estimates may need modest upward revisions for revenue while maintaining cautious EPS assumptions given persistent legal expenses and low gross margins* .

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Net sales resilience with a small beat and improved YoY loss supports the thesis that DDR5/AI demand is translating to higher volumes despite margin constraints .
  • Bold IP enforcement (ITC complaint) is a near‑ to medium‑term catalyst; outcomes could materially affect licensing revenues and competitive dynamics .
  • Operating discipline is evident: nine‑month OpEx down 38% YoY; continued focus here can drive incremental EPS leverage as gross margin improves .
  • Liquidity and working capital remain watch items; inventory build and payables suggest tight cash cycles—monitor financing actions and collection cycles .
  • Near‑term trading: stock likely sensitive to legal headlines and any Q4 demand commentary; directional revenue guide slightly higher could support sentiment vs low expectations .
  • Medium‑term thesis: product qualifications (e.g., Lightning DDR5) and patent coverage on DDR5/HBM could unlock higher margin contribution if licensing/commercialization resolves favorably .
  • Risk: thin analyst coverage (single estimate) and ongoing litigation expenses create elevated volatility in EPS trajectory*; position sizing should reflect legal/timing uncertainties*.

Additional sources used for the Q3 earnings call transcript:

  • Seeking Alpha transcript page and participants .
  • Transcript mirrors/hub pages .