Alpha and Omega Semiconductor Limited (AOSL) Earnings

Management highlights

### Strategic Transformation Progress - The company's long-term strategy to expand into higher-performance advanced computing applications is delivering clear results, with growing customer adoption, increasing content per platform, and a strengthened competitive position in AI infrastructure. - Management highlighted that the strategic shift to higher-margin advanced computing, combined with an improving pricing environment, will support higher gross margins in the second half of calendar 2026, demonstrating returns on prior strategic investments. - The company's computing and communications segments are outperforming their broader end markets amid industry-wide memory pricing and supply pressures, supported by the advanced computing portfolio and disciplined focus on premium smartphone platforms. ### Operational Updates - The company is expanding medium voltage manufacturing capacity to support growing AI-related demand, while increasing targeted R&D investments for next-generation AI infrastructure, building a growing pipeline of AI-focused new products. - Non-GAAP gross margin for Q4 was 23.7%, up 200 basis points sequentially, driven by improved product mix and higher factory utilization. Non-GAAP operating expenses were $45.3 million, up $1 million quarter-over-quarter, primarily due to higher R&D investment. - The company completed the $150 million sale of its joint venture equity in the quarter, receiving the final $15 million installment payment. Cash balance at quarter-end was $180.8 million, down from $190.3 million at the end of the prior quarter. Capital expenditure for Q4 was $14.9 million, up from $12.1 million sequentially. ### End Market Context - Traditional PC and broader smartphone end markets continue to face pressure from elevated memory pricing and supply constraints, with low- to mid-tier smartphone markets facing more challenging conditions than premium tiers. The console gaming product cycle is nearing maturity, driving near-term weakness in consumer segment gaming revenue.

Guidance

- **September quarter (next fiscal quarter) revenue**: Expected to be approximately $176 million, plus or minus $10 million, representing ~3% sequential growth from fiscal Q4. - **Gross margin guidance**: Non-GAAP gross margin is expected to be 24.5%, plus or minus 1%, an approximate 80 basis point sequential increase, driven primarily by improved product mix. The guidance already accounts for the expected impact of recent flooding at the company's Shanghai back-end factory. - **Capital expenditure guidance**: CapEx for the September quarter is expected to range between $15 million and $17 million, a modest sequential increase from Q4's $14.9 million. - **Operating expense guidance**: GAAP operating expenses are expected to be $52.5 million (plus or minus $1 million), while non-GAAP operating expenses are expected to be $46.5 million (plus or minus $1 million), a $1.2 million sequential increase driven by higher R&D investment. Modest further R&D growth is expected in subsequent quarters. - **Segment-specific quarterly guidance**: Advanced computing revenue is expected to grow more than 40% sequentially, with AI and server revenue alone growing more than 60% sequentially and making up the majority of the advanced computing segment. This growth will fully offset traditional PC weakness, leaving the overall computing segment sequentially flat. Consumer segment revenue is expected to decline ~25% sequentially across home appliances, wearables, and gaming. Communications segment revenue is expected to grow ~10% sequentially, driven by product ramps at a Tier 1 US smartphone customer. - **R&D investment roadmap**: Most of the stepped-up R&D investment for AI and advanced product development is expected to be completed in calendar 2026, with only standard organic R&D growth expected in calendar 2027.

Segment performance

Total revenue for the June 2026 quarter (fiscal Q4 2026) was $170.4 million, up 4% sequentially and down 3.5% year-over-year. Discrete (Demos) revenue was $113.2 million, down 1.6% sequentially and up 5.6% year-over-year. PowerIC revenue was $55.5 million, up 18.2% sequentially and down 19.3% year-over-year. Assembly Service and other revenue was $1.7 million, down from $1.9 million last quarter and up from $0.5 million year-over-year. 1. Consumer segment: Q4 revenue was down 21.3% year-over-year and up 8% sequentially, representing 12.3% of total company revenue. Sequential growth was broad-based across gaming, wearables, and home appliances, beating management's flat expectations. The year-over-year decline was driven by maturing console product cycles reducing gaming revenue. 2. Communications segment: Q4 revenue was up 22.3% year-over-year and down 2.3% sequentially, representing 19.3% of total company revenue. Results were in line with expectations, as seasonal dips in battery PCM shipments ahead of new smartphone model launches were offset by strong growth in DCDC modules and networking applications. 3. Computing segment: Strength in advanced computing (AI, server, high-performance computing) offset weakness in traditional PCs driven by memory chip supply constraints and elevated pricing. Advanced computing currently represents 31% of the overall computing segment mix as of Q4, with growing demand for the company's medium voltage MOSFET portfolio across AI and cloud infrastructure customers.

Risks & headwinds

- Industry-wide elevated memory pricing and supply constraints are negatively impacting demand and production plans for traditional PCs and low- to mid-tier smartphones, creating near-term weakness in these large end markets. - Recent flooding at the company's Shanghai back-end manufacturing facility is expected to create a several million dollar revenue impact and put pressure on September quarter margins, with the impact already incorporated into guidance. The full longer-term impact remains uncertain as restoration work is ongoing. - Forward-looking results, including AI revenue ramp and margin improvement, depend on continued customer design wins and market adoption of the company's advanced computing products, which is subject to industry demand and competitive dynamics. - Future traditional PC performance beyond the September quarter remains uncertain, as it is dependent on resolution of memory and CPU supply constraints, which are still unfolding as of the call.

Analyst Q&A

• Q: What factors are driving the sequential gross margin improvement, and what share comes from utilization versus product mix? What is the impact of recent Shanghai flooding on guidance?

  A: The 200 basis point sequential margin improvement in the June quarter came mostly from better product mix, with a smaller contribution from operational improvements. The planned further 80 basis point improvement for September is also driven primarily by better mix, and the expected impact of the Shanghai flooding has already been factored into the 24.5% gross margin guidance. Initial assessments put the flood impact at a few million dollars in revenue with corresponding margin pressure, and teams are working quickly to restore capacity.