S&P/ASX 200 Index (ASX: XJO) tech stock Audinate Group Ltd (ASX: AD8) is having a tough run today.

Shares in the media networking solutions provider closed yesterday trading for $9.54. In morning trade on Tuesday, shares are swapping hands for $8.42 apiece, down 11.7%.

For some context, the ASX 200 is down 0.9% at this same time.

This underperformance comes following the release of Audinate's first quarter update (Q1 FY 2025).

ASX 200 tech stock drops as profits squeezed

The Audinate share price is plunging after the ASX 200 tech stock reported an underwhelming unaudited quarterly gross profit of US$7.2 million (AU$10.6M).

The company cited a number of challenges it's faced in the new financial year. These include shorter order lead times, increased inventory across the industry, slower clearance of raw material inventories by its manufacturing customers, and softer-than-expected demand from end-users.

And these challenges are expected to persist in the current quarter. As such, Audinate expects gross profits in Q2 FY 2025 to be in line with the first quarter.

The ASX 200 tech stock also pulled back from prior expectations that it would generate a "slightly lower" FY 2025 gross profit (in US dollars) compared to FY 2024. The company said that due to the lacklustre performance in the first half of the year, "it is now unlikely we will achieve that result".

Management said they will update the market on performance and outlook after completion of trading in Q2 FY 2025, anticipating a moderately stronger second half.

Audinate reiterated that FY 2025 is a transitional year for the company as its manufacturing customers work through their inventory, and Audinate waits for a recovery in end-user demand to drive future orders.

The company expects this transition will last one year, returning to growth and more normal customer order patterns in FY 2026.

On the cost front, cost growth is expected to be in the range of 7% to 9% in FY 2025. Audinate said this reflects confidence in its long-term growth prospects.

Looking ahead, the ASX 200 tech stock noted that with over six million Dante devices in the field and more than a million being added annually, Audinate's growth will continue to be driven by the increasing adoption of Dante technology across a wide range of audio and video products.

The company added:

In the second half of FY25, we will launch new AVIO adaptor products and a premium version of Dante Virtual Soundcard. Both are expected to make a positive contribution to earnings in 2H FY25 and beyond.

Audinate share price snapshot

It's been a tough year for the ASX 200 tech stock. With today's intraday losses factored in, the Audinate share price is down 38% over 12 months.