Audinate Group Ltd (ASX: AD8) shares are having a very strong start to the week.

In morning trade, the ASX tech stock is up 23% to $9.31.

Why is this ASX tech stock rocketing?

Investors have been scrambling to buy the audio-visual media networking solution provider's shares following the release of its half year results.

Here's a summary of how it performed during the six months ended 31 December:

• Revenue down 38% to US$18.9 million
• Gross profit down 29% to US$16 million
• Gross margin up 10.7 percentage points to 82.2%
• EBITDA down 91.5% to A$0.84 million
• Loss after tax of A$2.2 million

What happened during the half?

For the six months ended 31 December, Audinate reported a gross profit of US$16 million, down 29% from the prior corresponding period. This decline was largely expected due to the overstocking of inventory among original equipment manufacturers (OEMs), which has dampened short-term demand for its hardware products.

And while the company anticipates these conditions to persist through the remainder of FY 2025, it expects them to normalise in FY 2026. This may be what is giving its shares a lift today.

Despite the revenue weakness, its gross margin improved to 82%, up from 72% in the prior period. This was driven by a shift toward higher-margin software-based implementations, which contributed to 13% growth in software revenue. Audinate also recorded 61 design wins, a 15% increase on the prior corresponding period, reinforcing confidence in future revenue growth.

As for earnings, the company's EBITDA came in at A$0.84 million, down 91% year on year.

This ultimately led to the ASX tech share recording a net loss of A$2.2 million for the half.

Nevertheless, the company continues to maintain a strong balance sheet with A$111 million in cash at the end of the period.

Positioned for success

The ASX tech share's co-founder and CEO, Aidan Williams, remains optimistic despite the short-term headwinds. He said:

Although the first half was impacted by excess inventory in the OEM channel, we remain confident in the fundamental strength of our business model. We continue to invest in our market-leading audio business, expanding our installed product base and manufacturer partnerships. Additionally, we are investing in long-term growth opportunities through our video and platform software businesses, positioning the company for success as market conditions improve.

Outlook

Management notes that second quarter gross profit exceeded what was recorded in the first quarter and a moderate strengthening is expected in the second half. However, FY 2025 remains a transitional year as customers work through inventory backlogs.

Audinate expects a return to normal order patterns and growth by FY 2026. It also notes that the long-term outlook remains strong, underpinned by a growing installed base of over 6 million Dante devices in the field, with more than a million being added each year.