Astera Labs ALAB is scheduled to report fourth-quarter 2024 results on Feb. 10.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

For the fourth quarter of 2024, the company expects revenues between $126 million and $130 million.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $128.20 million.

For the fourth quarter of 2024, the company expects non-GAAP earnings between 25 cents and 26 cents per share. The consensus mark for earnings is pegged at 26 cents per share, unchanged in the past 30 days. 

Astera Labs offers semiconductor-based connectivity solutions customized to leverage the full potential of cloud and AI infrastructure. ALAB started trading on March 20, 2024.

Let’s see how things have shaped up for the upcoming earnings announcement.

Factors Likely to Have Influenced Q4 Performance

Astera Labs’ fourth-quarter 2024 revenues are likely to have benefited from increasing demand for AI servers and data center infrastructure. Strong momentum across its three key product families, Aries, Taurus, and Leo, is likely to have contributed well. 

The Aries peripheral component interface express (PCIe) retimers and Taurus Ethernet product lines are expected to have driven significant revenue growth in the to-be-reported quarter. With continued adoption across AI platforms and general-purpose compute systems, these products will likely sustain high demand.

The expansion of the Scorpio Smart Fabric Switch family, which is already generating preproduction shipments, is expected to have contributed positively in the fourth quarter.

In October 2024, ALAB announced the Scorpio Smart Fabric Switch portfolio, including the industry’s first PCIe 6 switch, designed for AI and cloud-scale accelerated computing platforms. Benefits from this announcement are likely to have been reflected in the to-be-reported quarter.

ALAB Outperforms Sector and Competitor

ALAB  shares have surged 187.4% in the trailing six-month period, outperforming the broader Zacks Computer & Technology sector’s return of 19.5% and the Zacks Electronics - Semiconductors industry’s appreciation of 49.8%.

ALAB Shares Beat Sector, Industry

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ALAB’s expanding portfolio is expected to have helped it fend off competition from other industry players like Broadcom AVGO, which is also making strong efforts in the PCIe retimer market.

AVGO’s introduction of scalable, high-performance, and low-power 400G PCIe Gen 5.0 Ethernet adapters aims to transform data centers by resolving connectivity bottlenecks. Broadcom shares have returned 69.8% over the trailing six-month period.

ALAB Stock is Currently Overvalued

ALAB stock is not so cheap, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, ALAB is trading at 26.19X, higher than the sector’s 8.42X.

Price/Sales (F12M)

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ALAB Powers AI Advancements With Top Chipmakers

Astera Labs has made a significant impact on the AI industry with collaborations with top chipmakers, including NVIDIA NVDA, Advanced Micro Devices AMD, Micron Technology, and Intel. This is likely to have driven growth during the fourth quarter.

Astera Labs products are used in NVIDIA’s GB200 product. The PCIe switch is expected to play a key role in future NVIDIA products. This collaboration further emphasizes Astera Labs' influence in the development of advanced AI technologies.

AMD also continues to utilize Astera Labs solutions to enhance the efficiency and scalability of its AI-driven products. The partnership strengthens both companies’ positions in the AI market, fueling advancements in next-gen technologies.

ALAB: Smart Buy or Risky Bet?

Despite a strong product portfolio, ALAB faces increasing competition in the AI and cloud markets, particularly from larger semiconductor companies that are ramping up their product offerings for AI infrastructure. This competition is expected to hurt the company’s financial performance.

ALAB also anticipates a sequential decline in non-GAAP gross margin to approximately 75% in the to-be-reported quarter. This is primarily due to a product mix shift toward hardware solutions, which typically have lower margins than other product offerings.

Astera Labs currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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