Alpha and Omega Semiconductor Limited Aktie

Hello, everyone. Thank you for joining us, and welcome to the Alpha and Omega Semiconductor Fiscal Q4 2026 Earnings Call.

[Operator Instructions] I will now hand the call over to Steven Pelayo, Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2026 fourth quarter financial results. I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO; and Yifan Liang, our CFO.

This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the September quarter. Finally, we will have a Q&A session.

The earnings release was distributed over the wire today, August 12, 2026, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today's call.

Now I'll turn the call over to our CEO, Stephen Chang. Stephen?

Thank you, Steven. Welcome to Alpha and Omega's Fiscal 2026 Q4 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details.

We delivered fiscal Q4 revenue results above the midpoint of our guidance. Total June quarter revenue was $170.4 million, down 3.5% year-over-year and up 4% sequentially. Non-GAAP gross margin was 23.7%. Non-GAAP EPS was a loss of $0.13 per share. As anticipated, strength in Advanced Computing -- particularly AI and server applications -- and in the Communications segment offset softness in the traditional PC market, driven by higher memory costs, and in Gaming within the Consumer segment. Advanced Computing continues to be the strongest part of our business and provides clear evidence that our long-term strategy is delivering results.

As our portfolio expands into higher performance applications, we are increasing content per platform, broadening customer adoption and strengthening our competitive position in AI infrastructure. To support this opportunity, we continue expanding our medium-voltage manufacturing capacity while increasing targeted R&D investments.

With that, let me now cover our Q2 segment results and provide more details. Starting with Computing. June quarter revenue was down 8.6% year-over-year and up 5.6% sequentially and represented about 49.8% of total revenue. The segment results came in at the high end of our guidance for a low- to mid-single-digit sequential increase, driven by strength in Advanced Computing, which increased 35% sequentially and represented a record high 31% of the Computing segment in the June quarter. The strength in Advanced Computing was driven by AI, server, workstation, and cloud applications, while declines in PCs, tablets, and graphic cards offset and impacted the overall segment results.

Demand for our medium-voltage MOSFET portfolio continues to expand across AI and cloud infrastructure with growing engagement from power supply providers, module makers, leading ODMs, cloud service providers, and hyperscale customers. Customer engagement and design activity continue to expand in these areas, and we expect these products to contribute more meaningfully during the second half of 2026 and into 2027.

Looking ahead to the September quarter, we expect Advanced Computing revenue to grow by more than 40% sequentially, driven by continued strength across AI servers, graphics cards, and other high-performance computing platforms. Our AI and server business alone is expected to increase more than 60% sequentially and represent the majority of our Advanced Computing business. This growth is expected to more than offset the well-publicized weakness in traditional PC applications caused by memory chip constraints, resulting in flattish sequential growth for the overall Computing segment. More importantly, Advanced Computing is expected to exceed 40% of Computing segment revenue and approach 20% of total company revenue, another important step in shifting our product mix towards higher-value applications with richer product content and stronger profitability.

Turning to the Consumer segment. June quarter revenue was down 21.3% year-over-year and up 8% sequentially and represented 12.3% of total revenue. The sequential results were better than our expectations for a relatively flattish quarter, with broad-based quarter-on-quarter growth across Gaming, Wearables, and Home Appliances. The year-over-year decline primarily reflects lower Gaming revenue as the current console product cycle nears maturity. For the September quarter, we expect Consumer segment revenue to decline approximately 25% sequentially, primarily reflecting lower revenue in Home Appliances, Wearables, and Gaming.

Next, let's discuss the Communications segment. June quarter revenue was up 22.3% year-over-year and down 2.3% sequentially and represented 19.3% of total revenue. The results were in line with our expectations for a slight sequential decline, as seasonally lower battery PCM shipments ahead of new smartphone model transitions were largely offset by strong growth in DC-DC modules and networking applications.

For the September quarter, we are ramping new products with our Tier 1 U.S. smartphone customer, and we continue to benefit from our strong position in premium smartphone platforms, where our differentiated battery protection solutions and support for higher charging currents are increasing BOM content and driving greater value per device.

Outside of the premium tier, market conditions remain more challenging, as elevated memory pricing and supply constraints are pushing some OEMs toward lower performance components in certain platforms. We remain disciplined in managing our product mix, prioritizing higher performance sockets and premium smartphone platforms, where our technology and content opportunities are greatest. As a result, we expect Communications segment revenue to increase approximately 10% sequentially.

Now let's talk about our last segment, Power Supply and Industrial, which accounted for 17.6% of total revenue and was up 1.4% year-over-year and up 5.2% sequentially. Overall, the results were in line with expectations for mid-single digit sequential growth, driven by sequential and year-over-year growth in E-Mobility as well as DC fans tied to AI server demand. This was partially offset by sequential and year-over-year declines in Quick Chargers and AC-DC power supplies.

Looking ahead to the September quarter, we see stronger demand for Power Tools and continued momentum in DC fans supporting AI server rack applications. We also expect Quick Chargers and AC-DC power supplies to increase sequentially. While demand trends continue to vary across end markets, we remain encouraged by the expanding tangential opportunities in AI infrastructure and the improving demand environment across several industrial applications. Altogether, we expect Power Supply and Industrial revenue to increase nearly 30% sequentially.

In closing, we are encouraged by the continued progress of our strategic transformation even as conditions remain uneven across several end markets. Advanced Computing is now a clear and growing contributor to both revenue and earnings, reinforcing the long-term direction of the business. That mix shift, combined with an improving pricing environment, is expected to support higher gross margins in the second half of calendar 2026, demonstrating the benefits of the strategic investments we have made over the past several years.

Despite ongoing pressure on the broader PC and smartphone markets from elevated memory pricing and supply constraints, we believe our Computing and Communications businesses are outperforming their respective end markets, supported by our expanding Advanced Computing portfolio, total solution strategy, and disciplined focus on premium smartphone platforms with our Tier 1 U.S. customer.

We are expanding manufacturing capacity in key product areas, increasing targeted R&D investments for next-generation AI infrastructure, and building a growing pipeline of new products across AI-related workloads. We believe this combination, a broader product portfolio, increasing content per platform, and continued investment in technology, positions AOS to deliver stronger, more profitable, and more sustainable long-term growth.

I also want to address a recent event that is affecting our near-term outlook. A couple of days ago, Shanghai experienced Typhoon Dolphin and flooding that impacted portions of our packaging operations. We expect a slight impact to the September quarter. Our teams are moving quickly to restore effective capacity, minimize customer disruption and position us to recover as much of the delayed business as possible in the coming quarters.

With that, I will now turn the call over to Yifan, for a discussion of our fiscal fourth quarter financial results and our outlook for the next quarter. Yifan?

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the June quarter was $170.4 million, up 4% sequentially and down 3.5% year-over-year.

In terms of product mix, DMOS revenue was $113.2 million, down 1.6% sequentially and up 5.6% over last year. Power IC revenue was $55.5 million, up 18.2% from the prior quarter and down 19.3% from a year ago. Assembly service and other revenue was $1.7 million, as compared to $1.9 million last quarter and $0.5 million for the same quarter last year.

Non-GAAP gross margin was 23.7%, compared to 21.7% last quarter and 24.4% a year ago. The quarter-over-quarter increase was mainly impacted by better mix and higher utilization. Non-GAAP operating expenses were $45.3 million, compared to $44.3 million for the prior quarter and $40.9 million last year. The quarter-over-quarter increase was mainly due to higher R&D expenses. Non-GAAP quarterly EPS was $0.13 loss, compared to $0.28 loss per share last quarter and $0.02 earnings per share a year ago.

Moving on to cash flow. Operating cash flow was negative $10 million compared to negative $8.3 million in the prior quarter and negative $2.8 million last year. EBITDA, excluding equity method investment income and loss was $10.1 million for the quarter, compared to $5.9 million last quarter and $10.5 million for the same quarter a year ago.

Now let me turn to our balance sheet. We completed June quarter with a cash balance of $180.8 million compared to $190.3 million at the end of last quarter. During the quarter, we received the last $15 million installment payment and completed $150 million sale of our joint venture equity.

Net trade receivables increased by $4.5 million sequentially. Days Sales Outstanding were 23 days for the quarter compared to 20 days for the prior quarter.

Net inventory increased by $2.3 million quarter-over-quarter. Average days in inventory were 138 days for the quarter compared to 139 days for the prior quarter.

CapEx for the quarter was $14.9 million compared to $12.1 million for the prior quarter. We expect CapEx for the September quarter to range from $15 million to $17 million.

With that, now I would like to discuss September quarter guidance. We expect revenue to be approximately $176 million, plus or minus $10 million. GAAP gross margin to be 23.8%, plus or minus 1%. We anticipate non-GAAP gross margin to be 24.5%, plus or minus 1%. GAAP operating expenses to be $52.5 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $46.5 million, plus or minus $1 million. Interest income to be $0.6 million higher than interest expense, and income tax expense to be in the range of $1.1 million to $1.3 million.

With that, we will now open the call for questions. Operator, please start the Q&A session.

[Operator Instructions] Your first question is from the line of Tore Svanberg from Stifel.

First question, could you talk a little bit about some of the parameters around your gross margin? You are guiding it up sequentially. What's sort of the contribution there between utilization and pricing? And where is utilization right now?

Sure. Yes, for the June quarter, yes, our margin improved from March quarter by 200 basis points. A little bit bigger portion was because of the product mix, and then a smaller portion was because of the utilization and operation expenses. For the September quarter, we guided another 70, 80 basis points up. So primarily, it was considering the product -- better product mix. So we also factor in some of the impact from this typhoon impact on our back-end factory. So the net-net, we guided 24.5%.

Okay. Very good. And maybe as a follow-up to Stephen, and maybe adding your comments about pricing, you said you expect pricing to be higher in second half of '26. I'm just curious if there's sort of a lag time on when that impacts the P&L. And then with Advanced Computing now being 20% of revenue or approaching that for the September quarter, how should we think about that segment into fiscal '27? I'm pretty sure you're now prioritizing that market as opposed to these other areas that are seeing weakness from high memory costs.

Sure. Let me address that part of that, which is the mix portion. And we are happy to see the margin expand in this past quarter also going forward. And we do see that mix is becoming more beneficial, especially as we're seeing more successes, particularly in the Advanced Computing area, specifically in the AI and server applications. The products that we sell into these applications are high-performance products are -- especially our high-performance MOSFETs and medium-voltage, where there's less competition, it is performance-driven, and we're able to command better pricing and better margin because these applications are very performance-critical. So that is becoming a larger proportion, not only of our Computing segment, but the overall part of the company. So as we continue to put more resources into here and as we're following and taking part in this AI expansion in the industry, we see that as helpful and accretive to our margin.

Your next question comes from the line of Tyler Burmeister from Lake Street Capital Markets.

Maybe first, another on the Advanced Computing, obviously, very strong. It looks like faster than we were expecting. You highlighted continued customer traction. I guess I was wondering if you could maybe give some color on how much of the growth both in the June quarter and the September outlook is kind of customer traction, new program wins versus just ramps of previous sockets?

I would say it's a little bit of both. The benefit -- one of the great things about going into this market now is that we are serving a more diversified customer base. So we are seeing going into programs that go into hyperscalers, that go into power supplies for data centers. It is being spread into more customers as well as various programs within those customers. So I would say it's a little bit of both as these products are ramping.

Okay. I appreciate that color. And then maybe looking out to the future in 800 volt, I wonder if you could just give us any view on the timing of that? Do you think that could be a material revenue contributor in 2027? Is that more of a socket design win in '27 lead to more meaningful revenue in the '28 time frame? Any color there would be appreciated.

Sure. And I think we're a little too early to forecast that at the moment. We do see that, yes, 800 volt is right around the corner. We are promoting our solutions for that. I wouldn't be surprised that if next year, we see some business come for those applications. But this won't be like a 0, 1, and 1 and 0 for the standard solutions, and these will be phased in alongside with the other programs. Right now, we are still serving -- everyone is still serving the standard 48-volt platforms. And those will still coexist for a while as well, too. So -- and we're also ready for this when 800-volt comes with our new solution. So I think it will be a transition time, but we will benefit from either packs.

Understood. I appreciate that. And then maybe kind of a couple of housekeeping ones. The R&D investments, obviously proving to be successful here. You guided for them to step up in September. I'm wondering if that $46.5 million OpEx guide for Q1, is that the level we should think about going forward? Or is there the chance that that could continue to take modest steps up as we continue to make investments?

Yes. We have already been gearing up our hirings and investment in R&D area, primarily in the AI and total solution for PC and smartphone and in those areas. So yes, we guided about $1 million for the September quarter. I would say December going forward, we still have to fill positions we need to fill. So I would say probably some modest growth there.

Appreciate that. And then last quick one for me. Are you able to quantify what the impact to the flooding is in your September guidance for us?

Sure. I mean -- as we said, yes, it has some impact. Right now, this thing occurred only a couple of days ago. So our team are moving quickly to restore the capacities and then minimizing the impact to our customers. So our initial assessment right now is in the range of a few million dollars and some impact on our margins, also kind of reflected in our September quarter guidance.

Your next question is from the line of Craig Ellis from B. Riley Securities.

I wanted to follow-up on just the Compute segment activity. Beyond the Advanced Compute 31% mix in fiscal 4Q, can you help us understand what the other subsegments of the business did, notebook, gaming cards, et cetera?

Sure. Let's talk about standard PCs first. Standard PCs, June quarter in general, did grow modestly from the March quarter. But we expect there, right, to be an adjustment happening in the September quarter, as our end customers are having difficulty in dealing with the memory shortage as well as the CPU shortage. So we see this September quarter as an adjustment period for the PC business. But then at the same time, again, the Advanced Computing helps to cover for that.

The other subsegment that I can comment on is on the graphics portion. Graphics this year, they aren't releasing any major platforms this year. The last release was last year, where we benefited quite well. We expect the next platform release to be sometime next year, and that will be something that we also will prioritize in terms of growth for the next year. So in this calendar year, mainly the story is about PCs and dealing with the memory shortage. But then in the meantime, with our fueling the growth of our AI and server business.

That's helpful, Stephen. And then broadening the aperture a bit to include the Communications business and thinking about that with Compute. Given some of the things that you said on the call about the impacts from pricing and part availability to build intensity in the fiscal first quarter, can you talk about typical fiscal 2Q seasonality in those end markets? And what are customers telling you to expect this year as we look beyond fiscal 1Q into 2Q?

Sure. In the Communications segment, we're mainly talking about smartphone battery and protection business. And here, this segment is also not immune to the memory shortages. In general, we have always been focusing mainly on the premium part of the market. And that part of the market certainly is faring better than the low- to mid-end part of the market. Over here, we're selling our high-performance MOSFETs. And in the latest generation, we are seeing charging currents continue to increase. So that will offset some of the pressures that may come from the memory impact. But overall, we are still preparing for a growth season for our battery PCM business. And in terms of looking out further, I think the premium phones should do better. They're not immune to it. But at the same time, there's a little more ability to -- for consumers to bear some of the price increases there. So that's where we see the battery business.

Okay. And then I wasn't clear what you were indicating about the PC business beyond the fiscal first quarter and into the second quarter, what are your customers indicating about build intensity there, Stephen?

Yes. We mainly see September as the main correction. We're not right now -- December quarter is still a little fuzzy to see exactly, but we're not -- right now, we're not expecting a correction at that point. And -- but we have to just see what the memory situation is like.

Okay. And then just a clarification on operating expense. So we knew that we were going to increase R&D expense this year for new product work in Advanced Compute. It seems like that's having a positive impact. Can you help us understand the longer-term thinking about how you're weighing increased R&D intensity in the business? Is this something that we should expect would persist in calendar '27? Or do you exit '26 with the product programs in the right place, so R&D expense would grow to a more normalized level beyond this year?

Yes. For us, we are in this investment mode where we are investing in the R&D. Most of that spend -- increase in spending, we expect it to be done in this calendar year in terms of the additional investments to build up the teams and build up the technology capabilities to address these additional growth opportunities. So most of that expansion we expect to happen this year. I would expect next year will be more just kind of standard organic type of growth as opposed to a stepped-up growth this year.

[Operator Instructions] Your next question comes from the line of Patrick Muth from David Williams (sic) [ Needham ].

This is Patrick Muth on for David Williams over at Needham. Just a couple of questions. So as AI becomes a bigger share of revenue, should we expect gross margins to improve mainly because of this mix shift? Or is there a ceiling to how much AI volume can offset any weakness elsewhere? And then maybe also provide more color on the magnitude of the gross margin improvement from the mix shift in the second half of the calendar year.

Sure. This is an area that we've been excited to take part and to see our products being adopted into these high-performance applications. We are still in that ramping mode in terms of several of these products were released either late last calendar year or beginning of this calendar year. So the ramp that we saw was really starting just from this March quarter onwards. And we are continuing to design in our solutions and to win business. And so in general, we expect to see this segment continue to grow in the coming quarters and as we win more projects and as we open up into more customers. Yes, I'll stop there.

We have reached the end of the Q&A session. I will now turn the call back to Steven Pelayo, for closing remarks.

Okay. Great. Before we conclude, I'd like to just highlight a few upcoming investor events. The management team will be participating in the 7th Annual Needham Virtual Semiconductor and SemiCap 1x1 Conference on August 20; also at the Jefferies Semi, IT Hardware & Communications Technology Summit on August 26 in Chicago, Illinois; and the Benchmark 2026 Tech, Media and Telecom Conference on September 10 in New York, New York. If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank.

This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter. Take care.

Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Alpha and Omega Semiconductor Fiscal Q3 2026 Earnings Call. 

[Operator Instructions]

I will now hand the call over to Steven Pelayo, Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to Alpha Omega Semiconductor's conference call to discuss fiscal 2026 third quarter financial results.

I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO, and Yifan Liang, our CFO. 

This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the June quarter.

Finally, we will have a Q&A session. 

The earnings release was distributed over the wire today, May 6, 2026, after the market closed. The release is also posted on the company's website.

Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with GAAP measures.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. 

We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections.

These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially.

For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call.

Now I'll turn the call over to our CEO, Stephen Chang. Stephen?

Thank you, Steven. Welcome to Alpha and Omega's fiscal 2026 Q3 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details.

We delivered fiscal Q3 revenue results slightly above the midpoint of our guidance, primarily reflecting strength in advanced computing, including AI, servers, and graphics cards, offset by softness in PC markets resulting from seasonality and memory shortage headwinds. 

Tablets also showed strong sequential growth. And the Communications segment was also better than expected, driven by year-over-year growth from our Tier 1 U.S. smartphone customers, offset by weaker demand in China. 

Overall, total March quarter revenue was $163.8 million, down 0.5% year-over-year and up 0.9% sequentially. Non-GAAP gross margin was 21.7%.

Non-GAAP EPS was a loss of $0.28 per share. Our strategy remains consistent, and we are executing well.

As we have said, we believe the December and March quarters represent a bottom for both revenue and gross margin, reflecting the impact of near-term market conditions and supporting a more constructive outlook going forward. 

March marks the third anniversary of my journey as CEO of AOS. When I stepped into this role in 2023, my goal was to steer our organization from a component-level supplier towards becoming a provider of application-specific total solutions, a move designed to push us past a $1 billion milestone towards a multibillion-dollar future.

At that time, we were just scratching the surface of potential opportunities in front of us. Today, those opportunities have moved to the center of our business. 

Over the past 3 years, we have successfully pivoted to higher-performance applications where we can expand BOM content and build durable competitive advantages.

This strategy is translating into tangible results, particularly in advanced computing, where demand is broadening across AI data center applications.

Specifically, we are gaining traction in high-performance medium-voltage MOSFETs used in hot swap applications and intermediate bus converters with increasing customer engagement and design activity expected to accelerate and contribute more meaningfully as we progress through calendar 2026. 

We are actively expanding our medium voltage capacity to support this growth, and our backlog provides us with good visibility.

At the same time, we are seeing a broadening of both our solution set and customer base, extending beyond traditional GPU-centric platforms into a wider range of cloud and infrastructure deployments.

This reinforces our confidence that advanced computing is becoming a more durable and increasingly important growth driver for the company. 

As is broadly reported, memory supply constraints and price pressures represent growing headwinds for the second half of calendar 2026.

Against this backdrop, we are using 3 primary levers to protect our growth: steady margin expansion through improved product mix, and further increases in BOM content, where our total solutions approach is enabling us to capture more value as seen in transitions to next-generation PC platforms such as Intel's Panther Lake and higher charging current requirements in smartphones. 

Continued disciplined investment to support the opportunities ahead. We have stepped up our targeted R&D investments in areas where we are already seeing success, including power ICs, high-performance MOSFETs for AI and data center applications, and advanced solutions for smartphones.

These investments are highly focused and aligned with clear customer road maps and design wins. 

While calendar 2026 may reflect some near-term variability, we are confident that the combination of expanding advanced computing opportunities, increased BOM content across key end markets, and our continued execution will position us well for stronger growth as we exit 2026 and accelerate into 2027 and beyond. 

With that, let me now cover our segment results and provide some guidance by segment for the next quarter. 

Starting with Computing. March quarter revenue was up 2.1% year-over-year and down 0.1% sequentially and represented 49.1% of total revenue. The segment results were slightly better than our original guidance of a low single-digit sequential decline.

As I mentioned earlier, seasonal declines in PC markets were likely exacerbated by earlier pull-ins in calendar 2025 and potential demand impacts from rising memory pricing. 

Strength in advanced computing, including AI servers and graphics cards, more than offset such decline and combined more than doubled sequentially and increased more than 40% year-over-year.

The strong growth resulted in advanced computing representing 25% of the computing segment in the March quarter. 

As mentioned before, we are seeing solid demand for our medium-voltage MOSFETs across an expanding list of applications and a customer base that includes power supply providers, module makers, cloud service providers, and major hyperscalers.

We are shipping our high-performance MOSFET products into applications, including intermediate bus converters that are now moving into the build phase at some leading ODMs for major hyperscale customers. 

Looking ahead to the June quarter, we expect computing segment revenue to increase by low to mid-single digits sequentially, driven by strong AI and server demand in advanced computing.

While PC-related revenue is largely stable, tablets declined mostly due to seasonality as well as increased capacity allocation to opportunities in smartphones.

We acknowledge that industry forecasts for the PC market continue to be revised lower, and we generally agree with that view, expecting some decline in calendar 2026.

That said, we believe our performance should outpace the broader market, supported by continued increases in BOM content driven by our total solution strategy. 

Near-term PC demand appears stable for the June quarter, but visibility into the second half of the calendar year remains limited given ongoing macro and component-related uncertainties.

In advanced computing, we continue to see strong momentum with demand increasingly centered on our medium voltage solutions supporting server and AI infrastructure. 

Importantly, we are seeing a broadening of both our customer base and application footprint with growing engagement across multiple platforms.

These solutions are being deployed across both GPU and CPU-based architectures and are benefiting from the ongoing shift towards inference workloads, which are driving higher and more distributed power requirements. 

While we continue to view 48-volt to 12-volt intermediate bus architectures as a near-term standard that we are benefiting from today, we see this as a stepping stone towards higher voltage systems, including 800-volt architectures expected to begin emerging around 2027. 

In graphics, we expect a more muted environment in calendar 2026, given the current product cycle and allocation priorities, with the next major refresh opportunity tied to future platform transitions.

Overall, we expect another quarter of strong sequential growth for advanced computing. 

Turning to the Consumer segment. March quarter revenue was down 9.8% year-over-year and up 0.8% sequentially and represented 11.8% of total revenue.

The results were below expectations for mid-single-digit sequential growth as recovery in gaming following a sharp inventory correction in the December quarter was offset by softness in home appliances. 

On a year-on-year basis, wearables continued to see strong year-on-year growth, driven by market share gains, new customer engagements, rising BOM content, and a broader mix of end applications. 

For the June quarter, we expect the Consumer segment revenue to remain relatively flat sequentially.

In gaming, demand is tracking in line with our expectations as the current console cycle matures. While near-term production levels reflect seasonality as well, we remain closely engaged with our leading customer on their next-generation platform.

We believe our established relationship and strength in high-performance power solutions position us well to participate more meaningfully as that platform ramps, with a greater impact expected beginning in 2028.

Home appliance demand remains relatively soft and continues to reflect a cautious consumer demand environment with limited signs of near-term recovery.

That said, we continue to see ongoing design activity that supports longer-term opportunities, particularly in emerging markets.

Wearables are progressing through their typical seasonal patterns following recent strength, and we continue to benefit from solid customer engagement and a broadening mix of applications.

Next, let's discuss the Communications segment. March quarter revenue was up 18.7% year-over-year and up 1.9% sequentially, and represented 20.6% of total revenue.

The results were ahead of our expectations for a mid-single-digit decline, driven by strong year-over-year growth from our Tier 1 smartphone customer and BOM content expansion, offset by softness in China due to a weaker market and our prioritization towards premium models in the U.S.

Looking ahead to the June quarter, we expect the Communications segment to decline slightly sequentially, but sustain the high year-over-year growth experienced in the March quarter as demand from our Tier 1 U.S. smartphone customers remains robust.

As mentioned, we are prioritizing capacity for our Tier 1 U.S. smartphone customers in order to prepare for upcoming product cycles.

We continue to benefit from strong positioning in premium models where our differentiated silicon and packaging technologies for battery protection are enabling higher BOM content.

In particular, increasing charging currents across new smartphone platforms are driving incremental content opportunities, reinforcing our ability to capture greater value per device.

At the same time, we remain mindful that rising memory pricing could impact overall smartphone demand, particularly in more price-sensitive segments and regions.

However, we believe premium-tier demand will be more resilient, and our strategic focus on higher-end platforms positions us well to navigate this environment.

As a result, we expect continued growth in calendar 2026, driven by both content expansion and continued engagement with leading global smartphone customers.

Now let's talk about our last segment, Power Supply and Industrial, which accounted for 17.4% of total revenue and was down 13.1% year-over-year and up 5.3% sequentially.

Overall, the results were in line with expectations for mid-single-digit sequential growth as sequential growth in quick chargers and DC fans more than offset continued sluggishness, both sequentially and year-on-year, in solar, power tools, and e-mobility.

Looking ahead to the June quarter, we expect Power Supply and Industrial revenue to increase mid-single digits on a sequential basis, primarily driven by momentum in e-mobility, particularly in the Indian market, where we have built a solid backlog heading into the quarter.

DC fans also remain an area of strength, benefiting from continued demand tied to data center and AI infrastructure build-outs.

Lastly, power tools are also forecast to increase modestly in the June quarter. However, overall tool demand remains subdued.

In closing, as we move into the June quarter, we expect a return to sequential growth, along with margin expansion, supported by improving product mix and a greater contribution from higher-value applications, particularly within advanced computing.

We are seeing encouraging signs of traction in areas such as AI infrastructure, where demand is broadening across a wider set of applications and customers, and where our solutions are gaining adoption in both GPU and CPU-based platforms.

This momentum, combined with increasing BOM content across key end markets, positions us well as we enter the second half of the year, even as overall visibility remains somewhat limited.

At the same time, we are executing consistently against the strategy we have outlined. Our focus on becoming a provider of application-specific total solutions is enabling us to expand both our product portfolio and our customer reach.

We are seeing tangible progress in advanced computing, where our medium voltage and power IC solutions are addressing a growing range of use cases and where our customer base continues to broaden across hyperscalers, cloud service providers, and platform partners.

In parallel, we continue to benefit from structural drivers such as rising power requirements and increasing charging currents, which are driving higher BOM content in both computing and smartphone applications.

Looking across calendar 2026, we expect a dynamic environment with some uncertainty in consumer-related demand, particularly given the impact of memory pricing on end markets such as PCs and smartphones.

However, we believe these pressures will be partially offset by our increasing exposure to higher performance, less price-sensitive segments, and our ability to capture greater value per system through our total solutions approach.

Importantly, we are investing with discipline to support these opportunities with targeted R&D focused on areas where we have clear differentiation, strong customer alignment, and a path to sustainable margin expansion.

As we look beyond 2026 and into 2027, we expect the benefits of these investments and design wins to become more pronounced as new programs ramp into production.

The combination of expanding participation in advanced computing, increasing BOM content, and a broader and more diversified customer base is expected to drive stronger growth and improved profitability over time.

With that, I will now turn the call over to Yifan for a discussion of our fiscal third-quarter financial results and our outlook for the next quarter. Yifan?

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us.

Revenue for the March quarter was $163.8 million, up 0.9% sequentially and down 0.5% year-over-year. In terms of product mix, DMOS revenue was $115.1 million, up 13.9% sequentially and up 7.7% over last year.

Power IC revenue was $46.9 million, down 20.3% from the prior quarter and down 14.1% from a year ago. Assembly service and other revenue were $1.8 million as compared to $2.5 million last quarter and $0.4 million for the same quarter last year.

Non-GAAP gross margin was 21.7% compared to 22.2% last quarter and 22.5% a year ago. The quarter-over-quarter decrease was mainly impacted by lower utilization and higher operational costs.

Non-GAAP operating expenses were $44.3 million compared to $41.3 million for the prior quarter and $39.7 million last year. The quarter-over-quarter increase was mainly due to higher R&D expenses.

Non-GAAP quarterly EPS was a loss of $0.28 compared to a loss of $0.16 per share last quarter and a loss of $0.10 per share a year ago.

Moving on to cash flow. Operating cash flow was negative $8.3 million compared to negative $8.1 million in the prior quarter and positive $7.4 million last year.

In the March quarter, working capital fluctuated by $14 million.

EBITDA, excluding equity method investment income and loss, was $5.9 million for the quarter compared to $9.7 million last quarter and $14.7 million for the same quarter a year ago.

Now, let me turn to our balance sheet. We completed the March quarter with a cash balance of $190.3 million compared to $196.3 million at the end of last quarter.

In the March quarter, we repurchased 214,000 shares for $4.2 million under our share buyback program. We also repurchased 292,000 shares of employee restricted stock units vested during the quarter for $6.2 million.

Net trade receivables increased by $9.3 million sequentially. Days' sales outstanding were 20 days for the quarter compared to 25 days for the prior quarter.

Net inventory decreased by $1.1 million quarter-over-quarter. Average days in inventory were 139 days for the quarter compared to 140 days for the prior quarter.

CapEx for the quarter was $12.1 million compared to $15 million for the prior quarter. We expect CapEx for the June quarter to range from $15 million to $17 million. With that, now I would like to discuss the June quarter guidance.

We expect revenue to be approximately $168 million, plus or minus $10 million. GAAP gross margin to be 22.3%, plus or minus 1%.

We anticipate non-GAAP gross margin to be 23%, plus or minus 1%. GAAP operating expenses to be $52 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $45.5 million, plus or minus $1 million.

Interest income is expected to be $1 million higher than interest expense, and income tax expense to be in the range of $1 million to $1.2 million. With that, we will now open the call for questions. Operator, please start the Q&A session.

[Operator Instructions]

Your first question comes from the line of David Williams with Needham.

Congrats on the really solid progress there in the advanced computing side. Maybe first, just thinking about the gross margin.

We bottomed here in this quarter, it seems like maybe record computing or advanced computing revenue. And my suspicion would be that you would have maybe a little more IC and maybe higher value products going into that segment.

So how do you kind of square where the gross margin sits and how we should think about maybe that gross margin in terms of the data center or these AI opportunities for you?

Thanks, David, for the question. Yes, we are driving margin improvement through our advanced solutions.

And those advanced solutions can come in the form of both MOSFETs and ICs. Right now, we are seeing some of our medium-voltage MOSFETs actually gaining traction. And this is going into applications such as hot swap, as well as intermediate bus conversion that go into various data center types and server-type applications.

And the margin here actually is quite decent, and many of these medium voltage MOSFETs can actually be higher than some of our power IC products, too.

So we are happy to see the contribution of these high-performance MOSFETs contributing as part of the margin improvement.

And then, as you kind of think about the growth opportunity within that segment specifically, you said it's about 25% of computing revenues today.

Where do you think that could grow to? And what would be a good mix that you would be targeting, perhaps, in that segment? And potentially, when could you split that out and call it its own segment?

Yes, it's a good question. It is becoming a sizable portion of our computing segment. It is something that, when we look at advanced computing, just as a reminder, it includes AI, it includes servers, as well as graphics.

The reason we group those together is that the solution set for those ends up being quite similar. There's quite a bit of synergy when it comes to the products and the technology, as well as the end markets and applications that we serve.

So yes, we're happy to see it jump to becoming 25% of computing.

This was faster than our original expectations for this because, again, of the traction that we're seeing with our medium voltage devices. We do expect that this will continue to grow in the June quarter and in the coming quarters.

This is something that we have been investing in as a company. Some of the R&D that we've been investing in, as we talked about in the previous quarter, is going into these markets.

So it's for all types of high-performance solutions for AI, including these medium voltage devices.

And maybe one more, if I may. Just thinking about the capacity, you talked about expanding that for the medium voltage side.

Can you talk, maybe about where you're putting that capacity in? Is that in your domestic facility? Or is that in your third party you're building out there on that capacity?

It's a little bit of both. We do use a mix of both internal and external. So we are investing internally, and for some of the packages that are being done internally, as well as working on expanding on other options for diversifying our supply chain. So it's both.

Your next question comes from the line of Tore Svanberg with Stifel.

This is on for Tore Svanberg. So, regarding the memory supply constraint you previously cited, are you seeing Tier 1 customers in PC and smartphone segments trimming a bit of the build forecast for the second half of the year in anticipation of these rising costs?

Or is the headwind primarily a risk to end consumer price sensitivity? And just any color on how you see this memory situation play out throughout the year, and any strategies on offsetting the situation would be great.

Sure. For us, at least, when we say the consumer-facing, we're talking about mainly PCs and smartphones. Those are the biggest impacts for us. And the PC side, yes, over there, they are seeing the impact of memory shortages.

And for now, we're seeing some of our customers trying to build out sooner just in order to get products out. But from market reports as well as speaking to our customers, there's a lot of uncertainty about the second half about where the PC forecast will go.

So we've also had similar views on this, and that's reflected in our outlook, too.

And our story on the PC side is this is something that the industry will have to work to resolve, but our path here is still focused on how to grow share as well as to grow our BOM content in that application.

On the smartphone side, our business tends to be more on the premium phone side. And at the end of the spectrum of smartphones, we are anticipating that it will be a little more resilient to memory shortages.

We are prioritizing, again, towards the makers of those premium phones. So we actually still expect to grow our business in the smartphone side, mainly because it's not only because of the premium phones, but more specifically because those phone designs are increasing the charging currents.

So we are seeing BOM content increasing because we are introducing new products to serve those sockets with higher ASP that can help to make up for any challenges on maybe the lower end of the market for smartphones.

As a follow-up, for next quarter, you're guiding a bit of a sequential gross margin recovery in the June quarter.

And given that March utilization was a tiny bit of a headwind, how much of this sequential improvement is driven by maybe an uptick in loading versus an improvement in product mix, perhaps from higher performance applications?

Sure. Yes, we guided the June quarter margin quarter-over-quarter, like a 130 basis point improvement. I would say half of it is anticipated to be utilization improvement, and the other half is from our improved product mix.

[Operator Instructions]

Your next question comes from the line of David Williams with Needham.

Just want to ask, maybe on the pricing side. I know a few of your peers or competitors are certainly pressing pricing, it seems, on the MOSFETs and resetting those prices.

Just wondering what you're seeing in the marketplace and what your opportunity set is in order to reprice? And are you getting the benefit of maybe some more positive, favorable tailwinds there?

Sure. In the March quarter, we saw a slower ASP erosion than in the December quarter. It looks like the pricing environment is improving.

So that's definitely a plus. However, we count more on the product mix improvement and also our new product development to capture more high-performance and high-value sockets that Steven just talked about. So that will probably contribute more to our margin improvement.

And maybe just the last one for me. Stephen, if you think about the progress you've made, you've clearly made a lot of progress in this total solutions approach and even in driving these higher value, higher-margin products.

Where do you think you are along that road map? And are you where you thought you would be? Are you maybe better or maybe not as far along? And if we look back in a year from now, how do you think we'll see that success having played out?

Sure. It can never be fast enough. I'm always anxious to celebrate this. And this is, again, why we are investing to accelerate that.

But there is a clear difference in the types of products that we are shipping now compared to a few years ago. And that's also reflected in our customer base, the type of applications that we go after, the Tier 1 customers that we are serving. 

The reason why we can build better traction with these customers is because of the higher performance, and that has to come through differentiation.

So application-specific is working. We are investing to accelerate that. This is going to be our path, part of our reason for how we get to our $1 billion milestone, and that's definitely worth investing in to see the results.

[Operator Instructions] 

Your next question comes from Craig Ellis from B. Riley Securities.

I did miss the prepared remarks, so excuse me if you covered this, but I wanted to understand some of the strength that you saw in the compute segment.

It seemed like there was acceleration in the compute supply chain quarter-to-date, similar to the smartphone supply chain about where we were last year in 1Q and early 2Q.

To what extent was that at play in the results? And what do you think it means for the year's linearity, first half versus second half calendar?

If we're talking about computing, I think we should talk about maybe the subcomponents of that.

The PC portion, I think overall, was a little bit of -- we really saw the correction in this quarter from the last quarter, mainly because of memory challenges.

But the growth area that we see is particularly in what we call the advanced computing, and that's comprised of AI, server, as well as graphics. 

And in particular, we're seeing our solutions, particularly our medium voltage solutions for AI that's going into like hot swap applications, intermediary bus conversion.

Those are products that are really starting to take off and have started to ramp in the March quarter. And as we commented in the prepared remarks, the demand for computing represents about 25% of total computing, which is really exciting for us. 

We are expecting that this momentum will continue further going into the coming quarters as we continue to ramp our business. We talked a little bit about it. We are also expanding some of our capacity to support this growth as well.

Congratulations on the mix shift, Stephen, but that also would imply that there must have been a pretty steep falloff in either the traditional compute business or the gaming card business in the quarter if mid-voltage surged.

So, can you speak to what happened elsewhere in the segment and how it all netted out, given the significant rise in mid-voltage, hot swap, and other things?

Sure. As we mentioned, the standard PC industry is undergoing challenges due to memory shortages.

And it's also a low season and seasonally regular for the March quarter, but we do just see some correction due to that. And that was already anticipated from the previous quarter. The graphics card has also actually grown a little bit from the last quarter. 

But overall, that segment is not as robust as it was maybe a year ago when those graphics cards were first launched. We're expecting that graphics cards are also going to have some challenges in procuring both memory and GPUs that can limit total industry shipments for cards.

But overall, our share still remains strong, and it's still a good core part of our business. So this is why we see that and are excited that the advanced computing portion of the business can offset drops and challenges on the PC side, and a little bit of slowdown on the graphics side.

And just to understand the dynamics in the advanced computing side, can you speak to the OEM diversity that you have within that business?

To what extent is it more GPU-related systems, versus maybe x86 systems, that are seeing a resurgence as we see rising agentic workloads?

Sure. And we're happy that our solutions are going into, as you mentioned, a more diversified customer base. This is going into data center server makers as well as cloud service providers.

The solution right now is generally serving the 48-volt to 12-volt conversion. And this architecture is pretty common in many servers, just general server applications. So our solutions there can be generally used in many of those applications.

So traditional server applications. Got it. And then just moving on to gross margin dynamics.

One of the things we're starting to hear from companies' guys is that rising input costs are putting pressure on packaging and chip costs.

As we think through the course of the year, and this is more of a question for you, Yifan, but how do we think about the give and takes between what could be rising chip costs and potentially your ability to either offset those or pass those through, and then the potential for volume to benefit overhead absorption?

Sure. The March quarter ASP erosion was a little bit better compared to the December quarter. So, since the pricing environment is improving. So we definitely welcome that.

So we're monitoring the market and managing our own pricing and product mix. And yes, we count more on those new products and getting into those high-performance, high-value sockets.

So we want to grow that part of the business, which can definitely help us to improve gross margin.

So, Yifan, it's not clear to me if you're seeing rising input costs and to what extent or not? Can you just speak to that point specifically and the degree to which that is something that you're able to mitigate with cost pass-throughs, or if that's something we should be aware of as we think about COGS impacts later this year?

Yes. We are seeing some increases in input costs. Yes, definitely, I mean, some material costs and then some foundry subcontractors' prices.

Yes. So managing the product mix and then digesting some, and then managing our pricing environment. So Yes. Those increases in input costs and the pricing environment are already reflected in our guidance for the June quarter.

There are no further questions at this time. I will now hand the call over to Steven Pelayo for closing remarks. Stephen?

Thank you. Before we conclude, I'd like to highlight a few upcoming investor events. The management team will be participating in the B. Riley Securities 27th Annual Institutional Investor Conference on May 20 in Marina Del Rey, California; the Stifel 2026 Boston Cross Sector One-on-one Conference on June 3 in Boston, Massachusetts; and the Jefferies Semiconductor IT Hardware and Communications Technology Conference on August 26 in Chicago.

If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank. 

With that, this concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter.

This concludes today's call. You may now disconnect.

Good afternoon. Thank you for attending today's Alpha and Omega Semiconductor Fiscal Second Quarter 2026 Earnings Call. [Operator Instructions] My name is Victoria, and I'll be your moderator for today. [Operator Instructions]

I would now like to pass the conference over to Steven Pelayo. Thank you. You may proceed, Stephen.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2026 second quarter financial results. I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO; and Yifan Liang, our CFO.

This call is being recorded and broadcast live over the web. A replay will be available for seven days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the March quarter. Finally, we will have a Q&A session.

The earnings release was distributed over the wire today, February 5, 2026, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with the GAAP measures. A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release.

We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For the more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligations to update the information provided in today's call.

Now I'll turn the call over to our CEO, Stephen Chang. Stephen?

Thank you, Steven. Welcome to Alpha and Omega's Fiscal 2026 Q2 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q2 revenue results slightly higher than the midpoint of our guidance, primarily reflecting seasonality across several end markets, including PCs, wearables, tablets and gaming. Inventory digestion in AI further impacted by shifts in GPU allocation to prioritize data centers over graphic card markets, strength from our Tier 1 U.S. smartphone customer and sequential growth in e-mobility, power tools and home appliances.

Overall, total December quarter revenue was $162.3 million, down 6.3% year-over-year and down 11.1% sequentially. Non-GAAP gross margin was 22.2%. Non-GAAP EPS was a loss of $0.16 per share. In addition, we repurchased approximately $13.9 million of AOS shares during the December quarter, representing 728,000 shares as part of our recently announced $30 million share repurchase program approved by the Board. Following these purchases, approximately $16 million remains available. This balanced approach to capital allocation reflects the Board and management's confidence in our strategy and execution while maintaining the financial strength needed to invest for long-term growth and deliver shareholder value.

Several years ago, we launched a deliberate strategy to transform AOS from a component supplier into a provider of application-specific total solutions. From the start, our focus has been on higher performance markets where system-level differentiation matters. Barriers to entry are higher, and we can meaningfully expand BOM content. We believe this strategy is working. We have seen tangible results in AI and graphics and smartphones through a mix shift towards premium platforms and higher charging points. And more recently, this momentum has extended into our high-performance medium-voltage MOSFETs used in applications such as hot swap and intermediate bus converters for AI data centers. Just as important, this focus helps offset competitive pressure at the lower end of the market and reinforces our confidence in the direction we are taking.

We have remained disciplined in how we execute the strategy, making targeted long-term investments rather than reacting to short-term noise. As applications continue to evolve towards higher performance and greater system complexity, we believe the right response is to accelerate investment in the technologies, products and engineering resources required to win. Consequently, we are increasing critical R&D investments. These are not broad-based investments. They are highly focused where we hold clear differentiation, strong customer engagement and a clear road map to higher BOM content and sustainable margins.

To support this strategy, we strategically optimized our balance sheet. As part of a planned capital allocation approach, we monetized a portion of our equity interest in the Chongqing joint venture while retaining a meaningful ongoing stake. As previously announced, we sold approximately 20% of our equity interest in the joint venture for an aggregate purchase price of $150 million payable in installments, and we continue to hold an 18.9% equity interest in the joint venture. We received $94 million in the September quarter, followed by an additional $11 million in the December quarter. And subsequent to the quarter end, we received $30 million. There is an additional $15 million remaining that will be received later this calendar year. This financial strength allows us to invest decisively and strategically in technology development, manufacturing capability and engineering talent as we continue to shift the business towards higher-value, higher-margin opportunities.

We are already realizing the impact of our strategy on revenue. For example, while overall PC unit demand in calendar 2026 is expected to be constrained by tightening memory supply, our total solution strategy is gaining traction, and we are seeing increased BOM content on new platforms such as Intel's Panther Lake.

In communications, we are witnessing the fruits of our earlier investment in silicon and packaging technologies in smartphone battery protection. Our technology differentiation, coupled with the industry move towards higher charging currents enabled us to secure increased BOM content and deepen our relationship with top-tier customers, factors that are expected to contribute to our growth in 2026.

In advanced computing, including AI data centers, server and graphics, we are encouraged by an expansion in demand across a broader array of AI data center applications and a broader set of customers. We are seeing near-term demand for high-performance medium-voltage solutions used in applications such as hot swaps and intermediate bus converters for leading ODMs for major hyperscale customers. Advanced computing is becoming a core growing element within the computing segment. The key takeaway is that we are continuing to see the benefits of our structural transformation. We will see tangible results this calendar year, and we expect more meaningful acceleration in 2027 and beyond as new platforms and programs ramp.

With that, let me now cover our segment results and provide some guidance by segment for the next quarter. Starting with computing. December quarter revenue was up 5.9% year-over-year and down 17.1% sequentially and represented 49.6% of total revenue. The sequential revenue decline was in line with our expectations. Within computing, we saw softness following an unusually strong September quarter that benefited from tariff-related PC pull-ins as well as earlier AI and graphics shipments. Seasonality also affected sales of tablets. As we mentioned before, during the September quarter, AI and graphics customers entered a digestion phase that extended into the December quarter, which was further influenced by increasing prioritization of production by our customers towards GPUs for AI data centers over traditional graphics card platforms.

Looking ahead to calendar 2026, visibility into the PC market remains limited, driven primarily by uncertainty around memory shortages. While memory availability may impact end PC demand, data center investment continues to provide an important offset. As mentioned before, we are shipping our high-performance medium-voltage MOSFET products into infrastructure programs, including hot-swap power solutions are now moving into the build phase at leading ODMs for major hyperscale customers.

We are also expanding our presence in AI platforms through medium voltage solutions supporting 48-volt to 12-volt intermediate bus conversion.

Looking ahead to the March quarter, we expect computing segment revenue to decline low single digits sequentially. This reflects softness in the PC market, mostly offset by strength in AI data center applications as well as growth in graphics cards and tablets. Importantly, we have clear visibility into demand for our new medium voltage MOSFETs across an expanding list of applications and customer base that includes power supply providers, module makers, cloud service providers and major hyperscalers.

Turning to the consumer segment. December quarter revenue was down 14.9% year-over-year and down 18.3% sequentially and represented 11.8% of total revenue. The results were in line with our original expectations for a high teens sequential decline. While wearables experienced a normal seasonal decline, the overall year-over-year revenue decrease in consumer was primarily driven by gaming with a smaller impact also from home appliances. In wearables, we continue to see underlying momentum supported by share gains, new customer engagements, higher BOM content and a broader mix of end applications.

In gaming, we remain closely aligned with our key customers as they progress through their next product cycle where our existing relationships and strength in high-performance power solutions positions us to participate in the next-generation platform. Home appliance demand was modestly lower year-over-year, though new design activity in 2025 supports longer-term opportunities, particularly in emerging markets. For the March quarter, we forecast mid-single-digit sequential growth in the consumer segment, primarily driven by a recovery in gaming after a sharp inventory correction in the December quarter.

Next, let's discuss the communications segment. December quarter revenue increased 1.1% sequentially and was flat year-over-year and represented 20.4% of total revenue. The results were supported by strong year-over-year growth from our Tier 1 U.S. smartphone customer, driven by continued expansion of BOM content. While demand from China smartphone customers remains uneven as we prioritize U.S. customers, we are sustaining high market share in the premium phone segment. We see additional growth coming in calendar 2026 as new models launch with higher charging currents and our investments in differentiated silicon and packaging technologies for battery protection further enable BOM content expansion. Looking ahead to the March quarter, the communications segment will likely decline mid-single digits sequentially. This is due to typical seasonality from our Tier 1 U.S. smartphone customer, partially offset by sequential growth from China smartphone. Korea is expected to remain relatively flat.

Now let's talk about our last segment, power supply and industrial, which accounted for 16.7% of total revenue and was down 22.5% year-over-year and down 3% sequentially. Overall, the results were below our expectations for mid- to high single-digit sequential growth as quick charger demand came in weaker than expected, but were partially offset by a rebound in power tools and e-mobility. Looking ahead to the March quarter, we expect power supply revenue to increase mid-single digits sequentially, driven primarily by quick chargers and DC fans, offset by softer power tools and e-mobility.

In closing, we are guiding the March quarter to be down slightly sequentially. We expect the March quarter to mark a near-term low point for revenue and margin with the business returning to growth beginning in the June quarter and into the peak season, supported by improving mix and a more favorable contribution from higher-value applications. Consistent with the strategy we have outlined, we are accelerating targeted investments in performance-driven applications where we have strong positions, clear differentiation and expanding customer engagement.

While calendar 2026 may reflect modest growth as markets work through near-term constraints, our application-specific total solution strategy is yielding results, and we are already seeing positive impact today. As we continue to move higher-value programs towards production, we expect these benefits to become increasingly visible through the course of calendar 2026, which we expect to support stronger growth as we move into 2027 and beyond.

With that, I will now turn the call over to Yifan for a discussion of our fiscal second quarter financial results and our outlook for the next quarter. Yifan?

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the December quarter was $162.3 million, down 11.1% sequentially and down 6.3% year-over-year. In terms of product mix, DMOS revenue was $101 million, down 6.9% sequentially and down 10.6% over last year. Power IC revenue was $58.8 million, down 19.1% from the prior quarter and up 9.5% from a year ago. Assembly service and other revenue was $2.5 million as compared to $1.3 million last quarter and $1.1 million for the same quarter last year. Non-GAAP gross margin was 22.2% compared to 24.1% last quarter and 24.2% a year ago. The quarter-over-quarter decrease was mainly impacted by higher input and operation costs. Non-GAAP operating expenses were $41.3 million compared to $41.4 million for the prior quarter and $39 million last year. Non-GAAP quarterly EPS was $0.16 loss compared to $0.13 earnings per share last quarter and $0.09 per share a year ago.

Moving on to cash flow. Operating cash flow was negative $8.1 million, including $4 million of repayment of customer deposits and $8.7 million income tax paid by one of our entities on the gain from the sale of CQJV equity interest. By comparison, operating cash flow was positive $10.2 million in the prior quarter and positive $14.1 million last year. We expect to refund $1 million of customer deposits in the March quarter. EBITDA, excluding equity method investment loss was $9.7 million for the quarter compared to $19.4 million last quarter and $16.8 million for the same quarter a year ago.

Now let me turn to our balance sheet. We completed the December quarter with a cash balance of $196.3 million compared to $223.5 million at the end of last quarter. Net trade receivables decreased by $8.1 million sequentially. Days sales outstanding were 25 days for the quarter compared to 21 days for the prior quarter. Net inventory increased by $3.9 million quarter-over-quarter. Average days in inventory were 140 days for the quarter compared to 124 days for the prior quarter. CapEx for the quarter was $15 million compared to $9.8 million for the prior quarter. We expect CapEx for the March quarter to range from $15 million to $18 million.

With that, now I would like to discuss March quarter guidance. We expect revenue to be approximately $160 million, plus or minus $10 million. GAAP gross margin to be 20.2%, plus or minus 1%. We anticipate non-GAAP gross margin to be 21% plus or minus 1% GAAP operating expenses to be $52 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $45 million, plus or minus $1 million. The sequential growth in the operating expenses is mostly the result of increased spending for R&D. Interest income to be $1 million higher than interest expense and income tax expense to be in the range of $1.1 million to $1.3 million.

With that, we will now open the call for questions. Operator, please start the Q&A session.

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of David Williams with Benchmark.

I guess maybe first, Stephen, you talked a lot about the strategy, and that's really starting to show here. But I wanted to first maybe talk about the AI opportunities and on the GPU track and those design wins. Can you maybe talk about how that's tracking? And is it to your expectations? I know there's been some push and pull between the segments there. But just kind of curious how you're seeing your -- how that AI opportunity is tracking and what your expectations are?

David, good to hear from you. Yes, the AI opportunity that we've been pushing for, it is less than what our original expectations were for -- regarding creating selling solutions for going into the VRM power the GPUs directly. However, actually, we've been talking about in this earnings as well as in the previous season, is that our AI opportunity is actually expanding. The breadth of our offerings into this AI opportunity is going beyond even just the total solutions that we're offering for the VRM solutions.

So we are excited to see that we can already start to address the medium voltage MOSFETs that are being used in the power conversions that happened even before that stage. And that's -- and we can see that already in our results for this quarter already, which is encouraging for us.

I certainly appreciate that. And then maybe from the OpEx perspective, when should we think that kind of normalizes? Is this a good base rate to kind of consider going forward? Or are there some expenses maybe in this next quarter that won't flow into the following quarters?

Sure, Dave. Yes, for the March quarter, we guided about $4 million up in operating expenses compared to the December quarter. $3 million out of that $4 million increase for the R&D. So, yes, like Stephen said, we are increasing our investment in R&D in some critical areas this year. So those new projects are focused on where we have strong foothold and strong customer engagement and where we have a big potential. So we're going to double down and step up R&D investment. So our divestiture of the CQJV equity share that provides some means for us.

So we plan to spend around like $20 million or so from this proceeds on some new R&D projects this calendar year. So that translates to about 25% R&D expense increase for this calendar year. So March quarter reflected a little bit lower. So, gradually in the June quarter, September quarter, it will inch up. So, on an annual basis, we expect about 25% increase compared to prior calendar year.

Okay. Great. And then just one last one, if I could sneak it in here. Just on the capacity side, just kind of given the balance sheet, are there areas within maybe your existing footprint that you could add capacity or areas that you might be able to do something there in terms of helping maybe on the gross margin front or any other just maybe uses of that cash as we look forward?

Yes. I mean, if you noticed that our CapEx investment in the December quarter was about $5 million higher than the prior quarter and March quarter also inched up compared to the December quarter. So we are investing in CapEx to prepare for the calendar year 2026 growth, some new products and new products started rolling out. So we are building up some capacity right now.

Our next question comes from the line of Tore Svanberg with Stifel.

This is Solomon Wang on for Tore Svanberg. So looking ahead to the March quarter, revenue guide implies a pretty healthy top line momentum, but gross margin comes in a little bit lower than what we're expecting. Could you share a little additional color regarding what's causing that? And where do you kind of see gross margin longer term as you try to reach that 30% target?

Sure. Yes, March quarter guidance is about 1.2% lower than the December quarter margin. It's mainly reflecting the lower in the March quarter, especially during the Lunar New Year time frame. So typically, each year, those last time some operators, they will go back to their hometown. So we also reduced our production. So mainly impacted by the utilization. So I would expect that for the June quarter, we expect to see the margin rebound. I would expect probably back up to the December 2025 or September 2025 quarter margin level, so somewhere in that neighborhood. So -- and then going forward, yes, our midterm target model is still $1 billion in revenue and 30% non-GAAP gross margin and then 20% OpEx.

So that's still our midterm target model. So from where we are now back up to the 30% gross margin level, yes, we expect new products to contribute to the margin growth and then better product mix and then some normal pricing environment, and that would also help. So that's the way we see we can get back to the 30% gross margin level.

Great. Very helpful. And kind of following up on R&D. And so as you're utilizing the proceeds from Chongqing's JV stake monetization to help accelerate and fund the R&D, could you share a little bit more regarding what specific programs the increased R&D is going to? And what revenue scale does this increased R&D really begin to offer some operating leverage? And yes.

Yes. Let me take a stab at that first. So as we described in our prepared remarks, yes, our investment is not going to be in all different directions. It's in very focused areas. We want to invest in the areas that we have strength that we have competitive leverage, and we want those areas to be even stronger. And we chose those areas because we've already seen success in those areas, whether it's in PCs with total solutions for that and then expanding that to AI applications going to graphics and AI and now expanding the breadth of that to go not only covering the ICs, but also the high-performance MOSFETs.

So we're -- in the AI space, this is pretty exciting for us because it's the expansion of the product breadth -- but on top of that, it's also expansion of the customer base. So not only are we going after the top AI guy, we're also going after that whole ecosystem. And our solutions can also be used and are actually already being sold into servers, other data center servers going to cloud service providers. So it increases that customer base for us to go after a bigger SAM with the expansion of our products. And of course, we are still seeing the expansion of our smartphone battery business. And this is because the underlying trend there is moving towards higher charging current. And with that, they basically -- the solutions have to physically be bigger. They have to handle quite a bit more current. And this requires a lot of technology, both in silicon as well as in packaging in order to meet the space constraints as well as the performance constraints.

So business for us means the impact on our business is that the BOM content will increase as well as the margins for those areas. So all three of those areas, we are already seeing results now. We'll see more results even later in this calendar year. But the bigger impact from the additional R&D investment will come in 2027.

There are currently no questions registered. [Operator Instructions] Our next question comes from the line of Craig Ellis with B. Riley Securities.

I wanted to go further on what's been topical on the call, which is the investment in advanced compute product. The first one, guys, I appreciate the clarification that R&D will be up about 25% year-on-year in calendar '26.

I was hoping to ask kind of a higher-level theoretical question or maybe a business strategy question, Stephen. As you look at investing in new opportunities, what are the gating factors that determine where you will invest? And what would be too far away from your low-voltage and mid-voltage core competencies so that we have a better understanding of where the targets set on a range of things you might be looking at? Hello?

Are you still on?

I'm sorry, did you hear my question.

So let me answer that question. I heard the question. I just talking, I'm sorry. So, regarding our investment into AI, it started with our total solutions for PCs. And with those total solution controller paired together with the driver MOS, that's what helped us to get into the graphics space as well as going into now various AI platforms. So our investments there will continue. We are going -- when we mentioned both total solutions for PCs as well as going after AI applications, still that is still a core target of ours, and it fits in very well with our technology strengths and with our ability to create these drivers, controllers as well as the better use inside these power stages.

But that said, we're also expanding. We're going after that medium voltage power conversion, especially in that 48-volt to 12-volt space, where we can use our solutions now. We don't have to wait for future platforms. And this is because we are going after not only onboard solutions, but also going after the ecosystem partners, even going after solutions that go into cloud service providers, too. This has broader reach beyond just the specific AI application. So this is why it's exciting for us to see the impact even now in a little bit in the December quarter, but more so in the March quarter.

So even we don't have to wait until for 2027 to see some of those results. This will be one of the key growth drivers that we'll see in this calendar year. But regarding kind of the bigger direction, yes, we're going to go after tackle more of the sockets in going into the AI applications. As we look forward to the 800-volt solutions, we are preparing solutions for wideband gap to go after the high-voltage aspect of that. There's also other solutions -- other products that we're developing to cover that space, including medium voltage. And we're also looking at various IC sockets as well, too.

If I could ask a follow-up that relates to that to understand what you're seeing in terms of revenue return on the investment. How big is advanced compute as a percent of the compute segment now? What do you think it would be a year from now as you start to get more benefit from all of the investment since you said it would be pretty quick. If we look down the road, eight quarters to fiscal third quarter of '28, 1Q of '28, how big would the business be by then? How much return are we going to see two years from now on this 25% R&D increase we're making?

Sure. And at least for the portion of -- R&D will be invested in three core areas. One, of course, is this AI opportunity. The second is the PC total solutions, which is a cousin for AI. And then also for our smartphones going after the high-performance battery protection. There's also a lot of opportunity there.

But with regard specifically to the proportion of AI graphics related, that portion of computing in the past has been -- has hit somewhere like 20% to 25% of computing in some of the quarters of this -- of calendar 2025. So, going forward, actually, we see much more potential. So we see opportunity not only for the VRM solutions directly powering the GPUs, but also, again, the SAM going into -- for the medium voltage is a new area that we didn't start to really have meaningful revenue until recently. And this is an area that we believe can have some quicker returns even in this calendar year.

So, I can't give a hard number, but I certainly can see it going to 50%, it could be higher than that depending on how successful, how quickly we can penetrate all the opportunities here.

Got it. And then one over to you, Yifan. We've been hearing from companies in the equipment space that their readings on Southeast Asia, China foundry utilization are now in the 80% to 90% range, which should be a range that starts to support less severe pricing. I know pricing has been a normalized level for the last quarter or so. But do you see an environment where pricing starts to help your ability to move gross margins up from, I think, that 21% guidance level in the current quarter? Where is pricing and how much of a headwind or a tailwind to what you see going through this year?

Okay. Sure. December quarter pricing was I would say it was in line with historical trend and a little bit better than the September quarter. So put it that way. March quarter we factor in normal historical trends and the price erosion at this point. So, yes, we are closely monitor the market, see what market is going to go and then we'll adjust ourselves accordingly. So, based on the business, customers, products, all those factors. So, we'll see, yes, definitely welcome better pricing environment.

That's real helpful. And if I could just ask one more bouncing it back to Stephen. Stephen, the commentary in the press release, and I think it was in the script on expectations for PC growth and smartphone growth this year, helped by content gains. So, good for you guys for getting even more of that because that's been part of the story for a long time. The question is, have lead times stretched out enough that you've really got long-term visibility? Or what gives you the confidence to make a comment that goes all the way through the end of calendar year '26?

Yes. For us, we do see that the impact of the memory shortage and memory supply, that will be a headwind for those markets. But we also believe that we are increasing BOM content. And in PC side, again, our total solutions still has a lot of room to grow in terms of penetrating the market. We've been selling our discrete MOSFET, discrete separate individual driver MOS, but we are looking forward to having a bigger adoption of our total solutions, including our controller solutions onto more platforms. So that can help there. Of course, we have to deal with the -- our customers have to contend with the memory supply. But that I feel confident at least in our ability to penetrate further with our total solution strategy.

And on the smartphone side, we do see that especially in the big U.S. customer that the move towards higher charging currents is going to be more widely adopted. And this is helping to support the quick charging features on these big smartphone batteries. And we are in a good position there with leading technology as well as a strong share.

There are currently no questions registered. So I'd like to pass the call back over to Steven for any closing remarks.

Okay. It's Steven Pelayo here. Before we conclude, I just want to highlight a few upcoming investor events. The management team is going to be participating in. So, first of all, we have the Susquehanna 15th Annual Technology Conference on February 26 in New York City. Then we have the Loop Capital 7th Annual Investor Conference on March 9, this is virtual. And we have the Jefferies Semis IT Hardware and Comm Tech Summit on August 26 in Chicago. If you wish to request a meeting, please contact the institutional sales representatives at sponsoring banks.

This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter.

Thank you.

That concludes today's call. Thank you for your participation, and have a wonderful rest of your day.

Good afternoon. Thank you for attending today's Alpha and Omega Semiconductor Fiscal Q1 2026 Earnings Call. My name is Jaylen, and I'll be your moderator for today. [Operator Instructions]

At this time, I'd like to pass the conference over to the Investor Relations representative for AOS, Steven Pelayo. Please proceed.

Good afternoon, everyone, and welcome to Alpha and Omega Semiconductor's conference call to discuss fiscal 2026 first quarter. I'm Steven Pelayo, Investor Relations representative for AOS. With me today are Stephen Chang, our CEO; and Yifan Liang, our CFO. This call is being recorded and broadcast live over the web. A replay will be available for 7 days following the call via the link in the Investor Relations section of our website.

Our call will proceed as follows today. Stephen will begin business updates, including strategic highlights and a detailed segment report. After that, Yifan will review the financial results and provide guidance for the December quarter. Finally, we will have the Q&A session. The earnings release was distributed over the wire today, November 5, 2025, after the market closed. The release is also posted on the company's website. Our earnings release and this presentation include non-GAAP financial measures. We use non-GAAP measures because we believe they provide useful information about our operating performance that should be considered by investors in conjunction with GAAP measures.

A reconciliation of these non-GAAP measures to comparable GAAP measures is included in the earnings release. We remind you that during this conference call, we will make certain forward-looking statements, including discussions of the business outlook and financial projections. These forward-looking statements are based on management's current expectations and involve risks and uncertainties that could cause our actual results to differ materially. For a more detailed description of these risks and uncertainties, please refer to our recent and subsequent filings with the SEC. We assume no obligation to update the information provided in today's call.

Now I'll turn the call over to our CEO, Stephen Chang. Stephen?

Thank you, Steven. Welcome to Alpha and Omega's Fiscal 2026 Q1 Earnings Call. I will begin with a high-level overview of our results and then jump into segment details. We delivered fiscal Q1 revenue results at the midpoint of our guidance, primarily driven by growth in our Computing and Communications segments, offset partially by weaker trends in Consumer and Power Supply and Industrial. Overall, total September quarter revenue was $182.5 million. Non-GAAP gross margin was 24.1%. Non-GAAP EPS was $0.13. Total revenue increased slightly year-over-year and 3.4% sequentially.

As previously noted, licensing revenue wound down in the March quarter. Excluding licensing and other revenue, our product revenue was up 3.3% year-over-year. Power IC revenue increased 5.9% sequentially and 37.3% year-over-year to a record quarterly high and now represents nearly 40% of total product revenue. The richer mix of Power IC benefits gross margins and combined with increased controller sales, underscores our transformation from a component supplier to a total solutions provider.

On October 13, we announced support for 800-volt DC power architecture, a major step forward for next-generation AI data centers. This shift from traditional 54-volt systems to 800 volts represents a fundamental change in data center power distribution, improving efficiency, reducing copper usage and enabling megawatt scale racks. AOS is part of an expanding ecosystem to provide silicon carbide, gallium nitride, stack die MOSFETs and multiphase controllers to address every stage of power conversion.

We are excited about this transition as the move to 800 volts opens the door for AOS to participate in entirely new system designs rather than competing for existing sockets. In short, this architecture change creates a new design cycle and with it, new opportunities for AOS to expand our footprint in high-performance computing and data center markets. During the quarter, we received the first installment payment of approximately $94 million from the sale of a portion of our equity interest in our China joint venture.

We are using this capital to accelerate the pace of strategic investment across technology, equipment and engineering talent, doubling down in the very areas where we've already proven success. These disciplined investments are designed to strengthen our technology leadership and expand our served markets into higher performance and higher-margin applications. Our momentum in graphics, smartphones and AI platforms is proof that past investments are paying off.

Now emboldened by that success, we are going deeper by expanding our served available market, strengthening differentiation and developing more complete system solutions that raise the performance bar for our customers. These investments position us to outpace the competition, increase our design capability and drive higher BOM content and margin contribution across a broader set of high-growth, high-value applications.

With that, let me now cover our segment results and provide some guidance by segment for the next quarter. Starting with Computing. September quarter revenue was up 27.1% year-over-year and up 4.6% sequentially and represented the majority or 53.2% of total revenue. These results were ahead of our original expectation for low single-digit sequential growth and mid-teens year-over-year. The strong demand from PCs continued into the September quarter, driven by 2 key factors: The ongoing orders from customers seeking to mitigate tariff-related uncertainty and traditional seasonal strength tied to back-to-school and holiday demand.

Combined AI and graphics card revenue declined sequentially but remained more than double from a year ago. The decline was anticipated, reflecting a digestion phase following strong June quarter shipments. One of our initial data center programs ramped at a smaller scale than originally planned, but we remain actively engaged across multiple new AI opportunities. In addition, some near-term moderation in graphics card demand reflects manufacturing prioritization towards AI platforms.

We view these effects as temporary and expect activity to normalize as new programs ramp in the March quarter. Looking ahead to the December quarter, we expect Computing segment revenue to decline nearly 20% sequentially. This reflects the anticipated slowdown following the typical post-holiday seasonal cooling in both PCs and tablets and the digestion phase in both AI and graphics cards. As we just mentioned, we view these factors as short term in nature, with demand expected to stabilize and return to a more typical pattern as we move into 2026.

At the same time, we are expanding our footprint beyond controller and power stage solutions to include new opportunities in the 48-volt to 12-volt power delivery board, broadening our reach into the AI market. Our medium voltage solutions are optimized for applications requiring fast switching performance in the power conversion stage as well as high safe operating area, capability for 48-volt hot swap applications.

Turning to the Consumer segment. September quarter revenue was down 25.8% year-over-year and 11.6% sequentially and represented 12.9% of total revenue. The results reflect the normalization of demand following strong Q2 promotional activity in gaming and a contraction from home appliances. The standout in the consumer segment was wearables, which delivered a second consecutive quarter of strong sequential growth, reaching a record high. Growth was fueled by share gains, new customers, higher BOM content and an expanding product lineup that includes headphones, watches and smart AI glasses.

For the December quarter, we forecast a high-teens sequential decline in the consumer segment, primarily driven by maturing product cycle demand in gaming and seasonality and wearables, partially offset by growth from new refrigerator and fan applications in home appliances. Specific to gaming, we continue to work closely with our key customers on their next-generation platform. These programs leverage our established designed-in position and play directly to our strength in high-performance power management. We expect to benefit when these new products enter production and launch their next product cycle.

Next, let's discuss the Communications segment. September quarter revenue increased 21.4% sequentially but declined 7.8% year-over-year. The sequential growth was primarily driven by demand related to product launches from our Tier 1 smartphone customer in the U.S.A., while smartphone sales in both China and Korea also improved from the prior quarter. The year-over-year decline is mostly due to weaker demand from smartphone customers in China and our strategic decision to prioritize U.S. customers.

Despite these dynamics, AOS has continued to capture share with leading global OEMs. We continue to strengthen our leadership position, particularly in high-end smartphones, where charging currents and BOM content continue to rise. Looking ahead, the December quarter will likely decline low to mid-single digits sequentially. This is better than typical seasonality as we expect demand from U.S. customers to remain strong, supported by share gains, ramping of new products and higher BOM content related to increasing charging currents.

Now let's talk about our last segment, Power Supply and Industrial, which accounted for 15.3% of total revenue and was down 12.4% year-over-year and 5.6% sequentially. The sequential decline was primarily due to softer demand in AC/DC power supplies and quick chargers, partially offset by a rebound in e-mobility after a weaker June quarter. Overall, the results were below our expectations for mid-single-digit sequential growth as quick charger demand came in weaker than expected. Within these segments, power tools revenue decreased sequentially and year-over-year, reflecting softer consumer spending and inventory adjustments at key customers.

Looking ahead to the December quarter, we expect Power Supply revenue to grow mid- to high single digits sequentially. Growth will be driven primarily by the power tools segment, which has been in a correction phase, but is now showing signs of recovery as customers ramp new products into mass production. We're already seeing progress, including a recent design win that integrates our driver ICs with medium voltage MOSFETs in the next-generation brushless motor platform. This win highlights our growing system-level capability and position in advanced motor control applications.

Elsewhere, DC fan demand is expected to soften in the December quarter, while e-mobility continues to show moderate growth, particularly in emerging markets where new projects are beginning to ramp. Looking ahead to the December quarter, we expect product revenue of around $150 million, reflecting typical seasonality following a strong September period. Demand across PCs is normalizing after a recent tariff-related demand, while gaming and wearables are also trending lower following promotional activity earlier in the year.

AI and graphics cards are also digesting the strong shipments in the June quarter. In contrast, we expect strength in power tools and e-mobility to help offset some of the softness. Before turning the call over to Yifan, I would like to take a moment to highlight several critical investments currently underway. We remain more confident than ever in our long-term trajectory as we deepen our role in the global transformation taking place across electrification, digitalization and AI-driven computing.

Power management has never been more essential, and AOS is well positioned across these megatrends with a broad portfolio spanning computing and AI, battery management and motor control. This diversification, combined with our evolution from discrete components to total power solutions continues to expand our served markets, enhance our resilience across cycles and drive sustainable growth. In the near term, while the market continues to recalibrate, we are driving innovation through disciplined investments and a focused strategy.

With the cash proceeds from our JV equity sales, we are deploying capital with discipline, directing resources towards areas where we already demonstrate strength such as smartphones and PCs, while further expanding our opportunities in graphics and AI. At the same time, we are investing in high-impact initiatives that will shape the next wave of growth. For example, we are seeing continued expansion of BOM content in AI platforms, not only through our total power solutions combining controllers and power stages, but also through our high-performance MOSFET portfolio.

Another key priority is accelerating development of the 800-volt AI power architecture, which marks a major inflection point in power efficiency and density for next-generation data centers. To support these opportunities, we are increasing targeted R&D and system-level engineering investments to advance design capability, qualification and early production readiness, applying the same proven playbook that has driven our success in high-performance computing and mobile markets.

These investments are designed to strengthen our technology leadership and expand our served market into higher performance and higher-margin applications. We expect steady growth through 2026, followed by a stronger uptrend in 2027 as programs transition from design-in to volume production. Capital deployment will remain milestone-driven and tied to clear technical and commercial objectives to ensure attractive returns on invested capital.

With that, I will now turn the call over to Yifan for a discussion of our fiscal first quarter financial results and our outlook for the next quarter. Yifan?

Thank you, Stephen. Good afternoon, everyone, and thank you for joining us. Revenue for the September quarter was $182.5 million, up 3.4% sequentially and up 0.3% year-over-year. In terms of product mix, DMOS revenue was $108.5 million, up 1.1% sequentially and down 11.4% over last year. Power IC revenue was $72.7 million, up 5.9% from the prior quarter and 37.3% from a year ago. Assembly service and other revenue was $1.3 million as compared to $0.5 million last quarter and $0.9 million for the same quarter last year.

Non-GAAP gross margin was 24.1% compared to 24.4% last quarter and 25.5% a year ago. The quarter-over-quarter decrease was mainly impacted by higher operation costs. Non-GAAP operating expenses were $41.4 million compared to $40.9 million for the prior quarter and $38.5 million last year. The quarter-over-quarter increase was primarily due to higher professional service fees. Non-GAAP quarterly EPS was $0.13 compared to $0.02 per share last quarter and $0.21 per share a year ago.

Moving on to cash flow. Operating cash flow was $10.2 million, including $5 million of repayment of customer deposits. By comparison, operating cash flow was negative $2.8 million in the prior quarter and positive $11 million last year. We expect to refund $8.2 million of customer deposits in the December quarter. EBITDA, excluding equity method investment income was $19.4 million for the quarter compared to $10.5 million last quarter and $20.6 million for the same quarter a year ago.

Now let me turn to our balance sheet. We completed the September quarter with a cash balance of $223.5 million compared to $153.1 million at the end of last quarter. In the September quarter, we divested 20.3% of our equity interest in the JV company for $150 million, and we received the first installment payment of $94 million. We expect to receive the remaining payments in the next few months. Also in the September quarter, we paid out $20.8 million for the remaining balance of our equipment loan.

Net trade receivables increased by $2.3 million sequentially. Days sales outstanding were 21 days for the quarter compared to 15 days for the prior quarter. Net inventory increased by $6.5 million quarter-over-quarter. Average days in inventory were 124 days for the quarter compared to 126 days for the prior quarter. CapEx for the quarter was $9.8 million compared to $14.3 million for the prior quarter. We expect CapEx for the December quarter to range from $14 million to $16 million.

With that, now I would like to discuss December quarter guidance. We expect revenue to be approximately $160 million, plus or minus $10 million. GAAP gross margin to be 22.3%, plus or minus 1%. We anticipate non-GAAP gross margin to be 23%, plus or minus 1%. GAAP operating expenses to be $47.1 million, plus or minus $1 million. Non-GAAP operating expenses are expected to be $40.5 million, plus or minus $1 million. Interest income to be $1 million higher than interest expense and income tax expense to be in the range of $1.1 million to $1.3 million.

With that, we will now open the call for questions. Operator, please start the Q&A session.

[Operator Instructions] Our first question comes from David Williams with the company Benchmark.

Can you guys hear me okay?

Yes. Now we can.

Apologies for the technical difficulties here. So excuse me for -- I kind of missed the first of the call here, but just kind of curious if you could give us maybe a little more color on the sequential decline, if there's anything in particular there that you think is maybe a demand side related as you kind of look out into next year, just kind of how things are trending as we get into 2026?

Sure. And we're looking at it into the fourth quarter, the fourth calendar quarter, December quarter, some of this is seasonality, but some of this does go a little bit beyond seasonality. And we noted particularly in the PC area, we saw activity tied to mitigating tariffs and seeing more activity in the beginning part of the year. We already, at that time, expected that to be temporary and end up being kind of a longer temporary going through most of even the September quarter.

But that is coming to an end, and we expect that it's right now going through a correction period, but we see this as more of a temporary thing as well, too. And fundamentally, the markets that we're in still have the underlying growth trends behind that, whether it's a BOM expansion in PCs or whether it's the smartphones moving to higher charging currents, those trends are still ongoing. So we see this more as a temporary correction whereas the underlying trends are still there.

And then just maybe on the gross margin side, Yifan, if you can, and forgive me if this has already been asked and answered, but can you just kind of speak to the gross margin and the degradation there and how you kind of think about or how we should think about that trending through next year?

Sure. Well, for the September quarter, our gross margin was in line with our guidance and then slightly below the midpoint, primarily reflecting some higher operation expenses. Going forward, yes, I would expect that this gross margin line will fluctuate along with the revenue top line and depending on the product mix and then the production level.

So as Stephen just mentioned, I mean, for the December quarter, yes, we are expecting a lower top line and then -- so we also expect the gross margin line is a little bit lower than the September quarter. So yes -- so next year, yes, we're still confident in our product mix will improve, but then after this near-term slowdown inventory correction.

At this time, there are no more questions registered in queue. [Operator Instructions] Our next question comes from Kyle Smith with company, Stifel.

Maybe shifting longer term, I'm curious what sort of dynamics you're seeing around ASPs and any potential erosion? I think I know like in the past, it's been like kind of like mid- to high single-digit declines annually. What sort of dynamics are you kind of seeing for fiscal '26? And then heading into fiscal '27, just any commentary there would be appreciated.

All right. Sure. I mean, right now, so far this year, this calendar year, we have been seeing pretty much the ASP erosion, has been trending toward historical number as what you said, mid-single digit year-over-year, that type of range. So that's on the same parts year-over-year basis.

So what we do is we roll out new products to provide our customers with more -- the higher performance and more functionality so that we can reset the ASP. So going forward, we'll be doing the same thing. And then in terms of overall market, the pricing situation, that's hard to say. I mean, depending on the overall economy and the competition. So far this year, it's in the -- along the traditional historical line.

And let me comment a little more on this one, too, is -- and yes, we're glad to see more normalization of ASP decline. But the key thing that we're driving to actually to raise margins going forward is actually through the mix, as Yifan has alluded to. We are going after sockets and applications that are more performance driven. And in this sense, this is where when we're talking about investing in growth, we are investing in these types of areas that can drive higher BOM content, both for our ICs as well as our MOSFET solutions.

We've been talking about and demonstrating the percentage of our Power IC business as a percentage of revenue increasing. And also -- and we're happy to see that even our MOSFETs are also going after higher performance sockets, whether it's in smartphones for higher charging currents or even for AI servers going after -- either going after the hot swap applications or intermediary bus conversions where they need a high-performance MOSFETs. All these kinds of sockets help to increase the BOM content as well as the margin profile.

Great. That's really helpful color. And then, yes, I guess maybe if I could just turn to the JV sale, which I know is obviously bringing in a lot of cash. And you talked about some of the uses that you kind of see for that influx of capital that's coming in. But I guess it would be helpful if maybe you could qualitatively just kind of rank sort the different uses of those proceeds that you kind of see. I think you alluded to it a little bit in your previous answer, but any additional color there would be appreciated.

Okay, sure. Yes, through this sale of equity deal, we already realized about $176 million. So this deal, we got $150 million back to December 2021, we got about $26 million. So $176 million in total. And then after this deal, we still own 18.9% of the JV. So definitely, I mean, this transaction significantly strengthened our balance sheet.

And then going forward, yes, in terms of how we want to use those proceeds and a couple of things. I mean, one is Stephen already talked about it, we'll continue to invest in the areas that we have been doing very well, for example, in the smartphone, PC and AI. And then at the same time, we'll invest in those expanding and growing BOM content in terms of AI. And then that would support our next wave of the growth. So in those AI and 800-volt AI power architecture, in those areas, we saw a lot of potential opportunities for us. So those are the areas that we're going to continue to invest.

Yes. Let me add on to that, too. So basically, in terms of the investment area, we are taking a very focused look at that, a very disciplined approach. And we want to invest more in areas where we have demonstrated already that we can execute and we can expand our business. So whether it's going deeper into existing applications such as PCs, such as phones or expanding into AI applications, if it's into areas where we see that we have competitive strength, we have products that are competitive going after performance-driven sockets. So those are the areas that we will focus on.

Great. And then just one quick housekeeping question. I missed it at the end. You guided for the Industrial segment to exhibit a mid- to high single-digit sequential increase or decrease in the December quarter?

December quarter should be to, grow mid- to high single digits sequentially. That's our guidance.

Our next question comes from Craig Ellis with the company B. Riley Securities.

I was like getting in. So apologies if these questions have already been asked. I think what I saw in the prepared remarks is that we had expected AI-related revenues to be coming back in the fourth quarter after some digestion in the fiscal first quarter, but now we expect more of that ramp to come in the fiscal third quarter. Is that correct? And what is happening that is causing that ramp to be a quarter later than we previously expected?

Sure. Yes, we were originally counting on some ramp-up happening in the second half of the calendar year. And although we have done some ramp in the previous quarter, right now, it looks like the demand for that is not as strong as what it was originally forecasted to be. And so we're continuing to watch at least for this particular program. But that said, we continue to be engaged on other opportunities that have different time lines that we are actively pursuing.

And as you convey that, Stephen, are you referring to engage with other opportunities with the same customer? Or are you referring to other opportunities with different customers? Just trying to understand what's happening in the business.

It's a little bit of both. So as we mentioned in the call, there is the total solutions with our controller and with our driver MOS and power stage products. Those are mostly with the same customer that we're engaged with now. But as we mentioned on the call, we're also expanding to go after other sockets in AI, which includes some of the power delivery to get the power even before getting to that last stage. And that expands our available customers to other ones besides the ones we're currently serving for AI.

Okay. And then there was remarks, I believe, in the call about investing for growth and maybe you're referring to that right there? Or maybe it's a different point. My question regarding the investments for growth. Does that mean we're sustaining current levels of R&D? Or are you expecting that you're going to need to take R&D higher because you would need either additional design engineers, additional field engineers, et cetera. Help me understand what investing for or in growth looks like?

Sure. Yes. We are planning to invest some more into R&D, especially to fuel some of these areas. And the idea is that we are happy to see the success so far, but we want to accelerate that success, go after more programs, go after more sockets, expand our offering even more in those specific areas. So that will come with some R&D expense as well to cover those additional products to serve the bigger opportunities there.

And can you, Stephen or can Yifan quantify how significant that would be and when we would expect to see it, for example, is it baked into the guide you've given for the fiscal second quarter? Or is it something that comes in the fiscal second half of the year?

Well, in terms of the return portion, timing-wise, this is -- we've already been investing so far. So some of this is going to be -- we'll start to see next year already. This is why we are signaling that we will expect to see some growth -- steady growth in the calendar '26, followed by a more upturn in 2027. So that is a result of further investment in these growth areas.

Okay. Got it. And then just moving on to non-AI businesses. You commented that compute was up in the fiscal first quarter despite some of the ship-ahead activity. I thought it might be up a little bit more given that we had, I think, 9% quarter-on-quarter sequential growth. Can you just comment on how you feel about share activity in the compute market? And then I'd just ask the same thing about the gaming card market because I think that's in the same segment.

Okay. Yes. For the PC side, seasonally, the September quarter is always a peak, and we saw that strength going into the September quarter. But by the end of the September quarter, that's when we started to see some of the adjustments happening based on the more pulling in terms of the first half -- first portion of the year.

So that started to change towards the end of the September quarter. But overall, it's still a strong quarter for us. It always is a strong quarter in the September quarter. Just now we were expecting some kind of temporary adjustment as we enter into the lower season for PCs. And your second question was about -- your second question, that is on the graphics cards, right?

So for the gaming cards portion, that also, I think, was strong more towards the first part of the year. We're expecting that to moderate some going into the December quarter, mainly because our end customer is focusing more on the data center. So the allocation for them is more shifted that way. But we see this as also temporary too. We expect this to come back pretty shortly.

Our next question comes from Tore Svanberg with the company, Stifel.

So I know it's very early, but I'm just looking at next year and I just want to understand some of the puts and takes. Obviously, I'm not looking for particular guidance here, but given your R&D pipeline, some of your design wins, what would be some of the relatively better performing segments you think next year?

Yes. I would say that those 3 areas that we're talking about investing in, those are the ones to focus on for us as a company. PCs in general, besides the more temporary adjustments, we are focused in general on expanding total solutions, including both controller as well as power stages. So we expect to see kind of further BOM content expansion just for standard PCs. In general, we also expect to see growth both for graphics and AI combined. I think we continue to make progress there. We hope to be -- to see more platforms hitting the market with our products on there.

Smartphones also, we've been talking about expanding BOM content there and over there is because of the higher charging currents. And we see more of that happening rolling out to more phone platforms in our key customer, and that should hit again in the peak season in the September quarter there. So overall, I think those are the areas that we're focusing on, PCs and AI applications as well as smartphone, those are the bigger ones that we see. Of course, we still have our investments in other motor applications over there, we're starting to see some signs of life in the power tools and as well as e-mobility. So those can help as well, too.

Very good. And my last question is on gross margin and I guess, more precisely on utilization. Obviously, down quarter, March quarter tends to be seasonally down. So when would you start to ramp utilization again -- or I guess the better question is, what are some of the signs that you need to see above and beyond seasonality, obviously, to start to get utilization up again?

Sure. We -- generally, we adjust our factory production along with the expectation of revenue, so the shipments. So yes, once we see the order patterns and then improving and then higher revenue, yes, we have to start turning on the utilization. Also, looking ahead for the entire year of calendar year 2026 for certain bottleneck areas, we may need to start some production early on in order to smooth out the whole year's production in order to support our customers.

At this time, there are no more questions registered in queue. I'd like to pass the conference back over to the management team for closing remarks.

Okay. This is Stephen Pelayo. Before we conclude, I just want to highlight a few upcoming investor events. The management team will be participating in the 14th Annual ROTH Technology Conference, November 19 in New York City; the UBS Global Technology and AI Conference on December 3 in Scottsdale, Arizona; and the 14th Annual NYC CEO Summit on December 16 in New York City. If you wish to request a meeting, please contact the institutional sales representative at the sponsoring bank. This concludes our earnings call today. Thank you for your interest in AOS, and we look forward to speaking with you again next quarter.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.