Alpha and Omega's Q2 2025 Earnings Call: Navigating Contradictions in AI Opportunities, Margins, and Gaming Trends

These are the key contradictions discussed in Alpha and Omega Semiconductor Limited's latest 2025 Q2 earnings call, specifically including: AI opportunity expectations, gross margin projections, AI accelerator market performance and expectations, and gaming market trends:



Revenue Performance and Seasonality:
- Alpha and Omega Semiconductor Limited reported revenue of $173.2 million for fiscal Q2 2025, in line with their guidance.
- There was a sequential decline in major segments, offset by growth in graphics cards, quick chargers, PC, desktops, and power tools.
- The decline was due to seasonal factors, with gaming, notebooks, tablets, and wearables experiencing a decrease in demand.

Inventory Correction and Market Recovery:
- AOS revenue increased 4.1% year-over-year in calendar 2024, suggesting that the inventory correction was complete.
- The recovery was particularly notable in computing and communications segments, with growth driven by market share gains and increased BOM content.
- The key drivers were market share gains in motherboards, AI, graphics cards, and tablets, along with strong growth in smartphones, wearables, and e-mobility.

Gross Margin Challenges and Recovery:
- Non-GAAP gross margin was 24.2% for fiscal Q2 2025, down from the previous quarter and year-ago levels.
- The decline was mainly impacted by ASP erosion and mix changes, with ongoing pricing pressure affecting margins.
- The company anticipates gross margin recovery beyond the March quarter, driven by smartphone, graphics card, and AI growth, with expectations to reach mid- to high-single-digit ASP erosion in 2025.

AI and Data Center Opportunities:
- The company is positioning for growth in AI and data centers, with AI expected to contribute significantly to revenue in the middle of 2025.
- AOS is involved in designing solutions for AI data center boards and expects increasing BOM content with higher charging currents in smartphones.
- These strategic shifts aim to leverage strengths in high-performance silicon, packaging, and intelligent ICs to expand market share and increase BOM content.