Should You Hold on to Astera Labs Stock Despite Its 36% Dip in YTD?

Astera Labs ALAB shares have plunged 36.1% in the year-to-date period, underperforming the broader Zacks Computer & Technology sector’s decline of 7.5% and the Zacks Internet - Software industry’s decline of 18.5% over the same time frame. The underperformance can be attributed to challenging macroeconomic uncertainties and stiff competition in the PCIe retimers market.

ALAB also suffered from a shift toward a higher mix of hardware sales, which impacted its profit margins. Increased operating expenses from expanded R&D efforts and recent acquisitions also impacted performance.

ALAB Stock's Performance

Image Source: Zacks Investment Research

However, the company is benefiting from its robust and diversified product portfolio to address the growing demands of AI infrastructure and connectivity solutions, as well as its expanding partner base. It benefits from strong demand for its PCIe solutions, which have also been a major growth driver.

ALAB Benefits From Strong Demand for PCIe Solution

ALAB is rapidly expanding its portfolio to address the growing demands of AI infrastructure and connectivity solutions. Its product portfolio, including Scorpio, Aries and Taurus, has been a key catalyst.

A standout performer in ALAB’s portfolio is its Aries PCIe 6 DSP retimer solutions, which are currently the only PCIe 6 DSP retimer products shipping in high volume. The Aries portfolio saw 70% year-over-year growth in 2025, driven by the increasing deployment of custom AI accelerators at major hyperscalers. With the PCIe 6 transition cycle still in its early stages, ALAB expects further growth as more customers launch PCIe 6-capable AI accelerators and systems in 2026 and beyond.

The Scorpio P-Series family has also been a key growth driver, contributing more than 15% of revenues in 2025. As the only PCIe 6 fabric available in large quantities, Scorpio P-Series is poised to grow in 2026, with shipments to more hyperscalers for next-generation AI platforms. The Scorpio X-Series is likely to move to high-volume production in the second half of 2026, which will further boost revenues.

ALAB is set to expand its footprint in the AI connectivity market, which is projected to grow 10-fold to $25 billion over the next five years. The Scorpio P-Series continues to ramp up, with shipments expected to expand to additional hyperscalers in 2026. Meanwhile, the Scorpio X-Series is anticipated to enter high-volume production in late 2026, further boosting revenues.

ALAB Offers Strong Q1 Guidance

Aster Labs is benefiting from strong demand for its Aries, Taurus, and Scorpio product families, all of which are expected to drive growth in the first quarter of 2026.

Astera Labs expects first-quarter 2026 revenues between $286 million and $297 million. The Zacks Consensus Estimate for first-quarter revenues is pegged at $292.5 million, representing year-over-year growth of 83.45%.

Earnings are expected to be between 53 cents and 54 cents per share for the first quarter. The Zacks Consensus Estimate for first-quarter 2026 earnings is pegged at 54 cents per share, unchanged over the past 30 days. The figure implies a year-over-year increase of 63.64%.

Astera Labs, Inc. Price and Consensus

Astera Labs, Inc. price-consensus-chart | Astera Labs, Inc. Quote

ALAB Faces Stiff Competition

Despite an expanding portfolio and strong partner base, ALAB is facing stiff competition from other industry players like Marvell Technology MRVL, Credo Technology CRDO, and Cisco Systems CSCO. Marvell Technology, Credo Technology, and Cisco Systems are all expanding their footprints in the AI infrastructure space.

Marvell Technology’s expanding portfolio has been noteworthy. In March 2026, the company introduced the Structera S 60260, the first 260-lane PCIe 6.0 switch in the industry. It allows for higher-density, lower-latency AI data center scaling by replacing several smaller switches with a single high-radix solution.

Cisco has been integrating AI into its product portfolios across networking, security, collaboration and observability. Strong demand for Cisco’s products in developing AI infrastructure has been a game-changer for the company. In the second quarter of fiscal 2026, AI infrastructure orders from hyperscalers hit $2.1 billion, and Cisco expects more than $3 billion in AI infrastructure revenues from hyperscalers in fiscal 2026.

Credo Technology’s expanding portfolio has been noteworthy. In February 2026, Credo Technology announced that its 7nm Toucan PCIe retimer achieved PCI-SIG compliance at 32.0 GT/s for PCIe 5.0 speeds, validating interoperability, signal integrity and low-power performance for next-generation AI and HPC platforms.

ALAB Shares Trading at a Premium

Astera Labs’ stock is trading at a premium, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, ALAB is trading at 12.58X, higher than the Computer & Technology sector’s 5.72X.

ALAB's Valuation

Image Source: Zacks Investment Research

Conclusion

Astera Labs’ strong fundamentals, expanding partnerships, and rising AI demand reinforce its leadership in connectivity solutions. However, challenging macroeconomic uncertainties and stiff competition remain a headwind. Stretched valuation also remains a concern.

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

Beyond Nvidia: AI's Second Wave Is Here

The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. Little-known AI firms tackling the world's biggest problems may be more lucrative in the coming months and years.

See

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Cisco Systems, Inc. (CSCO): Free Stock Analysis Report

Marvell Technology, Inc. (MRVL): Free Stock Analysis Report

Credo Technology Group Holding Ltd. (CRDO): Free Stock Analysis Report

Astera Labs, Inc. (ALAB): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research