Peraso's Strategic Transition: Can mmWave Growth Offset Legacy Revenue Decline and Drive Long-Term Value?

Peraso Inc. (NASDAQ: PRSO) has embarked on a bold strategic pivot, shifting entirely from legacy memory ICs to mmWave technology. This transition, while financially disruptive in the short term, positions the company to capitalize on high-growth markets like fixed wireless access (FWA) and defense. The question for investors is whether this pivot can sustain revenue momentum, navigate margin pressures, and unlock long-term value.

Financial Transition: Growth vs. Margin Compression

Peraso's Q2 2025 financials reveal a stark shift. Legacy memory IC revenue, which once dominated its business, has fully phased out. The mmWave segment now accounts for 100% of revenue, surging to $2.2 million in Q2—a 45% sequential increase and a 200% year-over-year jump. This growth is impressive, but it comes at a cost: GAAP gross margins plummeted from 69.3% in Q1 to 48.3% in Q2, reflecting the lower-margin nature of mmWave products compared to memory ICs.

The company's Q3 2025 guidance of $2.8–$3.1 million suggests confidence in sustaining this trajectory. However, investors must weigh the trade-off between high-growth potential and margin sustainability. While mmWave's scalability is evident in its 2 million cumulative shipments, the path to profitability hinges on improving gross margins through economies of scale or product differentiation.

Market Capture: Defense and FWA as Strategic Anchors

Peraso's mmWave technology is gaining traction in two critical sectors: defense and FWA. In defense, the company has secured a strategic contract to deliver 60GHz solutions for mission-critical communications, leveraging its stealthy, anti-jamming capabilities. This technology, with its low probability of detection, is a “must-have” in modern warfare, targeting a TAM of 3.44 million NATO personnel. Initial production shipments in Q2 2025 validate Peraso's ability to convert R&D into revenue, and the market's response to its military-grade solutions could drive recurring contracts.

In FWA, Peraso's partnership with Tachyon Networks is a game-changer. Tachyon's 60GHz solution, powered by Peraso's modules, offers gigabit connectivity over three kilometers at a breakthrough price point, targeting both urban and rural broadband markets. This partnership not only expands Peraso's customer base but also positions it as a key player in the $10 billion FWA market, which is growing rapidly as an alternative to fiber infrastructure.

Scalability and Strategic Flexibility

Peraso's ability to scale depends on its capacity to diversify applications for mmWave technology. Beyond defense and FWA, the company has entered the education sector with a wireless video system for classrooms, demonstrating the versatility of its solutions. This diversification reduces reliance on any single market and opens new revenue streams.

However, scalability also requires addressing cash burn and operational efficiency. While Peraso has reduced operating expenses year-over-year, its reliance on external capital remains a risk. The company's exploration of strategic alternatives, including mergers or acquisitions, signals a pragmatic approach to accelerating growth. Investors should monitor these moves for signals of value creation or dilution.

Investment Implications: High-Risk, High-Reward

Peraso's transition is a high-stakes bet. The mmWave segment's 200% YoY growth and expanding TAMs in defense and FWA suggest strong upside potential. However, margin compression and cash burn pose near-term risks. For investors, the key metrics to track are:
1. Revenue CAGR: Can Peraso maintain its 45% sequential growth in Q3 and beyond?
2. Gross Margin Trends: Will economies of scale or product mix improvements reverse the margin decline?
3. Strategic Partnerships: How quickly can Peraso replicate its Tachyon success in other markets?

Conclusion: A Calculated Bet on mmWave's Future

Peraso's strategic pivot to mmWave is a testament to its innovation and market foresight. While the loss of legacy revenue creates near-term headwinds, the company's traction in defense and FWA—coupled with its expanding product applications—positions it to capture long-term value. Investors with a high-risk tolerance may find Peraso compelling, particularly if the company can stabilize margins and execute on its growth pipeline. For now, the stock remains a speculative play, best suited for those who believe in the transformative potential of mmWave technology.