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Should You Buy, Sell, or Hold ALAB Stock Before Q4 Earnings Release?

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Key Takeaways

  • ALAB is set to report Q4 2025 results Feb. 10, with revenue guided to $245-$253M and EPS around 51 cents.
  • ALAB is seeing strong AI demand across Aries, Scorpio and Taurus products, led by PCIe Gen 6 adoption.
  • ALAB faces rising R&D costs, lower gross margin guidance near 75%, and stiff competition in connectivity.

Astera Labs (ALAB - Free Report) is set to report its fourth-quarter 2025 results on Feb. 10.

Astera Labs expects fourth-quarter 2025 revenues between $245 million and $253 million, representing a 6% to 10% increase from the third quarter. Earnings are expected to be approximately 51 cents per share for the fourth quarter.

The Zacks Consensus Estimate for fourth-quarter 2025 revenues is currently pegged at $249.79 million, indicating an increase of 77.03% from the figure reported in the year-ago quarter. 

The consensus mark for earnings is currently pegged at 51 cents per share, unchanged over the past 30 days, and suggests 37.84% growth over the figure reported in the year-ago quarter.

Astera Labs, Inc. Price and EPS Surprise

Astera Labs, Inc. Price and EPS Surprise

Astera Labs, Inc. price-eps-surprise | Astera Labs, Inc. Quote

ALAB’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average earnings surprise being 29.79%. 

Let’s see how things are shaping up prior to this announcement.

Factors to Note for ALAB’s Q4 Earnings

Astera Labs’ fourth-quarter 2025 revenues are likely to have benefited from increasing demand for artificial intelligence (AI) servers and data center infrastructure. Strong momentum across its three key product families, Aries, Taurus, and Leo, is likely to have contributed well. 

The Aries product line is expected to contribute significantly to the fourth quarter’s growth.  Aries solutions, particularly PCIe Gen 6 smart retimers, have been widely adopted across AI racks built around custom AI accelerators and merchant GPUs.  The company expects Aries growth to be driven by its support for scale-up and scale-out connectivity in various end-customer platforms.  With PCIe Gen 6 solutions already contributing over 20% of third-quarter revenues, this trend is likely to continue into the to-be-reported quarter, further solidifying Astera Labs’ leadership in the PCIe Gen 6 ecosystem.

The Scorpio product line, particularly the P-Series fabric switches, is another key growth driver for the to-be-reported quarter.  Astera Labs expects Scorpio P-Series demand for PCIe Gen 6 scale-out applications to remain robust, with new design wins and deployments at multiple hyperscalers.  The company has also begun shipping initial volumes of its Scorpio X-Series solutions, which are designed for scale-up connectivity topologies.  While the Scorpio X ramp is expected to accelerate in 2026, its initial shipments in the fourth quarter will contribute to the company’s revenue growth and position it for future success in the scale-up market. Scorpio revenues are expected to account for more than 10% of total revenues in 2025, while becoming the largest product line for Astera Labs over the next several years.

The Taurus smart cable modules are expected to be a significant growth driver in the fourth quarter of 2025.  The company anticipates strong demand for its 400-Gig designs, which are critical for AI scale-out connectivity.  These modules are designed to address signal integrity challenges in high-speed Ethernet applications, particularly as system architects transition to faster speeds and larger AI cluster sizes.

However, stiff competition from the likes of Credo Technology (CRDO - Free Report) , Marvell Technology (MRVL - Free Report) , and Broadcom (AVGO - Free Report) are major headwind. The company continues to invest in product development to stay ahead of the competition. In third-quarter 2025, Research and development expenses surged 55.8% year over year to $78.9 million. Non-GAAP operating expenses are expected to rise to approximately $85 million to $90 million in the to-be-reported quarter, driven by higher R&D expenses. In the fourth quarter of 2025, ALAB’s non-GAAP gross margins are expected to decline. The company has guided gross margins to be approximately 75%, down from 76.4% in Q3.  This decrease is attributed to a higher mix of Taurus hardware modules, which are margin-dilutive compared to silicon products.

ALAB Shares Underperform Sector

Astera Labs shares have declined 19.7% in the trailing six-month period, underperforming the broader Zacks Computer and Technology sector’s return of 10.6%. However, it has outperformed the Zacks Internet Software industry’s decline of 20.4%.

ALAB Stock's Performance

Zacks Investment Research
Image Source: Zacks Investment Research

Astera Labs' stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Sales, ALAB is trading at 20.34X, higher than the industry’s 4.04X.

ALAB's Valuation

Zacks Investment Research
Image Source: Zacks Investment Research

ALAB Faces Stiff Competition

Despite an expanding portfolio and strong partner base, ALAB is facing stiff competition from other industry players like Marvell Technology, Credo Technology, and Broadcom in the connectivity space.

Marvell Technology is benefiting from its expanding footprint in the connectivity space through acquisitions.  Marvell Technology recently completed its acquisition of Celestial AI, strengthening its scale-up optical connectivity capabilities for large-scale AI deployments.

Broadcom is benefiting from strong demand for its networking products and custom AI accelerators. Broadcom’s AI revenue increased 65% year over year in fiscal 2025, reaching $20 billion. This growth is driven by AI semiconductors and infrastructure software, with AI revenue expected to double year over year to $8.2 billion in the first quarter of fiscal 2026.

Credo Technology is expanding its footprint in the PCIe retimers market with a healthy pipeline of PCIe Gen6 AECs and retimers, with further customer wins expected to support fiscal 2026 growth.

Conclusion

Astera Labs is expected to benefit from a strong portfolio and partner base amid rising costs and stiff competition. A stretched valuation somewhat dims the stock’s appeal ahead of fourth-quarter 2025 results.

ALAB currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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