A maker of chips and cables that keep data moving smoothly inside cloud and AI data centers, Astera Labs builds retimers, memory controllers, and fabric switches that connect servers, GPUs, and storage. Founded in 2017 by three former Texas Instruments executives, the company designs its hardware in a fabless model while outsourcing manufacturing. Its name comes from the Greek word for "star," chosen to signal a guiding light for data connectivity.
Astera Labs revenue more than doubled to $392.4M in Q2 FY2026, but gross margin contracted 2.6 points to 73.3% as hardware modules grew as a share of sales.
more than doubled, but fell to its lowest level in over two years. Revenue rose 104% to $392.4 million, driven by higher unit shipments of Aries, Scorpio, and Taurus products, while gross margin contracted 2.6 points to 73.3% as lower-margin hardware modules made up a larger share of the mix. The company is growing fast, but the cost of that growth is showing up in the margin line.
Key takeaways
rose 104% to $392.4 million, driven by higher unit shipments of Aries, Scorpio, and Taurus products and a favorable mix toward higher-ASP hardware modules and Scorpio products.
contracted 2.6 points to 73.3%, which management attributed to a shift toward lower-margin hardware modules and the impact of .
more than doubled to $89.2 million, and nearly tripled to $153.1 million, boosted by a $49.7 million increase in income tax benefit from excess equity compensation tax benefits.
Section summaries
Management's Discussion and Analysis
Revenue surged 104% YoY to $392.4M in Q2 FY2026, driven by higher unit shipments of Aries, Scorpio, and Taurus products.
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Total grew 104% to $392.4M for Q2 and 99% YoY to $700.8M for H1, fueled by increased unit shipments and a favorable product mix toward higher-ASP hardware modules and Scorpio products.
R&D expense rose 104% to $135.9 million, driven by a 118% headcount increase, higher , and greater spending on hardware design, software licensing, and cloud services.
was $87.7 million in the quarter, down 35% from $135.4 million, and was $67.2 million, down 50%.
The company held $1.3 billion in cash, cash equivalents, and marketable securities at quarter-end, and management stated there have been no material changes to the risk factors disclosed in the FY2025 10-K.
What changed
expansion reversed: after expanding 1.4 points to 76.3% in Q1 FY2026 — which management attributed to a favorable product mix — gross margin fell 3.0 points sequentially to 73.3% in Q2, its lowest level since Q4 FY2024, as the mix shifted back toward lower-margin hardware modules and became a factor.
Sequential growth accelerated: Q2's 27.3% quarter-over-quarter increase was nearly double Q1's 14.0% rate, answering the prior quarter's question of whether growth was decelerating as the business scaled past $1.2 billion annualized.
Customer concentration and internal-control weaknesses remain unchanged from the FY2025 10-K, with one end customer over 70% of and no long-term purchase commitments, and the material weaknesses — including the one from the aiXscale acquisition — still unremediated as of this filing.
What to watch
Whether stabilizes near 73% or continues to decline as hardware modules and Scorpio products grow as a share of , and whether the impact on margin is recurring or one-time.
The pace of sequential growth into Q3 FY2026, to see whether Q2's 27.3% rate holds or decelerates as the business scales past $1.5 billion annualized.
Any update on customer concentration, given that one end customer accounted for over 70% of FY2025 with no long-term purchase commitments.
Whether the material weaknesses in internal controls — including the one from the aiXscale acquisition — are remediated before the FY2026 10-K is filed.
contracted 250 to 73.3% in Q2, primarily due to a shift toward lower-margin hardware modules and the impact of .
more than doubled to $89.2M in Q2, while nearly tripled to $153.1M, boosted by a $49.7M increase in income tax benefit from excess equity compensation tax benefits.
R&D expense rose 104% to $135.9M, driven by a 118% headcount increase, higher , and greater spending on hardware design, software licensing, and cloud services.
reached $162.3M in H1, and liquidity remained strong with $1.3B in cash, equivalents, and marketable securities, which management believes is sufficient for at least the next 12 months.
Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk and foreign currency exchange risk are described in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025. As of June 30, 2026, there have been no material changes…
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Interest rate risk and foreign currency exchange risk are described in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2025. As of June 30, 2026, there have been no material changes to the interest rate and foreign currency exchange risk described as of December 31, 2025.
We are not currently a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. The results of any current or future litigation cannot be predicted with certainty, and regard…
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We are not currently a party to any material pending legal proceedings. From time to time, we may be subject to legal proceedings and claims arising in the ordinary course of business. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
For a discussion of potential risks and uncertainties, see the information in the section titled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2025. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from…
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For a discussion of potential risks and uncertainties, see the information in the section titled “Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2025. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.