[Management View]
Alpha and Omega Semiconductor Limited (AOSL) reported fiscal Q1 2026 results, highlighting growth in computing and communications segments, offset by consumer and industrial softness. The company achieved record Power IC revenue, reflecting a strategic shift toward total power solutions and higher-margin applications. A significant cash infusion from the partial divestiture of the China joint venture enabled accelerated investment in targeted R&D and technology.

[Outlook]
Management provided guidance for fiscal Q2 2026 revenue of approximately $160 million, plus or minus $10 million, a decrease from $182.5 million reported in fiscal Q1 2026. They expect computing segment revenue to decline nearly 20% sequentially due to post-holiday season slowdown and ongoing AI and graphics cards digestion. Investments in 800-volt AI power architecture and other strategic areas are expected to drive future growth.

[Financial Performance]
- Revenue: $182.5 million, up 3.4% sequentially and 0.3% year over year.
- Non-GAAP gross margin: 24.1%, down from 24.4% sequentially and 25.5% year over year.
- Non-GAAP EPS: $0.13, compared to $0.02 in the prior quarter and $0.21 a year earlier.
- Product revenue growth: Power IC revenue reached $72.7 million, up 37.3% year over year and 5.9% sequentially.
- JV equity sale proceeds: Received $94 million from the $150 million sale of 20.3% equity in the China joint venture.

[Q&A Highlights]
Question 1: Can you give more color on the sequential decline and how things are trending into 2026?
Answer: The decline is partly due to seasonality and the end of tariff-related activity in the PC area. The underlying growth trends in BOM expansion in PCs and higher charging currents in smartphones remain strong, indicating a temporary correction.

Question 2: Can you speak to the gross margin degradation and how it will trend through next year?
Answer: The gross margin was impacted by higher operation expenses. It is expected to fluctuate with revenue and product mix. The company is confident in product mix improvement after the near-term slowdown and inventory correction.

Question 3: What dynamics are you seeing around ASP erosion for 2026 and 2027?
Answer: ASP erosion is trending toward historical single-digit declines. The company rolls out new products to reset ASP and improve margins through higher BOM content and performance-driven applications.

Question 4: How do you plan to use the proceeds from the JV sale?
Answer: The proceeds will be invested in areas of strength such as smartphones, PCs, AI, and expanding BOM content in AI and 800-volt AI power architecture.

Question 5: What are the better-performing segments for next year?
Answer: Focus areas include PCs, AI applications, and smartphones, with expected growth in BOM content and performance-driven applications.

Question 6: When will you start to ramp utilization again?
Answer: Utilization will be adjusted based on revenue expectations and order patterns. Early production may start for certain bottleneck areas to support customers throughout 2026.

[Sentiment Analysis]
Analysts' tone was inquisitive and focused on understanding the reasons behind the sequential decline, gross margin trends, and future growth areas. Management's tone was confident, emphasizing temporary corrections and strategic investments for long-term growth.

[Quarterly Comparison]
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 |
|-------------------------|-----------|-----------|-----------|
| Revenue | $182.5M | $176.5M | $182.0M |
| Non-GAAP Gross Margin | 24.1% | 24.4% | 25.5% |
| Non-GAAP EPS | $0.13 | $0.02 | $0.21 |
| Power IC Revenue | $72.7M | $68.7M | $53.0M |

[Risks and Concerns]
- Higher operation costs impacting gross margins.
- Sequential decline in computing segment revenue due to post-holiday season slowdown and AI/graphics cards digestion.
- Potential ASP erosion and competitive pressures.

[Final Takeaway]
Alpha and Omega Semiconductor Limited delivered solid fiscal Q1 2026 results, driven by strategic growth in computing and communications segments. The company is investing in high-impact areas such as 800-volt AI power architecture to drive future growth. Despite near-term challenges, management remains confident in their long-term trajectory, supported by a strong balance sheet and targeted R&D investments.