Astera Labs (NASDAQ:ALAB) executives said they remain optimistic about the long-term trajectory of artificial intelligence infrastructure demand, arguing that concerns about a near-term slowdown may be overstated even as the industry debates how growth extends beyond 2026. Speaking at a Morgan Stanley event, CEO Jitendra Mohan and CFO Mike Tate described expanding opportunities across the company’s signal conditioning, connectivity, switching, and emerging optical product roadmaps, while also addressing margin dynamics and customer concentration.
Management view of AI demand
Mohan said he believes AI remains in the “very early innings” and pointed to continued capex commitments by large hyperscalers as supportive of sustained buildouts. While he acknowledged demand may not be linear over time, he framed Astera Labs’ goal as outperforming broader market conditions in both upcycles and downcycles.
Aries retimers: signal conditioning demand and Gen6 progress
He added that Aries has expanded beyond “scale-out” deployments into “scale-up” applications with PCIe retimers used for backplanes, front ports, and active electrical cables. On competitive positioning, Mohan said Astera’s advantage has been a “software-first approach” with its COSMOS software platform, which he described as enabling optimization, customization, and diagnostics that customers can incorporate into their operating stacks.
Regarding PCIe Gen6, Mohan said Astera introduced its Gen6 retimer in March 2024 and is “probably the only company” shipping PCIe Gen6 retimer solutions in volume. He also argued that customers increasingly prefer vendors with broader PCI Express portfolios, citing Astera’s offerings across retimers, electrical cables, gearboxes, and switches.
Taurus active electrical cables: ramp from 200G to 400G and 800G
Astera’s Taurus active electrical cable (AEC) portfolio was described as the company’s fastest grower in the fourth quarter. Tate said Astera began shipping Taurus in the second half of 2024 for 200G switches and has recently begun ramping 400G switch deployments, which management expects to contribute to growth in 2026.
Looking further out, Mohan said Astera is bringing 800G switch solutions to market and characterized that move as a way to diversify beyond its largest customer, which he said could provide incremental growth into 2027.
Leo CXL: slower than expected, but Azure private beta cited
Mohan said the company’s Leo compute express link (CXL) product family has not met earlier growth expectations, attributing the slower ramp to factors including the availability of CXL-capable CPUs and the industry’s investment focus on AI.
However, he said momentum is improving with a lead customer qualifying Leo for data center applications, and noted that “a CXL-based server instance is now available in private beta on Azure cloud.” He said general purpose compute is expected to be the first deployment of CXL, with adoption beginning later this year and ramping into 2027.
Mohan also discussed potential CXL use cases in AI, saying Astera has some design-ins for KV-cache-type applications, though he cautioned they are not meaningful enough to comment on as a 2026 revenue driver.
Scorpio switching: anchor position in AI system design
Management emphasized switching as a major growth driver, describing the switch as an “anchor socket” in AI system design. Mohan said hyperscalers typically start with the XPU and then choose connectivity approaches for scale-out and scale-up.
- Scorpio P-series (PCIe scale-out): Mohan estimated a long-term total addressable market (TAM) of about $4 billion and called Scorpio P the fastest growing product line in the company’s history. He said the product began generating revenue in Q2 of the prior year and exceeded 10% of revenue within three quarters. Tate later said it reached 15% of revenue in three quarters.
- Scorpio X-series (scale-up): Mohan estimated a $10 billion TAM when combining PCI Express and UALink opportunities, and said Astera already has a design win. He said Scorpio X begins ramping in 2026, building through the back half of the year, and cited “over 10 engagements” that have continued to grow.
On customer momentum, Mohan said the company has announced two additional U.S.-based hyperscalers designing in Scorpio P, with qualification underway and revenue ramps expected next year. For Scorpio X, he said Astera expects multiple customers designed in by year-end and described some designs that enter production in 2027 and ramp through 2028.
Discussing protocol ecosystems, Mohan grouped the market into three camps: proprietary protocols (such as NVLink), memory-centric open standards (PCI Express and UALink), and Ethernet-based approaches. He said customers tend to remain in their chosen “swim lanes” because software stacks are tuned to specific protocols. He described PCI Express and UALink as Astera’s “bread and butter,” and said the company participates in Ethernet-centric deployments through scale-out products including Scorpio P and Taurus.
Mohan said UALink is purpose-built for scale-up GPU-to-GPU traffic and characterized it as an open standard, contrasting it with proprietary approaches and with Ethernet-based solutions that may require additional layers on top of base Ethernet. He estimated the overall scale-up TAM at $20 billion in 2030, split roughly evenly between UALink and Ethernet, implying a $10 billion UALink opportunity.
On NVLink Fusion, Mohan said the technology enables external XPUs and ASICs to interoperate with NVIDIA’s NVLink ecosystem through a translation chip that sits 1:1 with each XPU. He said Astera has recently announced participation in NVLink Fusion with a lead hyperscaler and added that Astera’s content in a “hybrid rack” could be comparable to that of a native architecture.
Optical roadmap: start with scale-up optics, focus on CPO/NPO
While Astera’s current deployments are largely copper-based, Mohan said the company views copper versus optical as a “media choice” layered on top of core functions such as switching and control. He said customers want to use copper as long as possible due to reliability, cost, and power, but optical becomes necessary as clusters scale and rack-to-rack distances increase.
Mohan said Astera intends to participate in optical by first delivering an optically enabled Scorpio switch, integrating an optical engine with the switch. He said the company also plans to provide an optical engine that can attach to the XPU. He further noted that technology acquired through aiXscale Photonics—described as a glass connector used to gather photons and launch them into fiber—has generated customer interest even as a standalone component.
In response to an audience question, Mohan said Astera is targeting scale-up optics first, which he said will rely on near-package optics (NPO) or co-packaged optics (CPO), rather than pluggable optics, which he characterized as primarily a scale-out domain with established incumbents.
He also described the optical engine as comprising three parts: an electrical IC, silicon photonics, and a glass connector. Mohan said the company acquired aiXscale because it believes the connector and alignment step is a bottleneck for deploying optics at scale due to reliability challenges, while the other elements are wafer-level technologies. He said Astera’s silicon photonics approach will remain flexible to accommodate customer preferences rather than forcing a single technology choice.
On timing, Mohan said there is not a single “wall” where copper abruptly ends and optical begins. He expects copper to remain within-rack at 200G, with optical first used for rack-to-rack links as cluster domains expand. He said broader CPO deployment decisions are not finalized because the industry has not yet demonstrated CPO at scale in volumes where failure rates and cost are acceptable.
Financial discussion: product mix, warrants, and R&D investment posture
Tate said Astera is seeing growth across product lines, highlighting Aries, Taurus, and Scorpio. On Scorpio, he said the company shipped initial Scorpio X volumes in Q4, expects higher volumes in Q1 and Q2, and anticipates a “much more material ramp” in Q3 and Q4. Tate said Scorpio X should ultimately surpass Scorpio P and make Scorpio the company’s largest product line.
On gross margin, Tate pointed to mix shifts as Astera expands beyond discrete semiconductors into module sales, including AEC hardware that combines retimer devices with PCB assemblies and other components. He said these modules carry lower margins than discrete devices. He also said Scorpio margins will vary by use case and lane utilization, with some applications potentially below corporate average.
Tate also discussed the impact of an Amazon warrant, stating that the value of warrants at vest is recorded as a dollar-for-dollar reduction to revenue, which the company estimates will be about a 200 basis point gross margin headwind beginning in Q2.
On operating expenses, Tate said the company is prioritizing capturing the market opportunity rather than optimizing for near-term operating margin. He said Astera had “underinvested” last year and highlighted two recent acquisitions—one described as a technology acquisition and the other as more of an acqui-hire. While he said the company expects operating leverage from the current revenue level, he reiterated a model target of 40% operating margins over time, depending on revenue growth and R&D investment levels.
Customer concentration and diversification
Addressing customer concentration, Tate called it a natural outcome of selling into hyperscalers. He said Astera’s lead customer has been the fastest adopter of its technologies, including being first to adopt Taurus and Scorpio. However, he said the company sees diversification paths for both product lines, citing the move to 800G Taurus beyond the lead customer and the addition of two new U.S. hyperscalers for Scorpio, along with “over 10” scale-up customers.
Mohan also emphasized that Astera’s long-standing hyperscaler relationships provide early insight into customer roadmaps—often two to three years ahead of deployment—and help the company prioritize which products and features to build.
About Astera Labs (NASDAQ:ALAB)
Astera Labs is a fabless semiconductor company that develops connectivity solutions for data center and cloud infrastructure. The firm focuses on addressing signal integrity and link management challenges that arise as server architectures incorporate higher-bandwidth processors and accelerators. Its technology is aimed at improving reliability and performance for high-speed interconnects used in servers, storage systems and compute accelerators.
The company’s product portfolio centers on silicon devices and accompanying firmware and software that enhance and manage high-speed links.
