GSI Technology Shares Tumble 18% on Net Loss, Supply Chain Woes

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By Ronald Tech

Shares of GSI Technology, Inc. GSIT have declined 18.4% since the company reported earnings for the quarter ended June 30, 2025, underperforming the S&P 500 index, which slipped just 1% over the same period. Over the past month, the stock has declined 13.4% against the 1.5% growth in the broader market, signaling a significant divergence in investor sentiment toward the microchip maker.

GSI Technology incurred a net loss of 8 cents per share for the first quarter of fiscal 2026 against a net income of 4 cents per share in the same quarter last year.  

Net revenues of $6.3 million marked a 35% increase from $4.7 million in the year-ago period and a 7% sequential rise from $5.9 million in the prior quarter. The growth was largely driven by a surge in SRAM chip sales amid rising demand from AI processor markets. Gross margin also expanded notably to 58.1%, up from 46.3% a year earlier and 56.1% in the fourth quarter of fiscal 2025, attributed to a favorable product mix and better absorption of fixed costs.

Despite top-line gains, the company reported a net loss of $2.2 million versus net income of $1.1 million in the same quarter last year. However, the prior-year period included a one-time $5.7 million gain from a sale-leaseback transaction. Excluding that, the company showed a year-over-year improvement in operating performance, with its operating loss narrowing from $4.7 million to $2.2 million.

GSI Technology, Inc. Price, Consensus and EPS Surprise

GSI Technology, Inc. Price, Consensus and EPS Surprise

GSI Technology, Inc. price-consensus-eps-surprise-chart | GSI Technology, Inc. Quote

Business Metrics and Segment Breakdown

GSI’s SRAM business had another strong quarter, recording its third consecutive period of rising sales, especially from enterprise and generative AI customers. SigmaQuad product shipments accounted for 62.5% of first-quarter shipments, significantly up from 36.3% in the prior-year period.

However, the company experienced shifting dynamics among its key customers. Sales to KYEC plunged to $0.3 million (4.3% of net revenues), down from $1 million (21.9%) a year ago and $1.7 million (29.5%) last quarter. Sales to Nokia also declined year-over-year to $0.5 million (8.5%) from $1 million (21.4%). In contrast, Cadence Design Systems emerged as a major contributor with $1.5 million in sales, representing 23.9% of net revenues, up from zero in the same quarter last year.

Defense and military shipments, often a stable revenue stream for GSI, fell to 19.1% of total shipments from 31.9% in the prior-year period. This indicates a shift in customer mix and end-market exposure, even as the company continues proof-of-concept engagements with offshore defense contractors.

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Management Commentary

CEO Lee-Lean Shu described the quarter as a “strong start” to fiscal 2026, highlighting progress in product development and customer engagement. The company successfully completed evaluation of its second spin of the Gemini-II chip, declaring it fully functional and production-ready. A Leda-2 board — optimized for low-power Edge AI — was shipped to a defense contractor as part of a proof-of-concept project for satellite and drone applications.

CFO Douglas Schirle emphasized the firm’s strengthened financial position, with cash and equivalents growing to $22.7 million from $13.4 million at the end of March, aided by $11 million raised via its at-the-market (ATM) program.

Factors Influencing Financial Results

The primary contributors to revenue growth were higher SRAM sales and a favorable product mix. However, geopolitical factors and tariffs impacted the company’s supply chain. Management pointed to increased lead times due to assembly shifts from China to Taiwan, which affected shipment timing, particularly to customers like KYEC. Inventory stabilization and adjusted ordering behavior are expected to ease these pressures in future quarters.

Meanwhile, operating expenses declined to $5.8 million from $6.8 million a year ago (excluding the one-time gain), driven by a sharp drop in R&D spending — from $4.2 million to $3.1 million — reflecting a more focused product development strategy.

Guidance

For the second quarter of fiscal 2026, GSI Technology expects net revenues to range between $5.9 million and $6.7 million, with a gross margin between 56% and 58%. 

Other Developments

The company reiterated its strategic evaluation process, initially disclosed in May 2024, which includes exploring options to secure capital and expand its application teams. GSI has retained Needham & Company to assist in assessing potential strategic alternatives. Management also signaled the possibility of further ATM offerings, depending on market conditions and operational needs.

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