Shares of GSI Technology, Inc. (GSIT Quick QuoteGSIT - Free Report) have declined 0.4% since the company reported its earnings for the quarter ended Dec. 31, 2024. This compares to the S&P 500 index’s 0.2% growth over the same time frame. Over the past month, the stock has declined 19.6% compared with the S&P 500’s 1.3% growth.

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GSI Technology incurred a net loss of 16 cents per share in the third quarter of fiscal 2025, narrower than the prior-year quarter’s loss of 26 cents per share.

The company reported net revenues of $5.4 million, reflecting a 2% increase from the prior-year period’s $5.3 million. Gross margin came in at 54%, down from 55.9% in the prior-year quarter.

Operating expenses declined to $7 million from $9.7 million a year ago. Research and development (R&D) spending dropped to $4 million from $7 million in the prior-year period. Selling, general, and administrative (SG&A) expenses rose to $3 million from $2.7 million a year ago.

The company’s operating loss narrowed to $4.1 million from $6.7 million in the prior-year quarter. Net loss narrowed to $4 million from a net loss of $6.6 million.

Other Key Business Metrics of GSIT

Military and defense sales accounted for 30% of total shipments, compared to 28.2% in the prior-year period. Sales to Nokia declined to $0.2 million, representing 4.4% of total revenues, from $0.8 million (15.2%) a year ago. SigmaQuad sales accounted for 39.1% of total shipments, down from 46.9% in the year-ago period. 

As of Dec. 31, 2024, GSI Technology had cash and cash equivalents of $15.1 million, up from $14.4 million at the end of fiscal 2024. Working capital stood at $17.9 million, compared to $19.1 million as of March 31, 2024. Stockholders’ equity decreased to $29.9 million from $36 million at fiscal year-end.

GSIT’s Management Commentary

Chairman and CEO Lee-Lean Shu highlighted the company’s progress in revenue growth and cost reduction initiatives. He noted that a key customer in the AI semiconductor industry is ramping up orders, potentially making it GSIT’s largest revenue contributor in fiscal 2025.

GSI’s APU (Associative Processing Unit) initiative continues to advance, with the Gemini-II chip on track for a February tape-out and availability in May. This aligns with the company’s milestone commitment under the Space Development Agency's Small Business Innovation Research (SBIR) program. Management also introduced a new chip, Plato, which will leverage Gemini-II’s architecture to target edge AI and large language model applications.

Factors Influencing GSIT’s Performance

The sequential improvement in gross margin was attributed to higher revenues, a favorable product mix and the absence of severance costs incurred in the prior quarter. Management acknowledged ongoing cost-control efforts that have contributed to a reduction in net losses.

The company’s declining sales to Nokia and a shift in defense segment contributions could be key factors affecting revenue composition in future quarters. However, strengthening SRAM demand and a pipeline of government contracts may provide stability.

Guidance

For the fourth quarter of fiscal 2025, GSI Technology expects net revenues to range between $5.4 million and $6.2 million, with gross margin projected between 55% and 57%.

Other Developments

GSI Technology continues its strategic review process with Needham & Company, evaluating alternatives to enhance shareholder value.

The company secured a $0.3 million Phase 1 SBIR contract with the U.S. Army to explore AI-driven edge computing applications. Additionally, existing SBIR projects with the Space Development Agency and Air Force Research Labs remain on track, with key deliverables expected in the coming quarters.