ALAB 10-K & 10-Q changes, risk factors and insider trading

•We have a limited history of generating net losses,income, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not maintain profitability in the future;

•We have rapidly grown as a limitedbusiness operatingin history,dynamic and rapidly evolving markets, and we may have difficulty accurately predicting our future revenue for the purpose of appropriately budgeting and adjusting our expenses;

•Our customers require our products and our third-party manufacturing partners to undergo a lengthy and expensive qualification processprocess, which does not assure volume product sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer;

•Our business would be adversely affected by the departure of existing members of our senior management team.team;

•Cybersecurity risks, including cyber-attacks, cybersecurity incidents, data breaches, and system vulnerabilities could adversely affect our business and disrupt our operations;

We have experienced significant growth in a short period of time. Our revenue increased from $115.8 million for the year ended December 31, 2023 to $396.3 million for the year ended December 31, 2024.2024 to $852.5 million for the year ended December 31, 2025. We may not achieve similar growth rates in future periods. You should not rely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance. If we are unable to maintain adequate revenue growth, our financial results could suffer, and our stock price could decline.

•recruit, hire, onboard / integrate, train, and manage additional qualified personnel for our research and development activities;

•implementcontinue implementing and improveimproving our administrative, financial and operational systems, procedures, and controls.

We have a limited history of generating net losses,income, and if we are unable to achieve adequate revenue growth while our expenses increase, we may not maintain profitability in the future.

We have a limited history of generating net losses.income. We recorded net income of $219.1 million and incurred net losses of $83.4 million and $26.3 million for the years ended December 31, 2025, 2024 and 2023, respectively. As of December 31, 2025, 2024 and 2023, we had anretained earnings of $10.3 million and accumulated deficitdeficits of $208.8 million and $125.4 million, respectively. TheseOur historical losses and our accumulated deficitdeficits arewere a result of the substantial investments we have made to grow our business. We expect our costs will continue to increase over time and our losses may continue if such increases in costs are not more than fully offset by increases in our revenue. We expect to continue to invest significant additional funds in expanding our business and research and development activities as we continue to develop new products. We have experienced and expect to continue to incur additional general and administrative expenses as a result of our growth and increased costs to support our operations as a public company. Historically, our costs have increased over the years due to these factors, and we expect to continue to incur increasing costs to support our anticipated future growth.

We have rapidly grown as a limitedbusiness operatingin history,dynamic and rapidly evolving markets, and we may have difficulty accurately predicting our future revenue for the purpose of appropriately budgeting and adjusting our expenses.

We werehave establisheda inrapidly Octobergrowing 2017. Our limited operating experience,business, a dynamic and rapidly evolving market in which we sell our products, our dependence on a limited number of customers, as well as numerous other factors beyond our control, could impede our ability to forecast quarterly and annual revenue accurately. As a result, we could experience budgeting and cash flow management problems, unexpected fluctuations in our results of operations and other challenges, any of which could make it difficult for us to maintain profitability and could increase the volatility of the market price of our common stock.

Products for our target markets are based on industry standards that are continually evolving, and industry standards are often developed and promoted by larger companies who are industry leaders and provide other components of the systems into which our products are incorporated. In choosing products to develop, we also make certain assumptions about which industry standards we believe will be adopted by industry leaders. For example, CXL connectivity solutions and UALinkTM are in the early stages of market adoption. If our assumptions are incorrect, and larger companies do not support the same industry standards that we do, or if competing standards emerge, it could be difficult for our products to meet the requirements of certain customers. As a result, if we fail to introduce new products or new generations of our existing products that meet prevailing industry standards and the needs of our customers, or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will likely lose market share and our competitive position, potentially on an extended basis, and our operating results will be adversely affected.

A substantial portion of our revenue is driven by a limited number of end customers. In 2024,2025, noone end customer represented more than 40%70% of our revenue; the top three end customers represented an aggregate of approximately 80%86% of our revenue. Our distributors and end customers’ manufacturing partners provide us with information in their purchase orders about which end customer will receive the products purchased. This data allows us to estimate the portion of our revenue that is due to specific end customer demand. We anticipate that we will continue to be dependent on a limited number of end customers for a significant portion of our revenue in the future, and in some cases, the portion of our revenue attributable to certain end customers may increase in the future. However, we may not be able to maintain or increase sales to certain of our top end customers for a variety of reasons, including the following:

In addition, to attract new customers or retain existing end customers, we may offer (in some cases through distributors) certain customers favorable prices for our products. In that event, our revenue and gross margins may decline. The loss of a top end customer, a reduction in sales to any top end customer, or our inability to attract new end customers could impact our revenue and materially and adversely affect our results of operations.

The resources devoted to product development and sales and marketing may not generate material revenue for us, and we have needed in the past, and may need in the future, to write off excess and obsolete inventory if we have produced a product in excess of forecasted demand whichthat does not materialize. If we incur significant expenses and investments in inventory in the future that we are not able to recover, and we are not able to compensate for those expenses, our operating results could be adversely affected.

Additionally, we expect to see increasing government and supranational legislation and regulation related to artificial intelligenceAI use and ethics, which may also significantly increase the burden and cost of research, development, and compliance in this area. For example, the EU’s Artificial Intelligence Act,Act or the (“EU AI Act, — the world’s first comprehensive AI law —Act”), entered into force in JuneAugust 2024 and, with some exceptions, becomebecomes effective 24 months thereafter. ThisAs legislationenacted, the EU AI Act imposes significant obligations on providers and deployers of high risk artificialAI intelligencesystems systems,and general purpose AI models and encourages providers and deployers of artificial intelligence systems to account for EU ethical principles inwhen their developmentdeveloping and useusing AI technology. The scope of theserequirements systems.depends on judicial interpretations and forthcoming legislative amendments, and non-compliance can lead to significant fines. If we develop or use AI systems that are governed by the EU AI Act, it may necessitate ensuring higher standards of data quality, transparency, and human oversight, as well as adhering to specific and potentially burdensome and costly ethical, accountability, and administrative requirements. SignificantIn resourcesaddition, will be required to design, develop, test and maintain our products to help ensure that artificial intelligence is implemented and deployed in accordance with applicable law and regulation and in a socially responsible manner and to minimize any real or perceived unintended harmful impacts. Our customerswe may also become subject to such upcoming AI regulations, which could cause a delaysimilar or impedimentadditional tolegislation or requirements in the commercializationUnited ofStates AIor technologyother jurisdictions, as well as evolving regulatory guidance and couldenforcement leadunder toexisting a decrease in demand for our customers’ AI systems, and may adversely affect our business, financial condition, and results of operations.laws.

Our third-party manufacturing partners and distributors, and the majority of our revenue, are concentrated primarily in Taiwan,Singapore, China, andTaiwan, South Korea, and other countries, areas that are or may be subject to geopolitical uncertainty, trade disputes and restrictions, environmental disasters, and other risks. Any disruption to the operations of these manufacturing partners or distributors could cause significant delays in the production or shipment of our products and impact our financial condition.

In addition, our dependence on our relationship with our third-party manufacturing partners or distributors may be affected by changes in governmental policies, taxation, rising inflation or interest rates, social instability, geopolitical conflicts and tensions, and diplomatic and social developmentsdevelopments, which are outside of our control. The occurrence of such events may have an adverse impact because the majority of our revenue derives from sales into East Asia. For example, since 1949, Taiwan and mainland China have been separately governed. Although significant economic and cultural relations have been established between Taiwan and mainland China in the past few years, past developments in relations between Taiwan and mainland China have on occasion depressed the market prices of the securities of companies doing business in Taiwan, and may depress the price of our common stock. Additionally, trade tensions between the United States and China may lead to restrictions on our ability to use our third-party manufacturing partners or distributors located in China or may impose restrictions such that our use of such manufacturing partners or distributors may no longer be practical or on terms favorable to us. Further, continued or heightened tension between South Korea and North Korea, an outbreak in military hostilities, or other actions or occurrences could cause significant delays in the production or shipment of our products until we are able to shift our manufacturing, assembling, testing, or distribution from the affected contractor to another third-party.

If any of these events, or other macroeconomic trends, should cause a prolonged disruption of operations that impact our third-party manufacturing partners, we may see operational downtimes or operation at reduced capacities, preventing us from completing our operations or production in a timely manner, leading to loss of business volume and reduced productivity or profitabilityprofitability, which could have a material adverse effect on our business, financial conditions, and results of operations. Given the concentration of chip manufacturing in Taiwan and other parts of East Asia, as well as the other risks described herein, we may not be able to obtain alternate service or materials quickly and on favorable terms, if at all. Any unplanned production downtime or other operational problems and delays, if significant, could have a material adverse effect on our business, financial condition, and results of operations.

Our customers require our products and our third-party manufacturing partners to undergo a lengthy and expensive qualification processprocess, which does not assure volume product sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.

The industry in which we compete is characterized by rapid technological change, changes in customer requirements, frequent new product introductions and enhancements, short product cycles and evolving industry standards, and new delivery methods. In addition, the fabrication of semiconductor products has transitioned over time to increasingly smaller line width geometries, and failure to successfully transition to product designs utilizing smaller geometry process nodes could impair our competitive position. In order to remain competitive, we have made, and expect to continue to make, significant investments in research and development.development and often well ahead of the anticipated product revenue. For the years ended December 31, 20242025 and 2023,2024, research and developments expenses were $200.8$304.0 million and $73.4$200.8 million, respectively. If we fail to develop new and enhanced products and technologies, if we focus on technologies that do not become widely adopted, or if new competitive technologies or industry standards that we do not support become widely accepted, demand for our products may be reduced. Increased investments in research and development or unsuccessful research and development efforts could cause our cost structure to fall out of alignment with demand for our products, which would have a negative impact on our financial results.

In addition, we maintain an inventory of our products at various stages of production and in finished goods inventory. We hold these inventories in anticipation of customer orders. If those customer orders do not materialize in a timely manner, we may have excess or obsolete inventoryinventory, which we would have to reserve or write-down, and our gross margins would be adversely affected. In addition, for customers that we issue warrants, we recognize the related grant date fair value of the warrants as a reduction of revenue for each sales transaction in proportion to total expected cumulative sales volume resulting in achievement of the vesting conditions, which reduces the reported gross profit and gross margin in the periods the related revenue is recognized. The timing and magnitude of these charges may vary and could cause fluctuations in our reported gross margins and results of operations.

Our revenue and operating results could fluctuate materially and could be materially and disproportionately impacted by the purchasing decisions of our end customers. Due to the inability to predict demand or other reasons, some of our distributors and end customers’ manufacturing partners may accumulate excess inventories and, as a consequence, defer purchases of our products. For example, in the first quarter of 2023 we had a $9.7 million charge to write down inventory in excess of our sales forecast for a legacy customer system. Anticipating demand is difficult because our end customers face unpredictable demand for their own products and/or deployment of their own systems. If we overestimate end customer demand, or end customer demand is otherwise impacted by other factors impacting our assumptions, we might produce significant excess inventory,inventory and consequently inventory write-off, which would reduce our gross margin and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we may miss revenue opportunities, potentially lose market share and damage our customer relationships. In addition, as an increasing number of our products are being incorporated into end customer systems, we anticipate greater fluctuations in demand for our products, which makes it more difficult to forecast end customer demand.

We generally do not have long-term contracts with our third-party manufacturing partners that require them to supply manufacturing capacity, materials, or services, and substantially all of our purchases are on a purchase order basis. We place orders with our third-party manufacturing partners for manufacturing, assembling, and testing our products and purchasing components that are integrated into our products according to our estimates of customer demand many months prior to the anticipated delivery date to our customer. This process requires us to make multiple demand forecast assumptions with respect to our customers’ demands in advance of actual purchase orders, each of which may introduce error into our estimates. In addition, while many of our customers are subject to purchase orders or other agreements that do not allow for cancellation without penalty within a certain number of days before the estimated ship date, there can be no assurance that these customers will honor these contract terms, and any cancellation of these orders may adversely affect our business operations and demand forecastforecast, which is the basis for us to have products made.

Our products may contain defects when they are first introduced or as new versions or enhancements are released, or their release may be delayed due to unforeseen difficulties during product development. If any of our products or third-party components used in our products, contain defects, bugs, vulnerabilities, or have reliability, quality, or compatibility problems, we may not be able to successfully design workarounds or resolve the issues in a timely manner. Furthermore, if any of these problems are not discovered until after we have commenced commercial production or deployment of a new product, we may be required to incur additional development costs, as well as costs to repair or replace our products, and expense previously capitalized production maskequipment costs, all of which could materially adversely affect our reputation, business, results of operations, and/or financial condition.

Regulatory activity, such as tariffs, export controls, economic sanctions, and restrictions on investment and data transfers as well as vigorous enforcement of U.S. export controls and economic sanctions laws have in the past and may continue to materially limit our ability to make sales to our customers in China, which has in the past and may continue to harm our results of operations, reputation, and financial condition. Due to the U.S. government restricting sales to certain customers in China, sales to some of our customers may require licenses in order for us to export our products; however, there can be no assurances that requests for licenses will be approved by the U.S. government. Further, augmentation of restricted or prohibited persons lists maintained by the U.S. government could reduce our ability to sell to certain customers. Fluid tariff policies of both the U.S. and Chinese governments may reduce demand for our products and could increase input costs. Moreover, concerns that U.S. companies may not be reliable suppliers as a result of these and other actions has caused, and may in the future cause, some of our customers in China to amass large inventories of our products well in advance of need or caused some of our customers to replace our products in favor of products from other suppliers. Additionally, the Chinese government adopted a law with respect to unreliable suppliers. Any designation as an unreliable supplier may have an adverse impact on our business and operations. Recent U.S. government restrictions on investments into China by U.S. persons and regarding access by Chinese persons to certain personal data relating to U.S. persons could hinder our Chinese operations. In addition, there may be indirect impacts to our business that we cannot easily quantify such as the fact that some of our other customers’ systems may also be impacted by export restrictions.

Further, any upturn in the semiconductor industry could result in increased competition for access to third- partythird-party manufacturing partners. We are dependent on the availability of this capacity to manufacture and assemble our products, and our third-party manufacturing partners have not provided assurances that adequate capacity will be available to us in the future.

We havepreviously identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting. IfAlthough our remediation of thethese material weaknesses ishave notbeen effective,remediated, orif we fail to develop and maintain effective internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired, which could harm our business and negatively impact the value of our common stock.

We are not currently requiredsubject to comply with the SEC rules that implement Section 404(a) and (b) of the Sarbanes-Sarbanes-Oxley OxleyAct, Actwhich andrequires are therefore not requiredus to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. AsIn a public company, we are required to provide an annual management report on the effectiveness ofaddition, our internal control over financial reporting commencing with our second annual report on Form 10-K. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reportingreporting. untilMaintaining weeffective aredisclosure nocontrols longerand consideredprocedures anand emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which oureffective internal controlcontrols over financial reporting isare documented,necessary designedfor us to produce reliable financial statements and disclosure reports. While we have remediated previously identified material weaknesses, we cannot assure you that additional material weaknesses will not arise in the future, particularly as we continue to scale our operations, integrate new systems and processes such as a new enterprise resource planning system, and as certain of our foreign subsidiaries, which historically have not been subject to full SOX‑based testing due to their size and scope, grow or operating.otherwise become material and require expanded internal control design, documentation, and testing. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm our business and could cause a decline in the trading price of our common stock.

Cybersecurity risks, including cyber-attacks, cybersecurity incidents, data breaches, and system vulnerabilities could adversely affect our business and disrupt our operations.

We depend heavily on our technology infrastructure and cloud partners andas well as maintain and rely upon certain critical information systems for the effective operation of our business. We routinely collect, receive, process, and store personal information (which may also be referred to as “personal data” or “personally identifiable data”) and sensitive data via our information systems, including intellectual property and other proprietary information about our business and that of our customers, as well as personal data regarding our employees, suppliers, business partners, and others. We and the third parties upon which we rely face a variety of evolving threats, which could cause cybersecurity incidents or data breaches, such as cyber-attacks. TheseOur information technology systems are subject to damage or interruption from a number of potential sources, including, but not limited to, natural disasters, destructive or inadequate code, computer malware, ransomware attacks, bugs, viruses, system vulnerabilities, social engineering,engineering (including phishing attacks,attacks), denial-of-service attacks, other malicious internet-based activity, online and offline fraud, wrongful conduct by insider employees or vendors, as well as cybersecurity incidents, data breaches, power failures, internal negligence, malfeasance, and natural disasters or other events.disasters.

Cyber-attacks are increasing in number and sophistication, are well-financed, in some cases supported by state actors, and are designed to not only attack, but also to evade detection.detection, and are being facilitated or enhanced by evolving technologies, including AI. Since the techniques used to obtain unauthorized access to systems and data, or to otherwise sabotage them, change frequently and are often not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Attempts to disrupt or gain unauthorized access to our and our third-party vendors’ information systems from malicious third parties or insider threats may incorporate widely varying and frequently changing tactics, which may be enhanced or facilitated by evolving technologies such as AI. Geopolitical instability may also increase the likelihood that we will experience direct or collateral consequences from cyber conflicts between nation-states or other politically motivated actors targeting critical technology infrastructure. Accidental or willful securitycybersecurity breaches,incidents, data breaches, or other unauthorized access to our information systems or the systems of our third-party service providers, or the existence of computer viruses, malware (such as ransomware), or vulnerabilities in our or their data or software could expose us to a risk of information loss, business disruption, or the misappropriation of proprietary and confidential information, including information relating to our products or customers or the personal information of our employees or third parties. Despite our internal controls and investment in security measures, we have in the past, and may again in the future, be subject to cyber-attacks or unauthorized network intrusions. These events, should they occur, could disrupt our business and result in, among other things, unfavorable publicity, damage to our reputation, loss of our trade secrets and other competitive information, litigation by affected parties and possible financial obligations for liabilities and damages related to the theft or misuse of such information, significant remediation costs, disruption of key business operations, and significant diversion of our resources, legal notifications and disclosures, as well as fines and other sanctions resulting from any related breaches of data privacy laws and regulations (such as the CCPA), any of which could have a material adverse effect on our business, profitability, and financial condition. In addition, despite our internal controls and processes, malicious code, and cybersecurity vulnerabilities in our products and services may expose our customers to cyberattacks and other security risks, which may result in claims, regulatory action, or reputational damage. While we may be entitled to damages if an adverse event arises from our third-party service providers’ failure to perform under their agreements with us, any award may be insufficient to cover the actual costs incurred by us and, as a result of a service provider’s failure to perform, we may be unable to collect any damages.

Further, we continue to devote resources to protect our systems and data from unauthorized access or misuse, and we will likely be required to expend greater resources in the future. However, we cannot guarantee that our risk management processes will be effective at mitigating the risk to our information technology systems.

U.S. and foreign regulators have also increased their focus on cybersecurity vulnerabilities and risks. Compliance with laws and regulations concerning privacy, cybersecurity, data governance, and data protection could result in significant expense, and any failure to comply could result in proceedings against us by regulatory authorities or other third parties. Such proceedings could result in (among other things) unfavorable publicity, damage to our reputation, possible financial obligations for liabilities, and government orders to implement additional protective measures or adopt new protocols, which could result in additional material expense. Moreover, we may be required to make legal notifications to affected individuals, disclosures to investors, and subject to fines and other sanctions resulting from any related breaches of applicable data privacy laws and regulations. Further, customers and third-party manufacturing partners increasingly demand rigorous contractual, certification, and audit provisions regarding privacy, cybersecurity, data governance, data protection, confidentiality, and intellectual property, which may also increase our overall compliance burden. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our privacy and data security obligations. Further, any cyber liability insurance that we maintain may not provide adequate coverage against potential liabilities related to any experienced cybersecurity incident or breach.

A discussion regarding our financial condition and results of operations for the year ended December 31, 2025 compared to the year ended December 31, 2024 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 is presented below. A discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 can be found in thepart sectionII, titledItem 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our finalAnnual prospectus,Report datedon MarchForm 19, 2024 and10-K filed with the SEC on MarchFebruary 21,14, 2024 pursuant to Rule 424(b) of the Securities Act.2025. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Our patented software-defined platform approach delivers critical connectivity performance, enables flexibility and customization, and supports observability and predictive analytics. This approach aimsis designed to efficiently address the data, network, and memory bottlenecks, scalability, and other unique infrastructure requirements of our hyperscaler and system OEM customers.

Today, our connectivity solutions are at the heart of major AI platforms deployed worldwide featuring both commercially available Graphic Processing Units (“GPUs”) and proprietary AI accelerators. We offer our customers four product families across multiple form factors including ICs, boards, and modules, shipping millions of devices across all of the majorleading hyperscalers. Our products, which include Aries PCIe®/CXL® Smart DSP Retimers, Aries PCIe®/CXL® Smart Cable Modules™, Taurus Ethernet Smart Cable Modules™, Leo CXL Memory Connectivity Controllers, and Scorpio Smart Fabric Switches, are built upon industry standard connectivity protocols such as PeripheralsPeripheral Component Interconnect Express (“PCIe”), Ethernet, and ComputerCompute Express Link (“CXL”), to address the growing demand for purpose-built connectivity solutions that solve critical data, network, and memory bottlenecks inherent in cloud and AI infrastructure.

Since our inception, we have created and commercialized first-to-market PCIe, Ethernet, and CXL products. We have become a trusted partner and a proven supplier to our hyperscaler and system OEM customers. We have experienced strong growth since the commercial launch of Aries in 2020. Our revenue grew from $34.8 million in 2021, $79.9 million in 2022, $115.8 million in 2023, and to $396.3 million in 2024, and to $852.5 million in 2025, driven by a sizable increase in demand for our products. We have made significant investments in the design and development of new products and platform enhancements, and, as a result, we have not yet achieved profitability on an annual basis.

Our revenue for the year ended December 31, 2024,2025, increased by 242%115% compared to the yearsame endedperiod Decemberin 31, 2023,2024, primarily due to an increase in overall unit shipments driven by higher demand for our AriesAries, productsScorpio, and Taurus products, as well as higher overall average selling prices resulting from a more favorable product mix. Gross marginan increased 750 bps to 76.4% for the year ended December 31, 2024 from 68.9% for the year ended December 31, 2023, primarily driven by a net decreasemix of $10.2hardware millionmodules inand inventoryScorpio write-downs, partially offset by higher average unit cost as a result of product mix. The inventory write-downs during the year ended December 31, 2023 were due primarily to inventory in excess of our sales forecast for a legacy customer product.products.

The vast majority of our revenue consists of product sales andwith aan smallimmaterial portion is derived from engineering services. Product sales consistsconsist primarily of shipments of our Intelligent Connectivity Platform solutions. Engineering services revenue consists of engineering fees associated with customer-defined engineering services. Engineering services revenue accounted for an immaterial percentage of total revenue for each of the years ended December 31, 2024 and 2023.

Cost of revenue includes cost of product sales and cost of engineering services. Cost of product sales includes the cost of materials, such as wafers processed by third-party foundries, costs associated with packaging, assembly, shipping, depreciation of equipment associated with manufacturing, cost of logistics and quality assurance, warranty costs,cost, amortization of capitalized production masks,equipment, costroyalties ofon personnelour production products, personnel-related costs including salaries, non-cash stock-based compensation, employee benefits, write-down of inventories, and allocation of general corporate expenses.

While amortization of capitalized production masksequipment has historically not been material, we expect to incur significant amortization costs in the future as we continue to increase the number of additional products.products and place them into production.

Gross profit represents revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit has been, and may in the future be, primarily influenced by several factors, including sales volumes, pricing of our products and services, changes in product costs, contract manufacturing supplier pricing, amortization of capitalized production equipment, personnel costs, shipping and logistics costs, and inventory write-downs.

Research and development expenses consist of personnel-related costs incurred in performing research and development activities and includeincluding salaries, non-cash stock-based compensation expense, employee benefits, bonuses, pre-production engineering mask costs, software license and cloud hosting services costs, prototype wafer,costs, packaging and test costs, professional services fees, and allocated shared expenses. Research and development costs are expensed as incurred.

We believe that continued investments in our products are important to our future growth and, as a result, we expect our research and development expenses to continue to increase in absolute dollars and moderately decline as a percentage of revenue over time as our revenue increases.dollars.

Sales and marketing expenses consist of personnelpersonnel-related costs including salaries, non-cash stock-based compensation expense, employee benefits, bonuses, samples to potential customers, product marketing and conferences, travel and entertainment costs, and allocated shared expenses.

We expect that our sales and marketing expenses will increase in absolute dollars as we increase our sales and marketing personnel and continue to expand our customer engagement with more design activities and increased product offerings and moderately decline as a percentage of revenue over time as our revenue increases.offerings.

General and administrative expenses consist primarily of personnelpersonnel-related costs including salaries, non-cash stock-based compensation expense, employee benefits and bonuses related to corporate, finance, information technology, legal, and human resource functions, professional services fees, audit and compliance expenses, insurance costs, and general corporate expenses including allocated shared expenses.

We expect general and administrative expenses to increase in absolute dollars as we grow our operations and continue to incur additional expenses associated with operating as a public company and moderately decline as a percentage of revenue over time as our revenue increases.company.

Interest income primarily consists of interest income earned on our short-term investments included in cash and cash equivalents and marketable securities.

Income Tax (Benefit) Provision

Income tax (benefit) provision consists primarily of U.S. federal, state, and foreign income taxes. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Total revenue increased $280.5$456.2 million, or 242%,115%, for the year ended December 31, 20242025 compared to the yearsame endedperiod Decemberin 31,2024. 2023,The increase was primarily due to a 217%an increase in overall unit shipments driven by higher demand for our AriesAries, products.Scorpio, Theand increaseTaurus inproducts, revenueas waswell also attributable toas higher overall average selling prices resulting from an increased mix of hardware modules.modules and Scorpio products.

GrossTotal margincost of revenue increased 750$113.7 bpsmillion, toor 76.4%121%, for the year ended December 31, 20242025 compared to 68.9% for the yearsame endedperiod Decemberin 31, 2023.2024. The increase was primarily drivendue byto higher overall unit shipments and a netshift decreasein product mix, resulting from an increased mix of $10.2hardware millionmodules inand inventoryScorpio write-downs, partially offset by higher average unit cost as a result of product mix.products.

Research and development expense increased $127.4$103.2 million, or 174%,51%, for the year ended December 31, 20242025 compared to the yearsame endedperiod Decemberin 31, 2023.2024. The increase was attributableprimarily due to a $69.1$61.5 million increase in personnel-related costs, including $5.4 million of non-cash stock-based compensation expense primarily due to both RSUs that had previously met the time-based and liquidity event vesting conditions in connection with our IPO as well as RSUs with time-based vesting after the liquidity event. Additionally, there were $33.9 million higher personnel-related expenses asresulting from a result of a 63%97% increase in average headcount andheadcount, a $21.2$31.4 million increase in softwareoverall licensesspending to support our R&D initiatives, and clouda hosting$7.4 servicesmillion relatedincrease in other operating costs to support our developmentbusiness projects.expansion.

Sales and marketing expense increaseddecreased $103.7$43.9 million, or 519%,35%, for the year ended December 31, 20242025 compared to the yearsame endedperiod Decemberin 31, 2023.2024. The increasedecrease was attributableprimarily due to a $93.8$56.0 million increasedecrease in non-cash stock-based compensation expenseexpense, which resulted primarily duefrom tothe bothrecognition of time-based vesting of RSUs that had previously metand the time-basedsatisfaction andof the liquidity event vesting conditionscondition in connection with our IPO as well as RSUs with time-based vesting afterin the liquidityprior event,period. andThe decrease was partially offset by a $8.2$9.8 million increase in personnel-related expenses asresulting from a result of a 29 %25% increase in average headcount.

General and administrative expense increaseddecreased $78.4$6.2 million, or 492%,7%, for the year ended December 31, 20242025 compared to the yearsame endedperiod Decemberin 31, 2023.2024. The increasedecrease was attributableprimarily due to a $60.2$24.3 million increasedecrease in non-cash stock-based compensation expenseexpense, which resulted primarily duefrom tothe bothrecognition of time-based vesting of RSUs that had previously metand the time-basedsatisfaction andof the liquidity event vesting conditionscondition in connection with our IPO as well as RSUs with time-based vesting afterin the IPO,prior period. The decrease was partially offset by a $9.9$9.7 million higherincrease in personnel-related expenses asresulting from a result of a 81%49% increase in average headcount, and a $3.4$3.9 million increase in professional services fees asassociated wewith continuethe tocontinued builddevelopment outof our public company infrastructure.infrastructure, and a $3.8 million increase in other operating costs to support our business expansion.

For the year ended December 31, 2024,2025, interest income increased $27.7$10.4 million, or 424%,30%, compared to the yearsame endedperiod Decemberin 31, 2023, respectively.2024. The increase in interest income was primarily due to higher average balances of short-term investments and cash equivalents balances primarily as a result of our IPO.IPO in the prior period and net cash inflow from operations.

Income Tax (Benefit) Provision

Income tax (benefit) provision decreased $1.7$2.6 million, or 50%,160%, for the year ended December 31, 20242025 compared to the yearsame endedperiod December 31, 2023. The effective tax rate decreased from 14.5% for the year ended December 31, 2023 to 2.0% for the year ended December 31,in 2024. The change in income tax (benefit) provision was p primarily due to a significantthe increase in non-cash stock-based compensation tax deductions post our IPO, and U.S. research and development credits,deductions, partially offset by anthe increasedecrease in taxable income, and the foreign-derived intangible income deduction.

This Annual Report on Form 10-K contains certain financial measures that are not presented in accordance with generally accepted accounting principles in the United States (“GAAP”), which we use to supplement the performance measures in our consolidated financial statements, which are presented in accordance with GAAP. We refer to these measures as “non-GAAP financial measures.” These non-GAAP financial measures include non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss),income, and non-GAAP net income (loss).income. We use these non-GAAP financial measures for financial and operational decision-making and as a means to assist us in evaluating period-to-period comparisons. By excluding certain items that may not be indicative of our recurring core operating results, we believe that non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss),income, and non-GAAP net income (loss) provide meaningful supplemental information regarding our performance. Accordingly, we believe these non-GAAP financial measures are useful to investors and others because they allow for additional information with respect to financial measures used by management in its financial and operational decision-making and they may be used by our institutional investors and the analyst community to help them analyze the health of our business. However, there are a number of limitations related to the use of non-GAAP financial measures, and these non-GAAP measures should be considered in addition to, not as a substitute for or in isolation from, our financial results prepared in accordance with GAAP. Other companies, including companies in our industry, may calculate these non-GAAP financial measures differently or not at all, which reduces their usefulness as comparative measures.

We define non-GAAP gross profit as gross profit presented in accordance with GAAP, adjusted to exclude non-cash stock-based compensation expenses. The non-GAAP gross margin is non-GAAP gross profit divided by revenue. We have presented non-GAAP gross profit because we consider non-GAAP gross profit to be a useful metric for investors and other users of our financial information in evaluating our operating performance as it excludes the impact of non-cash stock-based compensation, a charge that can vary from period to period for reasons that are unrelated to our core operating performance. This metric also provides investors and other users of our financial information with an additional tool to eliminate the effects of items that may vary for different companies for reasons unrelated to core operating performance.

A reconciliation of our GAAP gross profit and GAAP gross margin, the most directly comparable GAAP financial measure,measures, to non-GAAP gross profit and non-GAAP gross margin is presented below:

(1) Stock-basedNon-cash stock-based compensation expense recognized in connection with the time-based vesting and settlement of RSUs that had previously met the time-based vesting condition and for which the liquidity event vesting condition was satisfied in connection with our IPO.

Non-GAAP Operating Income (Loss)and Non-GAAP Operating Margin

We define non-GAAP operating income (loss) as operating income (loss) presented in accordance with GAAP, adjusted to exclude non-cash stock-based compensation expensesexpenses, acquisition-related costs, and employer payroll taxes related to the time-based vesting and net settlement of RSUs with a liquidity event-based vesting condition that was satisfied in connection with the IPO. We define non-GAAP operating margin as non-GAAP operating income divided by revenue. We have presented non-GAAP operating income (loss)and non-GAAP operating margin because we consider non-GAAP operating income (loss) to be athem useful metricmetrics for investors and other users of our financial information in evaluating our operating performance as it excludes the impact of non-cash stock-based compensation expenseexpense, acquisition-related costs, and employer payroll taxes related to the time-based vesting and net settlement of RSUs in connection with our IPO, chargesa charge that can vary from period to period or are one time charges for reasons that are unrelated to our core operating performance. ThisThese metricmetrics also providesprovide investors and other users of our financial information with an additional tool to eliminate the effects of items that may vary for different companies for reasons unrelated to core operating performance.

A reconciliation of our GAAP operating loss,income (loss) and GAAP operating margin, the most directly comparable GAAP financial measure,measures, to non-GAAP operating income (loss)and non-GAAP operating margin is presented below:

(1) Stock-basedNon-cash stock-based compensation expense recognized in connection with the time-based vesting and settlement of RSUs that had previously met the time-based vesting condition and for which the liquidity event vesting condition was satisfied in connection with our IPO.

Non-GAAP Net Income (Loss)

We monitor non-GAAP net income (loss) for planning and performance measurement purposes. We define non-GAAP net income as net income (loss) aspresented netin lossaccordance reportedwith GAAP on our consolidated statements of operations, excluding the impact of non-cash stock-based compensation expenses, acquisition-related costs, employer payroll taxes related to the time-based vesting and net settlement of RSUs with a liquidity event-based vesting condition that was satisfied in connection with our IPO, and the related tax impact on the adjustments. We have presented non-GAAP net income (loss) because we believe that the exclusion of these charges allows for a more relevant comparison of our results of operations to other companies in our industry and facilitates period-to-period comparisons as it eliminates the effect of certain factors unrelated to our overall operating performance.

A reconciliation of our GAAP net loss,income (loss), the most directly comparable GAAP financial measure, to our non-GAAP net income (loss) is presented below:

(1) Stock-basedNon-cash stock-based compensation expense recognized in connection with the time-based vesting and settlement of RSUs that had previously met the time-based vesting condition and for which the liquidity event vesting condition was satisfied in connection with our IPO.

(34) Income tax effect is calculated based on the tax laws in the jurisdictions in which we operate and is calculated to exclude the impact of non-cash stock-based compensation expense and one-off discrete tax adjustments that are unrelated to our core operating performance. We no longer maintain valuation allowance for non-GAAP purposes due to our profitability on a non-GAAP basis. For the yearyears ended December 31, 2025, and 2024, the non-GAAP tax expense rate was 12.7% and 6.9%, compared to a tax benefit rate of 27.0% for the year ended December 31, 2023. The reduction of the rate was due to the realization in deferred tax asset related to the release of valuation allowance, on a non-GAAP basis.respectively.

Since our inception, we have financed our operations primarily through proceeds from theequity issuanceissuances of our redeemable convertible preferred stock,including net proceeds from our IPO, and cash generated from the sale of our products. As of December 31, 2024,2025, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $914.3$1.2 million.billion. Our principal use of cash is to fund our operations, invest in research and development, fund capital expenditures for production mask capital expenditures,equipment, and to support our overall growth.

While we have generated $136.7$319.3 million in cash flow from operating activities for the year ended December 31, 2024,2025, in prior years we generated significant losses from operations and negative cash flows from operating activities haveas resultedreflected in our accumulated deficit of $208.8 million as of December 31, 2024. We believe that our current cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months and beyond. Our future capital requirements, however, will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, capital expenditures for production masks,equipment, the continuing market acceptance of our products, and the use of cash to fund potential mergers or acquisitions. In the event that additional financing is required from outside sources, we may seek to raise additional funds through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be adversely affected.

Change in Cash Flows from Operating Activities

Since our inception, we have created and commercialized first-to-market PCIe, Ethernet, and CXL products. We have become a trusted partner and a proven supplier to our hyperscaler and system OEM customers. We have experienced strong growth since the commercial launch of Aries in 2020. Our revenue grew from $34.8 million in 2021, $79.9 million in 2022, $115.8 million in 2023, and $396.3 million in 2024, and to $852.5 million in 2025. Our revenue was $308.4$700.8 million for the threesix months ended MarchJune 31,30, 2026, driven by a sizable increase in demand for our products.

Our revenue was $308.4$392.4 million for the three months ended MarchJune 31,30, 2026, compared to $159.4$191.9 million for the same period in 2025, representing an increase of 93%104% year over year.

NetOur incomerevenue was $80.3$700.8 million for the threesix months ended MarchJune 31,30, 2026,2026 compared to $31.8$351.4 million for the same period in 2025, representing an increase of 152%99% year over year.

Comparison of the Three and Six Months Ended MarchJune 31,30, 2026 and 2025

Total revenue increased $148.9$200.5 million, or 93%,104%, and $349.4 million, or 99%, for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, primarily due to an increase in overall unit shipments driven by higher demand for our Aries, Scorpio, Aries, and Taurus products, as well as higher overall average selling prices resulting from an increased mix of hardware modules and Scorpio products.

Total cost of revenue increased $33.2$58.5 million, or 83%,126%, and $91.7 million, or 106%, for the three and six months ended MarchJune 31,30, 2026, compared to the same periodperiods in 2025, respectively, primarily due to higher overall unit shipments and a favorable shift in product mix.mix cost.

Gross margin increaseddecreased 136250 bps to 76.3%73.3% for the three months ended MarchJune 31,30, 2026 compared to 74.9%75.8% for the same period in 2025. The increasedecrease was primarily driven by a favorableshift in product mix.mix towards lower margin hardware modules, as well as the impact of the Warrants.

Research and development expense increased $61.1$69.2 million, or 95%,104%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase was primarily due to a $29.3$32.7 million increase in personnel-related costs resulting from an 118% increase in headcount, an $18.6 million increase in non-cash stock-based compensation expenses, and a $12.1 million increase in overall spending to support our R&D initiatives, which includes hardware design, software license,licensing, and cloud hosting services costs, a $17.1 million increase in personnel-related costs and $10.2 million of non-cash stock-based compensation expenses resulting from a 90% increase in headcount, and $3.1 million increase in other operating costs to support our business expansion.costs.

Sales and marketing expense increased by $0.2$7.8 million, or 1%,42%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase was primarily due to a $2.0$4.9 million increase in personnel-related costs resulting from a 55%47% increase in headcountheadcount, and $0.3a $2.2 million in other operating costs to support our business expansion, partially offset by a $2.4 million decreaseincrease in non-cash stock-based compensation expenses.

General and administrative expense increased $3.9$15.6 million, or 18%,76%, for the three months ended MarchJune 31,30, 2026 compared to the same period in 2025. The increase was primarily due to a $2.5$6.4 million increase in non-cash stock-based compensation expenses, a $5.6 million increase in personnel-related costs resulting from a 79% increase in headcount, a $1.8 million increase in professional services fees associated with the continued development of our public company infrastructure, and a $1.8 million increase in personnel-related costs resulting from a 57% increase in headcount, a $1.5 million increase in other operating costs to support our business expansion. The increase was partially offset by a $1.9 million decrease in non-cash stock-based compensation expenses.

Interest and Other Income

For the three and six months ended MarchJune 31,30, 2026, interest and other income increased $1.1$2.7 million, or 11%,25%, and $3.8 million, or 18%, compared to the same periodperiods in 2025, respectively, primarily due to higher average balances of short-term investments and cash equivalents as a result of cash flow from operations.operations, partially offset by lower interest rates.

The benefit from income tax decreasedincreased $3.2$49.7 million, or 32%,8,876%, and $46.5 million, or 436%, for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to the same periodperiods in 2025, primarily due to aan decreaseincrease in excess tax benefits related to equity compensation.

We define non-GAAP operating income as operating income presented in accordance with GAAP, adjusted to exclude non-cash stock-based compensation expenses and acquisition-related costs. We define non-GAAP operating margin as non-GAAP operating income divided by revenue. We have presented non-GAAP operating income and non-GAAP operating margin because we consider them useful metrics for investors and other users of our financial information in evaluating our operating performance as it excludes the impact of non-cash stock-based compensation expense and acquisition-related costs, a chargecharges that can vary from period to period or are one time charges for reasons that are unrelated to our core operating performance. These metrics also provide investors and other users of our financial information with an additional tool to eliminate the effects of items that may vary for different companies for reasons unrelated to core operating performance.

We monitor non-GAAP net income for planning and performance measurement purposes. We define non-GAAP net income as net income presented in accordance with GAAP on our condensed consolidated statements of operations, excluding the impact of non-cash stock-based compensation expenses, acquisition-related costs, non-cash fair value adjustments on equity investments without readily determinable fair values, and the related tax impact on the adjustments. We have presented non-GAAP net income because we believe that the exclusion of these charges allows for a more relevant comparison of our results of operations to other companies in our industry and facilitates period-to-period comparisons as it eliminates the effect of certain factors unrelated to our overall operating performance.

(23) Income tax effect is calculated based on the tax laws in the jurisdictions in which we operate and is calculated to exclude the impact of non-cash stock-based compensation expense and one-off discrete tax adjustments that are unrelated to our core operating performance. WeWhile we maintain a valuation allowance for GAAP purposes, we no longer maintain valuation allowance for non-GAAP purposes due to our cumulative tax profits on a non-GAAP basis. For the three months ended MarchJune 31,30, 2026 and 2025, the non-GAAP tax rate was approximately 12% and 9%, respectively. For the six months ended June 30, 2026 and 2025, the non-GAAP tax rate was approximately 11% and 7%,8%, respectively.

Since our inception, we have financed our operations primarily through proceeds from equity issuances including net proceeds from our IPO, and cash generated from the sale of our products. As of MarchJune 31,30, 2026, our principal sources of liquidity were cash, cash equivalents, and marketable securities of $1.2$1.3 billion. Our principal use of cash is to fund our operations, invest in research and development, fund capital expenditures for production equipment, acquisitions of businesses or technologies, and to support our overall growth.

We generated $74.6$162.3 million in cash flow from operating activities for the threesix months ended MarchJune 31,30, 2026 and a retained earnings of $90.6$243.7 million as of MarchJune 31,30, 2026. We believe that our current cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months and beyond. Our future capital requirements, however, will depend on many factors, including our growth rate, the timing and extent of our sales and marketing and research and development expenditures, capital expenditures for production equipment, the continuing market acceptance of our products, and the use of cash to fund potential mergers or acquisitions. In the event that additional financing is required from outside sources, we may seek to raise additional funds through equity, equity-linked arrangements, and debt. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition could be adversely affected.

Net cash provided by operating activities was $162.3 million for the threesix months ended MarchJune 31,30, 2026 was $74.6 million,2026, compared to $10.5$145.9 million for the comparable period in 2025. The $64.1$16.4 million increase in operating cash inflows was a result of a $48.5$150.4 million increase in net income, higher non-cash charges of $12.3$50.1 million, andpartially aoffset favorableby an unfavorable change of $3.3$184.0 million from changes in operating assets and liabilities. The higher non-cash charges of $12.3$50.1 million were primarily due to a $6.5$35.0 million increase in stock-based compensation expense, $2.6 million increase in depreciation and amortization, a $1.7$10.2 million increase in warrants contra revenue, and $1.3a $5.1 million increase in accretiondepreciation ofand discounts on marketable securities.amortization. The favorableunfavorable change of $3.3$184.0 million in operating assets and liabilities was predominantly attributable to a $28.4 million favorable change in the prepaid expenses and other assets, and a $7.1 million favorable change in inventory. The favorable change was partially offset by (i) a $20.8$124.0 million unfavorable changeschange in accounts receivable due to higher product sales and the timing of customer payments, and (ii) a $11.4$38.6 million unfavorable change in inventory primarily resulting from per-unit inventory costs and inventory build up to support anticipated demand, and (iii) a $22.9 million unfavorable change in the prepaid expenses and other assets. These unfavorable changes were partially offset by a $1.4 million favorable change in accounts payablespayable and accrued other liabilities primarily due to the timing of payments.

Net cash used in investing activities was $225.6 million for the threesix months ended MarchJune 31,30, 2026 was $94.0 million,2026, compared to $3.9$67.6 million for the comparable period in 2025. The $90.1 million increase in cash used in investing activities of $157.9 million was primarily due to a $65.0 million increase associated with the acquisition of a business, a $53.7$109.7 million decrease in proceeds from sales and maturities of marketable securities, and a $3.0$69.2 million increase in proceedspayments usedrelated to business acquisitions, and a $21.5 million increase in purchasepurchases of property and equipment,equipment. These increases were partially offset by a $34.2$45.0 million decrease in purchases of marketable securities.

Net cash provided by financing activities was $7.1 million for the threesix months ended MarchJune 31,30, 2026 was $0.1 million,2026, compared to $0.4$5.1 million for the comparable period in 2025. The $0.3 million decreaseincrease in cash provided by financing activities of $2.0 million was primarily due to a decrease$1.9 relatedmillion toincrease in proceeds received from exercisesthe ofemployee stock options.purchase plan.

Purchase commitments. Our purchase commitments are primarily related to software licenses,licenses and cloud hosting services, or performance of certain services.hosting. For an additional discussion of our purchase commitments, see Note 8 - Commitments and Contingencies in the notes to the unaudited condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.