GSI Technology outlines $6.0M–$6.8M Q3 revenue guidance as Gemini-II advances in edge AI and defense markets

Earnings Call Insights: GSI Technology (GSIT) Q2 2026

MANAGEMENT VIEW

* CEO Lee-Lean Shu highlighted two key developments: a Cornell University research paper validated the Gemini-I chip's performance on AI tasks, showing parity with NVIDIA's A6000 while using about 98% less energy, and the company closed a $50 million equity financing to accelerate hardware and software execution. Shu stated, "We are rapidly moving forward with the Plato hardware design and the software development, ramping up our Gemini software ecosystem and strengthening ties with key defense and government partners in our POC and Small Business Innovation Research or SBIR programs."
* Didier Lasserre, Vice President of Sales, reported, "Recently, Gemini-II has been approved for prototyping by the offshore defense contractor to whom we shipped a board and software to a few months back. This POC focuses on synthetic aperture radar or SAR applications for drones and other edge systems."
* CFO Douglas Schirle reported, "The company reported net revenues of $6.4 million for the second quarter of fiscal 2026 compared to $4.6 million for the second quarter of fiscal 2025 and $6.3 million for the first quarter of fiscal 2026. Revenue growth in the quarter was driven by strong market momentum for leading SRAM solutions."

OUTLOOK

* The company expects net revenues in the third quarter of fiscal 2026 to range from $6.0 million to $6.8 million, with gross margin of approximately 54% to 56%. Schirle stated, "We remain focused on disciplined execution to bring Gemini-II to market, advance our road map for Plato and drive long-term shareholder value."
* Management indicated an accelerated focus on commercializing Gemini-II and advancing Plato hardware, aiming for the tape-out of Plato in early calendar 2027 and initial benchmark results for Gemini-II algorithms before year-end.

FINANCIAL RESULTS

* Net revenues for Q2 2026 were $6.4 million, up from $4.6 million in Q2 2025 and $6.3 million in Q1 2026.
* Gross margin stood at 54.8% compared to 38.6% a year ago and 58.1% in the previous quarter, with the recent decrease attributed to a change in product mix.
* Operating expenses were $6.7 million, down from $7.3 million a year ago but up from $5.8 million in the prior quarter. Research and development expenses rose to $3.8 million due to higher stock-based compensation and lower government funding offsets.
* The company reported an operating loss of $3.2 million, compared to $2.2 million last quarter and $5.6 million a year ago. Net loss for the quarter was $3.2 million or $0.11 per diluted share.
* Cash and cash equivalents at September 30, 2025, were $25.3 million, with working capital of $26.8 million and stockholders' equity of $38.6 million.

Q&A

* Robert Christian asked about auto industry efforts for autonomous vehicles. Lasserre replied, "We have not yet. So as we've talked about in past calls, we've certainly have limited resources, and that takes a tremendous effort for that market space. So we're currently starting in the military defense arena, but we certainly believe our technology will adapt well in those areas."
* An unknown attendee inquired about the $50 million placement and strategic investors. Schirle clarified, "No, it was just someone that was interested in the company, wasn't strategic in any way. And there is no required holding period for the shares."
* David Zalkowitz (ISQ) questioned third-party validation for Gemini-II. Lasserre confirmed ongoing discussions with Cornell and other researchers to validate Gemini-II.
* Zalkowitz raised the need for more military or defense expertise on the board. Schirle responded, "At this point, there are no plans to revise the Board. It doesn't mean that we won't in the future, if it makes sense, though."
* Michael Roberts (Roberts Capital Advisors) asked about capital allocation from the recent raise. Shu noted, "On the Plato because there's some fixed costs that we have to spend like IP costs and the mass tape-out costs. So those are fixed $15 million, $60 million, $70 million kind of range, okay? And the rest of them, I think they're probably pretty even between the Gemini-II and the Plato."
* Michael Roberts also asked about breakeven revenue or gross margin. Schirle said, "It's something that I need to take a look at. We're still putting our plans together... I don't have all those numbers yet to do a calculation."
* Michael Cooper requested market size and pricing details. Lasserre referenced a Needham & Company report on the drone market, describing it as "tens of billions at least market size," and stated, "the chip could be $1,000 or more depending on the market and the volume."

SENTIMENT ANALYSIS

* Analysts' sentiment was largely inquisitive and cautiously optimistic, pressing for clarity on commercialization, validation, and capital deployment, with a focus on timelines for pilot shipments and market opportunities.
* Management maintained a confident tone in prepared remarks, especially citing technical and commercial progress, but was more reserved during Q&A, acknowledging resource limitations and deferring on specifics about board changes or breakeven projections. Phrases such as "we certainly believe our technology will adapt well" and "I don't have all those numbers yet to do a calculation" reflected cautious optimism and some hesitation.
* Compared to the previous quarter, management conveyed greater momentum due to third-party validation and new funding, while analysts shifted to more detailed questions around execution and capital usage.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for Q3 2026 shifted slightly lower on gross margin expectations (54%–56%) compared to Q2's range (56%–58%).
* Management emphasized accelerated commercialization and development of Gemini-II and Plato, compared to prior focus on resolving chip issues and initial customer deliveries.
* Analysts' questions evolved from supply chain and sales incentives in Q1 to more strategic themes in Q2, such as validation, defense market engagement, and capital allocation.
* Management confidence increased on technical validation and financing, yet remained measured regarding operational execution and resource constraints.

RISKS AND CONCERNS

* Management identified limited resources as a constraint for entering new verticals like automotive.
* The company noted the need for additional IP acquisition and reliance on strategic partners for Plato's development and time-to-market.
* Ongoing customer evaluations with no confirmed purchase orders or letters of intent present uncertainty in near-term revenue realization.
* R&D expense increases and product mix shifts impacted gross margins.
* Analyst concerns included the pace of commercialization, board composition for defense expertise, and transparency around capital allocation and breakeven timelines.

FINAL TAKEAWAY

GSI Technology’s Q2 2026 call emphasized the transformative potential of its Gemini-II and Plato chips, supported by technical validation and new funding. Management outlined a disciplined post-funding strategy focused on defense and edge AI markets, with key milestones targeted for 2026 and 2027. While customer engagement and technical performance appear strong, investors should monitor the company’s execution on commercialization, capital deployment, and the evolution of its customer pipeline for meaningful revenue growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/gsit/earnings/transcripts]

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