ALAB Stock Down 24% in a Month: Should Investors Buy the Dip or Wait?

Astera Labs ALAB shares have plunged 24.2% over the past month, underperforming the broader Zacks Computer & Technology sector’s 2.5% decline and the Zacks Internet - Software industry’s 1.8% rise over the same period.

The company’s shares have also underperformed its peers, which include Marvell Technology MRVL and Cisco Systems CSCO. Both Marvell Technology and Cisco Systems are expanding their footprint in the AI infrastructure space. Shares of Marvell Technology and Cisco Systems have lost 5.6% and 10.1%, respectively, over the past month.

The underperformance can be attributed to higher operating expenses due to continued investment in its product roadmap. Challenging macroeconomic uncertainties and stiff competition remain headwinds.

However, Astera Labs shares have outperformed its peer, Credo Technology CRDO, which is also expanding its footprint in the AI infrastructure space. Credo Technology stock has plunged 30.6% over the past month. The outperformance can be attributed to strong demand for its AI connectivity products, especially the Scorpio, Aries and Taurus portfolios.

ALAB Stock Performance

Image Source: Zacks Investment Research

ALAB Rides on Strong Scorpio Demand

Astera Labs is benefiting from robust demand for its Scorpio X-Series fabric switches, which is helping the company to fend off its competitors like Marvell Technology, Cisco Systems and Credo Technology. In the second quarter of 2026, ALAB reported record revenues of $392.4 million, up 104% year over year, with Scorpio X-Series entering volume production and set to become the company’s largest product line by the third quarter of 2026.

This momentum is fueled by Scorpio’s advanced features, such as hardware-accelerated Hypercast and In-Network Compute, which deliver up to 2x performance improvements for AI workloads. The COSMOS software platform further enhances customer loyalty by enabling dynamic traffic shaping and real-time performance management.

The Scorpio product family delivered significant growth as the X-Series began shipping in initial production volumes across multiple lane configurations. The high-radix Scorpio X-Series entered volume production and is expected to scale materially during the second half of 2026. Management expects Scorpio to become the company’s largest product family in the third quarter, one quarter earlier than previously projected. The transition will be led by the 320-lane Scorpio X-Series fabric switch, which supports larger accelerator clusters and includes hardware-based Hypercast and in-network compute capabilities.

ALAB Rides on Strong Aries and Taurus Demand

Astera Labs rides on robust demand for its Aries and Taurus product lines, which are driving significant growth and positioning the company for further upside.

Aries delivered record second-quarter revenues, supported by rising adoption of PCIe 6 retimers and gearboxes across scale-up and scale-out AI architectures. Growth is being fueled by larger accelerator clusters, higher unit attach rates and increased average selling prices associated with the PCIe 6 transition. PCIe 5 demand also remains resilient as inference workloads create additional use cases. In the second quarter of 2026, PCIe 6 products, including the Scorpio AI Fabric Switches and Aries Retimers, accounted for more than 50% of total revenues, highlighting the market leadership of ALAB’s Gen 6 portfolio.

In the second quarter of 2026, Taurus revenues grew strongly on increased unit shipments across AI and general-purpose computing platforms. The company also delivered preproduction volumes of 100-gigabit-per-lane Taurus Smart Cable Modules for 800-gigabit active electrical cables.

Astera Labs expanded its Taurus signal conditioning portfolio with 3.2T Smart Retimers and Smart Redrivers for 224G Ethernet and UALink connectivity, strengthening AI infrastructure capabilities. The new OCP-compatible design enables Smart Swap flexibility, while Unified COSMOS software adds advanced telemetry, diagnostics and intelligent link management across high-speed interconnects.

ALAB Offers Strong Q3 Guidance

Astera Labs is benefiting from strong demand for its Aries, Taurus, and Scorpio product families, all of which are expected to drive growth in the third quarter of 2026.

For the third quarter of 2026, revenues are expected to be between $540 million and $560 million. The midpoint implies sequential growth of approximately 40%, driven by the Scorpio X-Series production ramp, continued Aries PCIe 6 retimer strength and preproduction Taurus shipments for 800-gigabit Ethernet applications. The Zacks Consensus Estimate for third-quarter revenues is pegged at $550.39 million, representing year-over-year growth of 138.71%.

Management projects non-GAAP earnings between $1.16 and $1.21 per share in the third quarter of 2026. The Zacks Consensus Estimate for third-quarter 2026 earnings is pegged at $1.19 per share, which has increased 54.5% over the past 30 days. The figure implies a year-over-year increase of 142.86%.

Astera Labs, Inc. Price and Consensus

Astera Labs, Inc. price-consensus-chart | Astera Labs, Inc. Quote

ALAB Shares Trade at a Premium

Astera Labs’ stock is trading at a premium, as suggested by the Value Score of F.

In terms of the forward 12-month Price/Sales, ALAB is trading at 17.81X, higher than the Computer & Technology sector’s 6.03X.

ALAB's Valuation

Image Source: Zacks Investment Research

Conclusion

Astera Labs is well-positioned to benefit from strong AI infrastructure spending, supported by the rapid adoption of its Scorpio, Aries and Taurus product families. These factors justify its premium valuation.

Astera Labs stock currently sports a Zacks Rank #1 (Strong Buy), which implies that investors should start accumulating the stock right now. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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