Napatech AS (STU:NAT) (Q2 2026) Earnings Call Highlights: Revenue Surges 55% as AI ...

Q & A Highlights

Q: Can you provide more detail on how the memory cost increase impacts gross margin, and how significant is memory as a part of the bill of materials? A: Klaus Skovrup, CFO, explained that memory is a significant part of the bill of materials. He provided a hypothetical example: if a unit sells for $5,000 with a 70% margin, the cost is $1,500. If memory costs double the cost to $3,000, the margin would drop to around 40% unless the price is raised. The company is working to secure the best possible pricing to maintain gross profit margins.

Q: Regarding the Tier 1 OEM engagement, the ramp-up is slower than expected. Can you share any progress updates and confirm the strategic value remains intact? A: Kartik Srinivasan, CEO, confirmed that the technical engagement remains extremely strong. The delay is attributed to organizational and management changes at the customer, which is common for large companies with disciplined multiphase qualification processes. He emphasized that this does not diminish the activity, size, or scope of the overall opportunity.

Q: Given the acceleration in design wins, how big is your pipeline nowadays, and what are the core levers to hit the top end of the revenue guidance? A: The CEO stated that the pipeline is growing for both core infrastructure (with 12 new design wins) and AI infrastructure. While 2026 design wins won't impact this year's revenue, prior design wins will. The levers to hit the top end of guidance are managing deliveries and pricing effectively. The CFO added that they have enough inventory to meet demand at the high end of the guidance range.

Q: On the AI infrastructure products, you mentioned lower gross margins. Can you give a sense of the margin to model on production orders and whether it improves as volumes scale? A: The CEO stated that exact margin numbers are still volatile due to component pricing, particularly memory. As the company scales and gains more visibility, they will provide more guidance. The objective is to continuously improve margins through supply chain management and the value added to solutions, but specific modeling numbers will be shared as the company becomes more educated over time.

Q: If you received a large order of 20,000 units instead of the current 2,000, would you be able to deliver? A: The CEO confirmed they are prepared for explosive growth, having planned their supply chain across contract manufacturers and vendors to support orders of that magnitude. The CFO added a liquidity perspective, noting that while they welcome big orders, they would need to manage working capital commitments, potentially through prepayments or other financing arrangements to support such large-scale production.

Q: How do you see the cash flow and working capital requirements progressing through the second half of the year? A: Klaus Skovrup, CFO, explained that the Q2 cash burn was due to inventory builds for H2 demand and back-loaded invoicing in June. As they enter H2, they expect to exceed $10 million in quarterly revenues, which should bring them close to cash flow neutral, and potentially cash flow positive in the next two quarters.

Q: Regarding the lead AI customer, how are you positioned for their next-generation architecture, and are there updates on other AI opportunities? A: The CEO noted that heterogeneous compute is becoming commonplace in AI inference. Napatech has moved from a dedicated offering for the first generation to a more industry-specific RDMA offering. The industry is gravitating toward RDMA technologies (RoCE, UEC, MRC, Meta's Rocky), and Napatech's programmable architecture is a key differentiator in this dynamically changing landscape. He declined to provide specific names or numbers on other pipeline opportunities, stating it's too soon.

Q: The core infrastructure segment is performing well. What is your visibility for growth in 2027, and should we expect continued growth at current rates? A: The CEO stated it's too early to provide specific growth numbers for 2027, but directionally, they expect growth in both core and AI infrastructure. The company is investing in both segments and will provide better visibility in the coming quarters.

Q: Regarding the order pattern from the lead customer, are the two orders for different customers, and what insights do you have into the timing of future orders? A: The CEO stated that the first order is for delivery in 2026, and the second order, announced last month, starts in Q1 2027. He declined to provide further details on customer specifics or future order timing, as that information has not been directly provided to them.

Q: Can you reflect on the core infrastructure segment's opportunities, particularly with traditional customers like trading and financial services investing in AI compute? A: The CEO acknowledged the core infrastructure market has a huge SAM, and Napatech has participated in a limited capacity with its capture product. Market signals are positive with a resurgence in demand. The company remains excited about core infrastructure, understanding the go-to-market and customers well, while also focusing on the dynamic AI infrastructure opportunity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .