GSI Technology — Second Quarter Fiscal Year 2027 Earnings Summary

Financial Performance:

• Net revenue for the quarter ended September 30, 2026, was $6.0 million, compared to $6.4 million in the second quarter of fiscal 2026 and $6.3 million in the first quarter of fiscal 2027.
• Gross margin was 48.5% in the second quarter of fiscal 2027, down from 54.8% in the prior-year period and 53.4% in the prior quarter.
• Total operating expenses were $10.4 million, an increase from $6.7 million in the second quarter of fiscal 2026 and $8.8 million in the prior quarter.
• Research and development expenses were $6.0 million, up from $3.8 million in the prior-year period and $5.9 million in the prior quarter.
• Selling, general and administrative expenses were $4.3 million, up from $3.0 million in the prior-year period and $2.9 million in the prior quarter.
• Operating loss was $7.4 million, compared to an operating loss of $3.2 million in the prior-year period and $5.4 million in the prior quarter.
• Net loss was $7.0 million, or $(0.18) per diluted share, compared to a net loss of $3.2 million, or $(0.11) per diluted share, in the prior-year period and $4.8 million, or $(0.13) per diluted share, in the prior quarter.
• Pre-tax stock-based compensation expense was $1.1 million, compared to $856,000 in the prior-year period and $887,000 in the prior quarter.
• Cash and cash equivalents were $69.2 million as of September 30, 2026, down from $77.0 million at June 30, 2026, and up from $67.2 million at March 31, 2026.
• Working capital was $73.8 million as of September 30, 2026, compared to $70.0 million at March 31, 2026.
• Stockholders' equity was $86.2 million as of September 30, 2026, compared to $81.8 million as of the fiscal year ended March 31, 2026.
• Net cash used in operating activities was $7.993 million for the quarter.

Guidance and Future Outlook:

• Third quarter fiscal 2027 net revenue guidance is $5.0 million to $6.0 million.
• Third quarter fiscal 2027 gross margin guidance is approximately 38% to 40%.
• Management anticipates a recovery in revenue and gross margin beginning in the fourth quarter of fiscal 2027.
• Price increases are planned for new orders immediately and for existing customer backlog effective January 1, 2027, to address higher manufacturing costs.
• The company expects to complete the Plato tape-out in March 2027, with first-spin chips targeted for initial sampling by late summer of calendar year 2027.
• Management aims to secure a strategic partner to expand capabilities into new markets.
• The AI-assisted SDK is expected to reach commercial release in the first half of calendar year 2027.

Business Segments and Product Lines:

• The Smart Guardian Eye project has begun live AI video monitoring following acceptance of the initial stage of Phase I by the Hsinchu County government in Taiwan.
• The company is conducting an internal trial and validation of the alpha version of its AI-assisted software development kit (SDK) to simplify porting AI models to its APU platform.
• A beta version of the AI-assisted SDK is anticipated for release to initial customers before the end of December 2026.
• KYEC represented $1.2 million (19.7% of net revenues) in the second quarter, compared to $802,000 (12.4%) in the prior-year period and $1.0 million (16.1%) in the prior quarter.
• Nokia represented $376,000 (6.2% of net revenues) in the second quarter, compared to $200,000 (3.1%) in the prior-year period and $307,000 (4.9%) in the prior quarter.
• Military/defense sales accounted for 46.7% of second quarter shipments, compared to 28.9% in the comparable period a year ago and 31.3% in the prior quarter.
• Government funding under SBIR programs totaled $556,000 this quarter, compared to $279,000 in the prior-year period and $336,000 in the prior quarter.

Market and Competitive Landscape:

• The company is focusing on expanding commercialization of Gemini-II in calendar year 2027 and positioning Plato for adoption across a broader range of AI applications.
• Management is seeking to expand market reach through system integrators and support for multiple simultaneous evaluations of their technology.
• The company faces supply chain constraints for wafers and outsourced assembly, burn-in, and test operations, which have contributed to higher manufacturing costs.

Risks and Challenges:

• Gross margin decreased year-over-year due to unfavorable product mix and higher manufacturing costs resulting from supply chain constraints.
• Operating expenses increased primarily due to ongoing Plato chip design consultants, commercialization of Gemini-II, and non-routine legal and professional fees associated with an internal assessment of foreign operations.
• The internal assessment of vendor matters within foreign operations resulted in approximately $2.0 million of non-routine legal and other professional fees, partially offset by a $600,000 gain from assets received in a vendor settlement.
• Forward-looking statements highlight risks including the potential for AI tools to produce inaccurate outputs, compromise confidentiality, or fail to deliver efficiencies.
• Risks include the possibility that proof-of-concepts or pilot programs do not translate into design wins or revenue.
• Geopolitical conditions, particularly regarding Taiwan, and global economic challenges could amplify risks related to supply chains and market demand.

Management Commentary and Tone:

• Chairman and CEO Lee-Lean Shu stated the company made significant progress on several fronts, including the successful completion and acceptance of the initial stage of Phase I of the Smart Guardian Eye project.
• Management expressed confidence in the timeline for the Plato tape-out and the commercialization of Gemini-II.
• Mr. Shu noted that the company does not expect to incur significant additional expenses related to the internal assessment of foreign operations.
• Management indicated that price adjustments, combined with improved product availability, are expected to support a recovery in revenue and gross margin in the fourth quarter.

Other Key Points:

• The company will hold a conference call on November 5, 2026, at 1:30 p.m. Pacific Time to review results and outlook.
• A webcast of the call will be available at www.gsitechnology.com.
• The company is headquartered in Sunnyvale, California, with sales offices in the Americas, Europe, and Asia.
• The company's APU technology is designed for billion-item database searches and high-performance computing, with Gemini-I and Gemini-II products offering scalable, low-power solutions.