ALAB Stock Rallies 20% in One Year: Should You Buy, Hold, or Sell?

Astera Labs ALAB shares have gained 20.5% in the trailing 12-month period, underperforming the broader Zacks Computer & Technology sector’s rise of 25%.

The company’s shares have also underperformed its closest peer, Credo Technology CRDO. Credo Technology is expanding its footprint in the PCIe retimers market with a healthy pipeline of PCIe Gen6 AECs and retimers, with further customer wins expected to support fiscal 2026 growth. Credo Technology’s shares have rallied 76.6% in the trailing 12-month period.

The underperformance can be attributed to challenging macroeconomic uncertainties and stiff competition in the PCIe retimers market.

However, the company has outperformed the Zacks Internet - Software industry, which has increased 5% in the trailing 12-month period. The outperformance can be attributed to its robust and diversified product portfolio, to address the growing demands of AI infrastructure and connectivity solutions, as well as its expanding partner base. It benefits from strong demand for its PCIe solutions, which have also been a major growth driver.

ALAB Stock's Performance

ALAB Benefits From Expanding Portfolio

Astera Labs’ product portfolio, including Scorpio, Aries, and Taurus, has been a key catalyst. The Scorpio P-Series fabric switches have seen robust demand, particularly for PCIe Gen 6 scale-out applications, with new design wins across multiple hyperscaler customers and AI platforms.  

The Aries PCIe 6 smart retimer solutions contributed more than 20% of third-quarter revenues, highlighting the company’s leadership in the connectivity space.  Additionally, Taurus smart cable modules have experienced strong growth, with 400-gig solutions driving demand and 800-gig solutions expected to create new growth opportunities in 2026.

Acquisitions have played an important role in expanding ALAB’s portfolio. In the third quarter of 2025, Astera Labs signed a definitive agreement to acquire aiXscale Photonics GmbH, a company that offers fiber-chip coupling technologies. 

This acquisition helps advance AI Infrastructure 2.0 by providing larger optical connectivity solutions that meet strict demands for speed, power, reach and reliability in rack-scale systems. Combining aiXscale’s photonics expertise with Astera Labs’ connectivity and signal processing capabilities, the company aims to address the massive bandwidth needs of AI systems with hundreds of accelerators.

ALAB Offers Strong Q4 Guidance

Aster Lab is benefiting from strong demand for its Aries, Taurus, and Scorpio product families, all of which are expected to drive growth in the fourth quarter of 2025.

Astera Labs expects fourth-quarter 2025 revenues between $245 million and $253 million. The Zacks Consensus Estimate for fourth-quarter 2025 revenues is pegged at $249.79 million, indicating a year-over-year increase of 77.03%.

Earnings are expected to be approximately 51 cents per share for the fourth quarter. The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at 51 cents per share, unchanged over the past 30 days. The figure calls for a year-over-year increase of 37.84%.

Astera Labs, Inc. Price and Consensus

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

ALAB Faces Stiff Competition

Despite an expanding portfolio and strong partner base, ALAB is facing stiff competition from other industry players like Marvell Technology MRVL, Credo Technology, and Broadcom AVGO in the connectivity space.

In October 2025, Marvell Technology expanded its connectivity portfolio by introducing active copper cable (ACC) linear equalizers that extend reach and efficiency for in-rack AI interconnects while maintaining low cost, power, and latency. Built on Marvell Technology’s PAM4 expertise, the new ACCs support 800G and 1.6T copper links, delivering superior gain versus competing solutions and strengthening Marvell’s scale-up interconnect offerings.

Broadcom is expanding its footprint in the PCIe retimers market by developing advanced solutions that enhance signal quality and extend the reach of PCIe connections in high-speed data environments. Broadcom shares have surged 50.3% in the trailing 12-month period.

ALAB Shares Trading 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 23.24X, higher than the Computer & Technology sector’s 7.42X.

ALAB's Valuation

Conclusion

Astera Labs’ strong fundamentals, expanding partnerships, and rising AI demand reinforce its leadership in connectivity solutions. However, challenging macroeconomic uncertainties and stiff competition remain a headwind. Stretched valuation also remains a concern.

In the fourth quarter of 2025, Astera Labs expects a slight decline in non-GAAP gross margins to approximately 75%, down from 76.4% in the third quarter of 2025.  This is primarily due to an increased mix of Taurus hardware modules, which are margin-dilutive compared to silicon products.

Astera Labs currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research