GSI Technology Misses Gross-Margin Guidance on Mix and Costs

The Tip Desk · November 5, 2026 · 3 min read

Second-quarter fiscal 2027 net revenue was $6.0 million, inside the $5.7 million to $6.5 million range, while gross margin fell to 48.5% from 53.4% in the prior quarter.

GSI Technology, Inc. (GSIT) reported net revenue of $6.0 million for the second fiscal quarter ended September 30, 2026, inside its $5.7 million to $6.5 million guidance range. The Sunnyvale, California, associative-memory and edge-AI chip maker said the figure compared with $6.4 million a year earlier and $6.3 million in the first quarter of fiscal 2027.

Gross margin was 48.5%, below the company’s approximately 53% to 55% outlook and down from 53.4% in the first quarter and 54.8% a year earlier. The company attributed the miss to an unfavorable product mix and higher manufacturing costs from supply-chain constraints on wafers and outsourced assembly, burn-in and test. It said it is reviewing manufacturing costs and intends to pass increases on when it makes sense.

Military and defense sales were 46.7% of second-quarter shipments, up from 31.3% in the prior quarter and 28.9% a year earlier. KYEC accounted for $1.2 million, or 19.7% of net revenues, versus $1.0 million (16.1%) in the prior quarter and $802,000 (12.4%) a year earlier. Nokia contributed $376,000, or 6.2%.

Total operating expenses were $10.4 million, compared with $8.8 million in the first quarter and $6.7 million a year earlier. Research and development was $6.0 million, up from $3.8 million a year earlier, which the company said was driven primarily by external design services for the next-generation Plato processor, expected to continue until a March 2027 tape-out. Government funding under SBIR programs totaled $556,000.

Selling, general and administrative expenses were $4.3 million, versus $2.9 million in the prior quarter and $3.0 million a year earlier. The increase included about $2.0 million of non-routine legal and other professional fees tied to an internal assessment of certain vendor matters in foreign operations, which was concluded in the quarter. Those fees were partially offset by a $600,000 gain from assets received in a vendor settlement, for a net impact of about $1.4 million. The company said it does not expect significant additional expenses on those matters.

Operating loss widened to $7.4 million from $5.4 million in the first quarter and $3.2 million a year earlier. Net loss was $7.0 million, or $(0.18) a diluted share, compared with $4.8 million, or $(0.13) a share, in the first quarter and $3.2 million, or $(0.11) a share, a year earlier.

Cash and cash equivalents were $69.2 million as of September 30, 2026, down from $77.0 million at June 30, 2026. The company said the decline primarily reflected $8.0 million of cash used in operating activities, including spending on Plato development and Gemini-II commercialization and the non-routine internal-assessment costs. Working capital was $73.8 million and stockholders’ equity was $86.2 million.

Chairman and Chief Executive Officer Lee-Lean Shu said the initial stage of Phase I of the Smart Guardian Eye project was completed and accepted by the Hsinchu County government in Taiwan, with live AI video monitoring and interpretive incident reporting now underway. The company said Plato development remains on schedule for a March 2027 tape-out, with first-spin chips targeted for initial sampling by late summer of calendar 2027.

For the third quarter of fiscal 2027, the company expects net revenues of $5.0 million to $6.0 million and gross margin of approximately 38% to 40%. To address higher manufacturing costs, it plans immediate price increases on new orders and on existing customer backlog effective January 1, 2027. Management anticipates those adjustments, together with improved product availability, will support a recovery in revenue and gross margin beginning in the fourth quarter of fiscal 2027.