Astera Laboratories (ALAB 37.70%) The stock posted explosive gains during Tuesday’s trading. The company’s stock price closed the session up 37.7% and had risen as much as 39.8% earlier in the day.

After the market closed yesterday, Astera Labs released its third quarter results. The company reported sales and profits for the period that were much better than Wall Street had expected, and it also gave encouraging forward guidance.

Astera Labs’ third quarter performance exceeds expectations

Astera Labs released non-GAAP (adjusted) earnings per share of $0.23 on sales of $113.1 million in the third quarter. The performance was significantly better than Wall Street’s average estimate, which called for adjusted earnings per share of $0.17 on revenue of about $97.4 million.

Sales increased 206% year-over-year in the third quarter and 47% on a quarterly basis sequentially. Meanwhile, the business recorded an adjusted gross margin of 77.8% and an adjusted operating margin of 32.4%. The strong quarter results suggest that the company’s solutions for artificial intelligence (AI) processors continue to gain traction.

Astera forecast portends big victories

Astera Laboratories linked its third-quarter sales and profits to forward guidance that crushed Wall Street’s expectations. For the fourth quarter, Astera Labs expects sales between $126 million and $130 million. If the company hits the midpoint of this forecast range, it would mean a massive increase in annual sales and sequential quarterly sales growth of around 13%.

At the same time, the company expects to report an adjusted gross margin of around 75%. Adjusted earnings per share are expected to be between $0.25 and $0.26. The results suggest that the company may have achieved design gains related to NvidiaThe next-generation Blackwell processors investors have been hoping for. Alternatively, it is possible that the company will see stronger demand than expected from large-scale cloud computing companies such as Amazon, MicrosoftAnd Alphabet.