Shares in affordable computing company Raspberry Pi (RPI) leapt 25% after FY25 earnings topped forecasts. The firm also sounded more upbeat on the FY26 outlook than previousy, adding to investor enthusaism.
Higher margins
For the year to December, the company posted revenue of $323 million and EBITDA of $46.4 million. Both were ahead of the consensus, which had predicted revenue of $309 million and EBITDA of $45 million.
In January, the firm issued a trading statement saying EBOTDA would be ‘not less than $45 million’. The consensus at the time was $40.9 million, so analysts duly upgraded their forecasts.
Unit sales were in line with guidance, but the firm enjoyed higher margins due to ‘favourable unit economics’ in H2. What this means is growth was stronger in higher-margin boards so unit profit per board was up 18%.
At the same time, semiconductor device volumes exceeded those of boards and modules for the first time. This was a major step towards RPI becoming a two-franchise business, selling both electronic products and semicondustors.
Improved visibility
The firm had previously cautioned it was experiencing disruption to the availability and pricing of DRAM, a crucial component. Therefore, while H1 2026 shipments would be up on H1 2025, visibility beyond that was ‘limited’.
In today’s update, the company said it still expected the current supply environment to persist beyond this year. However, it has mitigated the impact on the business through supplier diversification and targeted pricing adjustments.
It also continues to benefit from inventory acquired at lower historical prices. Moreover, around a third of its boards and modules by volume either use no DRAM, or use older DRAM for which it keeps a separate, substantial inventory buffer.
Meanwhile, demand from its OEM and enthusaist cutomer bases remains ‘robust’, especially in the US and China. Therefore, although H2 visibility could be better, the current environment actually represents ‘an opportunity rather than a threat’.
We’re encouraged to hear the firm talking about tricky supply conditions presenting an opportunity to take market share instead of a threat. That suggests it has a hard-nosed commercial mindset which the market may not have appreciated previously.
The business has already evolved from supplying hobbyists and ‘garagistes’ to OEMs embedding its products in all kinds of industrial products. Sales may not keep growing at 25%, or earnings at 35%, but its customer base is clearly growing.
Moreover, as it develops into a two-franchise business, revenue and earnings are likely to exceed analysts’ medium-term forecasts. While its first year as a quoted company hasn’t been a great success in share price terms, we sense the omens are good.
Read the press release here: https://investors.raspberrypi.com/
