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    We're Keeping An Eye On GSI Technology's (NASDAQ:GSIT) Cash Burn Rate

    Simply Wall St·06/14/2025 13:46:14
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    Just because a business does not make any money, does not mean that the stock will go down. For example, biotech and mining exploration companies often lose money for years before finding success with a new treatment or mineral discovery. Nonetheless, only a fool would ignore the risk that a loss making company burns through its cash too quickly.

    So should GSI Technology (NASDAQ:GSIT) shareholders be worried about its cash burn? In this report, we will consider the company's annual negative free cash flow, henceforth referring to it as the 'cash burn'. We'll start by comparing its cash burn with its cash reserves in order to calculate its cash runway.

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    When Might GSI Technology Run Out Of Money?

    You can calculate a company's cash runway by dividing the amount of cash it has by the rate at which it is spending that cash. In March 2025, GSI Technology had US$13m in cash, and was debt-free. In the last year, its cash burn was US$19m. Therefore, from March 2025 it had roughly 9 months of cash runway. To be frank, this kind of short runway puts us on edge, as it indicates the company must reduce its cash burn significantly, or else raise cash imminently. The image below shows how its cash balance has been changing over the last few years.

    debt-equity-history-analysis
    NasdaqGS:GSIT Debt to Equity History June 14th 2025

    View our latest analysis for GSI Technology

    How Well Is GSI Technology Growing?

    At first glance it's a bit worrying to see that GSI Technology actually boosted its cash burn by 2.9%, year on year. And we must say we find it concerning that operating revenue dropped 5.7% over the same period. In light of the data above, we're fairly sanguine about the business growth trajectory. Of course, we've only taken a quick look at the stock's growth metrics, here. This graph of historic earnings and revenue shows how GSI Technology is building its business over time.

    How Easily Can GSI Technology Raise Cash?

    GSI Technology revenue is declining and its cash burn is increasing, so many may be considering its need to raise more cash in the future. Issuing new shares, or taking on debt, are the most common ways for a listed company to raise more money for its business. Commonly, a business will sell new shares in itself to raise cash and drive growth. We can compare a company's cash burn to its market capitalisation to get a sense for how many new shares a company would have to issue to fund one year's operations.

    GSI Technology's cash burn of US$19m is about 23% of its US$82m market capitalisation. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

    So, Should We Worry About GSI Technology's Cash Burn?

    We must admit that we don't think GSI Technology is in a very strong position, when it comes to its cash burn. While its increasing cash burn wasn't too bad, its cash runway does leave us rather nervous. Looking at the factors mentioned in this short report, we do think that its cash burn is a bit risky, and it does make us slightly nervous about the stock. On another note, GSI Technology has 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

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