When is ASX tech share BrainChip expected to become profitable?

BrainChip's profitability is hard to gauge due to lack of analyst coverage, but we can look over some of its recent partnerships.

Key points
  • BrainChip is burning cash as it establishes its commercial relationships
  • It's difficult to know when the company will post positive earnings due to lack of analyst coverage
  • But what we can do is examine its recent commercialisation efforts

BrainChip Holdings Ltd (ASX: BRN), like most tech companies in an early growth cycle, burns cash quarter to quarter.

The company announced it had spent 8.9% of its US$31.2 million total cash balance in its Q2 quarterly activities report posted on July 27. Meanwhile, cash receipts totalled $US1.2 million, up 500% from the previous quarter.

An influx of cash is a head start, but the question likely to be on most investors' minds is, when will BrainChip generate earnings?

This is hard to say as a high-growth ASX tech stock in neuromorphic computing. Wall Street hasn't taken a stab at answering this question either, with only one analyst rating the stock as a buy at the time of writing.

What we can do, though, is revise its recent commercialisation efforts as it progresses in the business cycle from startup to growth. These are signs of where the company is headed in the future and provide clues to when profitability will eventuate.

A small boy dressed in a bow tie and britches looks up, with books and an abacus on the table.

Image source: Getty Images

What did BrainChip announce?

Commercialisation was a key focus in its quarterly activities report, which was covered by my Foolish colleague Aaron.

The company made headway in developing its AkidaTM neuromorphic IP via several avenues, including technical scoping with several potential clients. Technical scoping is typically one of the first steps companies establish before the money exchanges hands, so this could suggest further deals are in the making.

More explicit progress was made by establishing commercial partnerships with tech companies Arm, SiFive, and Prophesee.

In a press release jointly published by SiFive and BrainChip, it was announced the companies had joined forces to offer processors that deliver BrainChip's artificial intelligence and machine learning capabilities, known as edge computing.

BrainChip also started preliminary partnerships with AI companies Impulse and NVISO.

BrainChip share price snapshot

The BrainChip share price is up 30% year to date. On Friday, shares closed 1.9% lower at $1.03.

The company's market capitalisation is roughly $1.81 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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