Rambus Inc (NASDAQ:RMBS) shares plunged nearly 23% to around $109.63 on Tuesday after the semiconductor intellectual property company reported first-quarter 2026 results that fell short of revenue expectations, compounded by an analyst downgrade citing mounting risks from tightening DRAM supply.
The company posted Q1 revenue of $180.2 million, missing the consensus estimate of $189.71 million, while adjusted earnings per share came in at $0.63, a hair below the $0.64 forecast.
Product revenue reached $88 million, up 15% year-over-year, while royalties totaled $69.6 million and contract and other revenue came in at $22.6 million.
For the second quarter, Rambus guided licensing billings of $76 million to $82 million, royalty revenue of $72 million to $78 million, product revenue of $95 million to $101 million, and contract and other revenue of $19 million to $25 million, with a diluted share count of 110 million.
Adding to the pressure, Baird downgraded the stock to Neutral, citing a growing risk of slowing RDIMM unit growth heading into 2027 driven by deepening DRAM supply constraints. The firm noted that while the acceleration in x86 CPU demand fueled by inferencing and agentic AI is a positive demand signal for Rambus, the company's volume-driven business model leaves it exposed when memory supply tightens.
"Rambus is the classic case of a unit-driven top-line impacted at times of severe memory shortages without the benefit of higher pricing," Baird wrote, adding that companies controlling their own capacity and benefiting from pricing power tend to maximize revenue and earnings leverage in such environments, while volume-driven players face headwinds when supply is constrained.
Baird flagged that the bulk of new DRAM capacity coming online is expected to be directed toward high-bandwidth memory, or HBM, leaving conventional RDIMM supply increasingly strained. The firm modeled RDIMM unit growth of 20% in 2026, slowing to 12% to 15% in 2027. It also noted that surging DRAM pricing could weigh on MRDIMM volumes, and that Google's ramp of CXL technology represents a further headwind.
Industry-wide DRAM bit growth is expected to reach only around 23% in 2027, potentially slowing further to barely 20% in 2028.
Baird also pointed to softening product revenue momentum, noting that second-quarter product revenue guidance implies growth of just 1% versus the fourth quarter of 2025, compared with 11% growth over the same period a year earlier, with the firm expecting year-over-year product revenue comparisons to decelerate through the remainder of 2026 and into 2027 absent new product introductions.
Despite the downgrade, Baird maintained its price target of $120 and described Rambus as one of the highest-quality names within its small-cap coverage.