Semtech Corporation

Semtech reported Q1 net sales of $291 million, up 6% sequentially and 16% year over year, with adjusted diluted EPS of $0.51, up 34% year over year. Adjusted gross margin was 53%, and total semiconductor products gross margin was 60.7%; adjusted net operating expenses were $95.1 million, adjusted operating income was $59.3 million, adjusted operating margin was 20.4%, adjusted EBITDA was $66.4 million, and adjusted EBITDA margin was 22.8%. Operating cash flow was $36.2 million and free cash flow was $28 million; ending cash and cash equivalents were $163.3 million, and principal debt was $503 million. For Q2, Semtech guided net sales to $328 million plus or minus $5 million, adjusted gross margin to 54% plus or minus 50 bps, adjusted operating expenses to $105.2 million plus or minus $2 million, adjusted EBITDA to $79.2 million plus or minus $2.3 million, and adjusted diluted EPS to $0.61 plus or minus $0.02. Management also expects Q2 data center revenue to grow 35% sequentially, high-end consumer revenue to rise sequentially, and industrial revenue to broadly grow; full-year commentary pointed to accelerating demand through fiscal 2027 and beyond.

Hong Hou framed the quarter as an exceptional start to fiscal 2027, emphasizing record revenue, strong bookings and backlog, and what he described as a transformed organization with better execution, customer engagement and ecosystem collaboration. Strategically, he highlighted three priorities: accelerating growth via supply assurance and operational excellence, increasing R&D in coherent light, CPO, LoRa and sensors, and completing portfolio optimization. His tone was confident and expansive, repeatedly pointing to multi-year opportunities in data center optics, CopperEdge and LoRa.

Mark Lin emphasized that Q1 was a ninth consecutive quarter of net sales growth and that results were above the high end of guidance across several metrics. He cited adjusted gross margin of 53% and total semiconductor gross margin of 60.7%, both helped by mix from data center and LoRa, plus adjusted operating income of $59.3 million and adjusted EBITDA of $66.4 million. He also noted operating cash flow of $36.2 million and free cash flow of $28 million, with cash of $163.3 million and debt of $503 million; for Q2 he pointed to higher R&D spend, SG&A falling as a percentage of revenue, and margin expansion supported by stronger data center and LoRa mix.

Analysts focused heavily on ACC standardization, capacity, and how much of the improved outlook reflects market share versus market expansion. Management said the ACC MSA specification is still being finalized and that ratification should help accelerate adoption, while also saying supply is being expanded with foundry and OSAT partners and could ultimately double or triple current capacity. Questions also probed HieFo’s coherent-light and CPO opportunity, where Hong said CW lasers with narrow linewidth are in qualification, 2028 is the key timing for some CPO opportunities, and Gain chip demand currently exceeds supply by about 3x with capacity expected to rise 3-4x by year-end and another 3-4x next year. On optics and LoRa, management said growth is broad-based across 800-gig, 1.6T, LPO/LRO, lasers and LoRa, with LoRa benefiting from end-node and gateway growth and a possible Edge AI upside.