Core Viewpoint - Allegro MicroSystems has experienced a significant share price increase of 44.5%, reaching $27, prompting investors to consider their next steps regarding potential buying opportunities or risks [1]. Group 1: Revenue Performance - Allegro MicroSystems has seen a decline in revenue, with a 14.2% annual decrease over the last two years, indicating a loss of previous growth [3]. - Despite a revenue growth of 6.1% over the past five years, the company's earnings per share (EPS) have declined by 15.6% annually, suggesting reduced profitability on a per-share basis [4]. Group 2: Cash Flow Analysis - The company has demonstrated poor cash profitability, with an average free cash flow margin of 7.8% over the last two years, which is considered inadequate for a semiconductor business [6]. - Limited free cash flow restricts Allegro MicroSystems' ability to return capital to shareholders, impacting its reinvestment potential [5]. Group 3: Valuation and Market Position - Following the recent stock rally, Allegro MicroSystems is trading at a forward P/E ratio of 36, indicating that the stock may be overvalued with much of the positive outlook already priced in [7]. - Analysts suggest that there are more timely investment opportunities available compared to Allegro MicroSystems [7].

Core Viewpoint - Allegro MicroSystems, Inc. (ALGM) shows potential for significant upside, with a mean price target of $38.75 indicating a 33.9% increase from its current price of $28.94 [1] Price Targets and Analyst Consensus - The average price target consists of 12 estimates ranging from $35.00 to $49.00, with a standard deviation of $4.14, suggesting a variability in analyst predictions [2] - The lowest estimate indicates a 20.9% increase, while the highest suggests a 69.3% upside [2] - A low standard deviation indicates strong agreement among analysts regarding the stock's price movement direction [9] Earnings Estimates and Analyst Optimism - Analysts have shown increasing optimism about ALGM's earnings prospects, with a positive trend in earnings estimate revisions [11] - Over the last 30 days, one estimate has increased, leading to a 7.8% rise in the Zacks Consensus Estimate [12] - ALGM holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [13] Caution on Price Targets - While price targets are a common tool for investors, they can often mislead, as empirical research indicates they rarely predict actual stock price movements [7][10] - Analysts may set overly optimistic price targets due to business incentives, which can inflate expectations [8]

Group 1 - Astera Labs, Inc. (ALAB) is currently ranked 1 (Strong Buy) in the Zacks Rank system, indicating a positive earnings outlook and strong performance potential [3] - The Zacks Consensus Estimate for ALAB's full-year earnings has increased by 70.9% over the past three months, reflecting improving analyst sentiment [4] - Year-to-date, ALAB has returned approximately 44.6%, outperforming the average return of 29.5% for the Computer and Technology sector [4] Group 2 - Astera Labs, Inc. is part of the Internet - Software industry, which consists of 168 stocks and is currently ranked 77 in the Zacks Industry Rank [6] - The Internet - Software industry has gained about 13.9% year-to-date, indicating that ALAB is performing better than its industry peers [6] - In comparison, Allegro MicroSystems, Inc. (ALGM), another stock in the Computer and Technology sector, has returned 32.4% year-to-date and has a Zacks Rank of 2 (Buy) [5]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Financial Performance - Net sales for the three-month period ended September 26, 2025, were $214.294 million, an increase of 14.3% compared to $187.391 million for the same period in 2024[17] - Gross profit for the six-month period ended September 26, 2025, was $190.594 million, up from $160.433 million in the same period of 2024, reflecting a year-over-year increase of 18.8%[17] - Operating income for the three-month period ended September 26, 2025, was $6.243 million, compared to $4.067 million for the same period in 2024, indicating a year-over-year increase of 53.7%[17] - The company reported a net income attributable to Allegro MicroSystems, Inc. of $6.519 million for the three-month period ended September 26, 2025, compared to a net loss of $33.675 million in the same period of 2024[19] - Comprehensive income attributable to Allegro MicroSystems, Inc. for the three-month period ended September 26, 2025, was $6.313 million, compared to a loss of $28.312 million in the same period of 2024[19] - Allegro Microsystems reported a net income of $6,583,000 for the period ending June 27, 2025[23] - The company reported a net loss of $6.58 million for the six-month period, an improvement from a net loss of $51.23 million in the prior year[26] Expenses and Costs - Research and development expenses for the three-month period ended September 26, 2025, were $50.891 million, representing an increase of 16.5% from $43.510 million in the prior year[17] - The company incurred $974,000 and $1,574,000 in restructuring costs during the three- and six-month periods ended September 26, 2025, respectively, with cumulative costs reaching $7,334,000[78] - Allegro MicroSystems expects future restructuring charges of approximately $7,200,000 primarily related to severance and other employee-related benefits[79] - The company recorded a total pre-tax stock-based compensation expense of $13,681,000 for the three-month period ended September 26, 2025, compared to $11,545,000 for the same period in 2024[73] Assets and Liabilities - Total current assets as of September 26, 2025, were $469.460 million, a decrease from $483.036 million as of March 28, 2025[15] - Total liabilities decreased to $438.499 million as of September 26, 2025, from $489.861 million as of March 28, 2025[15] - The company’s total assets as of September 26, 2025, were $1.384 billion, a decrease from $1.421 billion as of March 28, 2025[15] - The company's total debt decreased to $287,688,000 as of September 26, 2025, from $346,126,000 as of March 28, 2025, a reduction of 17%[59] Equity and Stock Transactions - The total equity balance at September 27, 2024, was $938,708,000, reflecting a decrease from $1,109,842,000 at June 28, 2024[21] - The company issued 28,750,000 shares of common stock, raising $665,850,000 net of underwriting discounts[21] - Allegro Microsystems repurchased 38,767,315 shares of common stock, totaling $821,199,000[21] - The Company completed an equity offering of 28,750,000 shares at a public offering price of $24.00 per share, resulting in net proceeds of approximately $665,850,000[82] - The Company repurchased 10,017,315 shares of common stock for a total cash consideration of $225,549, using proceeds from the Refinanced 2023 Term Loan Facility and existing cash[84] Segment Performance - For the six-month period ended September 26, 2025, total net sales reached $417.7 million, a 17.9% increase from $354.3 million in the same period of 2024[44] - Automotive segment sales for the six-month period were $300.1 million, up 12.3% from $267.1 million year-over-year[44] - Industrial and Other segment sales increased by 34.8% to $117.6 million for the six-month period compared to $87.2 million in 2024[44] - Magnetic sensors contributed $259.9 million to total sales for the six-month period, representing a 6.6% increase from $243.8 million in the prior year[45] Cash Flow and Investments - Cash flows from operating activities for the six-month period were $81.98 million, significantly higher than $49.74 million in the same period of 2024[26] - Cash and cash equivalents at the end of the period were $126.81 million, down from $199.04 million at the end of the same period in 2024[26] - The company incurred $17.04 million in cash used for investing activities, a decrease from $20.95 million in the prior year[26] Compliance and Debt Management - The company was in compliance with its debt covenants as of September 26, 2025, indicating stable financial management[62] - The company entered into a new $375,000,000 tranche of term loans maturing in 2030, aimed at refinancing existing debt and supporting general corporate purposes[61] Shareholder Information - The basic net income per share attributable to Allegro MicroSystems stockholders was $0.04 for the three-month period ended September 26, 2025, compared to a loss of $0.18 for the same period in 2024[69] - Allegro MicroSystems' outstanding Restricted Stock Units (RSUs) increased to 3,193,179 shares as of September 26, 2025, from 2,330,344 shares at the beginning of the period[71] - The company granted 1,840,282 RSUs during the six-month period ended September 26, 2025, with a weighted-average grant date fair value of $27.03[71] Other Transactions - A loss of $34,752 was recognized due to the fair value of the forward repurchase contract in the condensed consolidated statements of operations[85] - As of September 26, 2025, Sanken held approximately 32.3% of the Company's outstanding shares of common stock[88] - The Company made a one-time payment of $5,000 to Sanken for the cancellation of Sanken's exclusive distribution rights in Japan[89] - The Short-Term Distribution Agreement with Sanken was extended by 12 months on March 31, 2025[90] - The Company agreed to discharge outstanding promissory notes from PSL valued at $10,350 in exchange for PSL equity interests[91] - Purchases from PSL totaled $9,124 and $17,394 for the three- and six-month periods ended September 26, 2025, respectively[93]

Financial Data and Key Metrics Changes - Net sales for Q2 2026 were $214 million, with non-GAAP earnings per share at $0.13, gross margin at 49.6%, and operating margin at 13.9% [11][12] - Total sales increased by 5% sequentially and 14% year over year, with automotive sales up 8% sequentially and 12% year over year [11][12] - Non-GAAP EPS increased by 44% sequentially and 63% year over year, indicating significant operating leverage [13] Business Line Data and Key Metrics Changes - Automotive sensor business grew due to increased adoption in XEV powertrain systems, with E-Mobility sales up 21% year over year [5][11] - Data Center sales established a new quarterly record, driven by server power architecture upgrades for AI workloads [6][11] - Industrial and other sales declined by 1% sequentially but grew 23% year over year, with strong performance in data center offsetting declines in consumer and broad-based industrial [11] Market Data and Key Metrics Changes - Sales by geography: 29% in China, 24% in the rest of Asia, 17% in Japan, 17% in the Americas, and 13% in Europe, with growth in all regions except Europe [12] - China led automotive design win activity, particularly in ADAS and XEV applications, with inventory levels now lean [9][10] Company Strategy and Development Direction - The company is focused on relentless innovation, particularly in E-Mobility and Data Center markets, with a strong emphasis on design wins and new product introductions [5][8] - The introduction of a 10 MHz TMR current sensor is expected to enhance competitive advantage and accelerate sales growth [9] - The company is navigating geopolitical challenges while maintaining strong design win activity in China [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about positive momentum across the business, particularly in automotive and data center markets [5][10] - The outlook for Q3 2026 anticipates sales in the range of $215 to $225 million, reflecting a 24% year-over-year increase [14] - Management noted that while there are pockets of inventory in Europe and North America, overall demand remains strong [27] Other Important Information - The company made a voluntary debt repayment of $25 million, reducing total debt to $285 million and net debt to $168 million [13] - The effective tax rate for the quarter was 6%, driven by tax planning strategies [13] Q&A Session Summary Question: Insights on automotive business performance - Automotive sales were up 8% quarter over quarter and 12% year over year, with E-Mobility up 21% year over year, driven by design wins in powertrain-agnostic applications [18][19] Question: Understanding AI server revenue potential - The company sees significant growth potential in AI servers, with current sensors and fan drivers being increasingly adopted in power supplies [21][23] Question: Regional demand environment and inventory levels - No direct impact from the Nextperia situation was observed, with growth noted in the Americas and pockets of weakness in Europe [26][27] Question: Seasonal growth expectations for Q3 - The company expects above seasonal growth in December, driven by strength in automotive and data center markets [28][29] Question: Clarification on gross margin performance - Gross margin upside was driven by higher revenue and operational efficiencies, despite some headwinds from commodity costs [31][32] Question: Current sensing technology readiness - The current sensing technology is maturing, with significant growth potential in both EVs and data centers [76][78] Question: Pricing environment outlook - The pricing environment is expected to be more stable, with some larger players reducing aggressive pricing strategies [79][80]

Core Insights - Allegro MicroSystems reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.12 per share, and showing an increase from $0.08 per share a year ago, resulting in an earnings surprise of +8.33% [1][2] - The company posted revenues of $214.29 million for the quarter ended September 2025, slightly missing the Zacks Consensus Estimate by 0.21%, but up from $187.39 million year-over-year [2] - Allegro MicroSystems shares have increased approximately 40.6% year-to-date, outperforming the S&P 500's gain of 17.2% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.17 on revenues of $225.71 million, and for the current fiscal year, it is $0.53 on revenues of $879.19 million [7] - The estimate revisions trend for Allegro MicroSystems was mixed prior to the earnings release, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market [6] Industry Context - The Electronics - Semiconductors industry, to which Allegro MicroSystems belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance & Guidance - Allegro's 2QFY26 net sales reached $214 million, exceeding the midpoint of guidance[10] - The gross margin for 2QFY26 was 49.6%, surpassing the midpoint of guidance and showing a 140 bps quarter-over-quarter improvement[10, 14] - EPS for 2QFY26 was $0.13, also above the midpoint of guidance[10, 14] - Free cash flow for 2QFY26 was $14 million, representing 6% of sales[14] - The company made a $25 million voluntary debt repayment[14] - 3QFY26 sales guidance is between $215 million and $225 million, implying 24% year-over-year growth[20] Business Highlights & Market Position - Overall net sales increased by 14% year-over-year[15] - Auto sales increased by 12% year-over-year, with e-Mobility leading the growth at 21% year-over-year[15] - Industrial and Other sales increased by 23% year-over-year, driven by strength in Data Center[15] - Over 70% of design wins were in strategic focus areas[15] - Allegro is the 1 market leader in magnetic sensing[32, 37] Strategic Focus & Long-Term Goals - The company aims for long-term gross margin >58%, operating expenses ~26% of sales, operating margin >32%, and free cash flow >25% of sales[109] - Allegro repurchased approximately 39 million shares from Sanken Electric, reducing their ownership from 51.5% to 32.5%[119]

Financial Performance - Total net sales for the second quarter of fiscal year 2026 were $214 million, representing a 14% increase year-over-year[1][2] - Automotive sales reached $155.8 million, up 12% from the previous quarter and 12% year-over-year, while Industrial and Other sales were $58.4 million, a 22% increase year-over-year[2][16] - The company expects total net sales for the third quarter to be between $215 million and $225 million, implying a growth of 24% year-over-year at the midpoint[3] - Total net sales for the three-month period ended September 26, 2025, reached $214.294 million, a 14% increase from $187.391 million in the same period last year[17] - For the six-month period ended September 26, 2025, total net sales were $417.699 million, an 18% increase compared to $354.310 million in the prior year[17] Profitability - Non-GAAP EPS for the second quarter was $0.13, an increase of over 60% year-over-year[2] - Operating income for the second quarter was $6.2 million, compared to an operating loss of $6.6 million in the same period last year[16] - The company reported a net income of $6.5 million for the second quarter, a significant recovery from a net loss of $33.7 million in the prior year[16] - The company reported a net income of $6.583 million for the three-month period ended September 26, 2025, compared to a net loss of $33.613 million in the same period last year[21] - GAAP Net Income for the three-month period was $6,583,000, compared to a loss of $13,162,000 in the previous quarter[29] Expenses - Research and development expenses for the second quarter were $50.9 million, up from $43.5 million year-over-year[16] - GAAP Operating Expenses for the three-month period were $93,049,000, compared to $94,042,000 in the previous quarter, showing a slight decrease of 1.1%[27] - Non-GAAP Operating Expenses decreased to $76,456,000 from $75,312,000, indicating a 1.5% reduction[27] Cash Flow and Assets - Cash and cash equivalents at the end of the period were $126.814 million, down from $199.038 million at the end of the previous year[21] - Total assets decreased to $1.384 billion as of September 26, 2025, from $1.421 billion as of March 28, 2025[19] - Total liabilities decreased to $438.499 million from $489.861 million during the same period[19] Non-GAAP Measures - Non-GAAP financial measures are regularly reviewed to evaluate business performance, including non-GAAP Gross Profit and non-GAAP Operating Income[22] - The company plans to continue using non-GAAP measures to provide supplemental information regarding operating performance, excluding certain non-cash or infrequent items[23] - Non-GAAP Gross Profit for the same period was $106,194,000, up from $97,984,000, reflecting an 8.3% increase[26] - Non-GAAP Operating Income for the three-month period was $29,738,000, up from $22,672,000, marking a 31.5% increase[28] - Non-GAAP Net Income attributable to Allegro MicroSystems for the three-month period ended September 26, 2025, was $23,753,000, an increase from $15,959,000 in the previous quarter[32] Margins - Gross margin for the third quarter is projected to be between 49% and 51%[4] - Non-GAAP Gross Margin for the three-month period was 49.6%, up from 48.2% in the previous quarter[26] - Non-GAAP Operating Margin for the three-month period was 13.9%, compared to 11.1% in the previous quarter, indicating a significant improvement[28] Taxation - The GAAP effective tax rate for the three-month period ended September 26, 2025, was 342.5%[31] - Non-GAAP effective tax rate for the three-month period ended September 26, 2025, was 5.7%[31] Other Financial Metrics - Adjusted EBITDA for the three-month period was $40,823,000, compared to $33,368,000 in the previous quarter, representing a 22.3% growth[29] - Non-GAAP Profit before Tax for the three-month period was $25,252,000, an increase from $17,710,000, reflecting a 42.5% rise[30] - The company incurred transaction-related costs of $1,000 for the three-month period ended September 26, 2025[32] - The company reported a loss on change in fair value of forward repurchase contract of $34,752,000 for the three-month period ended September 27, 2024[32]

Core Insights - Allegro MicroSystems reported a 14% year-over-year increase in sales, reaching $214 million for the second quarter ended September 26, 2025, driven by growth in e-Mobility and Industrial sectors [2][18] - The company achieved a non-GAAP EPS of $0.13, reflecting over 60% growth year-over-year, with significant contributions from automotive sales and data center performance [2][3] - The outlook for the third quarter of fiscal year 2026 anticipates net sales between $215 million and $225 million, indicating a potential 24% year-over-year growth [3][4] Financial Performance - **Sales Breakdown**: - Automotive sales were $155.845 million, up 12% from $139.680 million year-over-year - Industrial and Other sales reached $58.449 million, a 23% increase from $47.711 million year-over-year [18] - **Gross Margin**: - GAAP gross margin was 46.3%, compared to 45.7% in the previous year - Non-GAAP gross margin improved to 49.6% from 48.8% year-over-year [16][29] - **Operating Income**: - The company reported an operating income of $6.243 million, compared to a loss of $6.563 million in the previous year [17] Future Outlook - The company expects gross margin for the third quarter to be between 49% and 51% and anticipates interest expenses around $5 million [4][5] - Diluted earnings per share for the upcoming quarter are projected to be between $0.12 and $0.16 [4] Business Strategy - Allegro MicroSystems is focusing on expanding its presence in the automotive and clean energy sectors, leveraging over three decades of expertise in magnetic sensing and power ICs [8] - The company has reported strong year-to-date design wins, particularly in e-Mobility and data center markets, indicating a robust pipeline for future growth [2][3]