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Core Insights - Semtech reported revenue of $267 million for the quarter ended October 2025, reflecting a year-over-year increase of 12.8% and surpassing the Zacks Consensus Estimate by 0.13% [1] - The company's EPS for the quarter was $0.48, up from $0.26 in the same quarter last year, resulting in a surprise of 9.09% over the consensus estimate of $0.44 [1] Financial Performance - Semtech's net sales by reportable segment for IoT Systems and Connectivity were $88.3 million, slightly below the estimated $90.92 million, but still representing a year-over-year increase of 7.1% [4] - The Signal Integrity segment reported net sales of $81.6 million, exceeding the average estimate of $79.54 million, with a year-over-year growth of 14.1% [4] - The Analog Mixed Signal and Wireless segment achieved net sales of $97 million, surpassing the estimated $96.81 million, and showing a year-over-year increase of 17.1% [4] Market Performance - Over the past month, Semtech's shares have returned -5.8%, compared to a -1.8% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Semtech (SMTC) reported quarterly earnings of $0.48 per share, exceeding the Zacks Consensus Estimate of $0.44 per share, and showing a significant increase from $0.26 per share a year ago, resulting in an earnings surprise of +9.09% [1] - The company achieved revenues of $267 million for the quarter ended October 2025, surpassing the Zacks Consensus Estimate by 0.13% and increasing from $236.8 million year-over-year [2] - Semtech has outperformed consensus EPS estimates three times over the last four quarters and has topped revenue estimates four times in the same period [2] Earnings Outlook - The sustainability of Semtech's stock price movement will largely depend on management's commentary during the earnings call and future earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.43 on revenues of $263.51 million, while for the current fiscal year, the estimate is $1.66 on revenues of $1.04 billion [7] Industry Context - The Semiconductor - Analog and Mixed industry, to which Semtech belongs, is currently ranked in the top 40% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - For Q3 FY2026, net sales were $267 million, representing a 4% sequential increase and a 13% year-over-year increase, driven by data center and LoRa portfolio momentum [5][22] - Adjusted operating margins grew by 180 basis points sequentially and 230 basis points year-over-year [5][23] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [5][26] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [23][26] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [13] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [14] Market Data and Key Metrics Changes - The data center business is expected to see continued growth, with projections for a 10% sequential increase in Q4 [27] - The high-end consumer market is anticipated to decrease by about 3% sequentially in Q4, partially offset by market share gains [27] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity offsetting declines [27] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio, including the recent acquisition of the Force Sensing business [6][20] - The strategy includes leveraging R&D resources to expand the portfolio, particularly in LoRa and data center technologies [6][19] - The company aims to strengthen its market position in next-generation data center solutions and LoRa-based IoT applications [18][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the data center business, supported by strong demand and customer engagement [8][62] - The company anticipates a meaningful contribution from LPO in Q4, with expectations for continued design wins [46][60] - Management highlighted the importance of power efficiency in their solutions, positioning the company to lead in ultra-power-efficient technologies [18][19] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing interest expenses and improving cash flow [24][25] - The adjusted net leverage ratio improved to 1.5, down from 7.2 year-over-year, reflecting strong business performance and debt reduction [27][26] Q&A Session Summary Question: Insights on CopperEdge ramping with lead CSP - Management indicated that CopperEdge is designed into three programs with a significant ramp expected starting mid-2026, which is seen as a catalyst for broader adoption [34][36] Question: Size of the ACC opportunity - Management noted that ACC is positioned between DAC and AEC, with a substantial total addressable market (TAM) and expected to capture a significant portion as deployment ramps up [38][39] Question: Growth expectations for LPO - Management expects LPO to contribute meaningfully in Q4, with a strong growth opportunity anticipated [44][46] Question: Gross margin outlook for Q4 - Management clarified that semiconductor gross margins are expected to remain healthy, driven by data center and LoRa growth, despite lower margins in IoT systems [50][51] Question: Force-sensing acquisition details - The force-sensing technology is expected to enhance the company's sensing portfolio, with integration already underway and first products shipped [65][68] Question: Divestiture of non-core assets - Management confirmed that interest from potential acquirers has increased, and the divestiture remains a top priority [82][84]

Financial Data and Key Metrics Changes - For Q3 FY2026, net sales were $267 million, representing a 4% sequential increase and a 13% year-over-year increase, driven by data center and LoRa portfolio momentum [5][22] - Adjusted operating margins grew by 180 basis points sequentially and 230 basis points year-over-year [5][23] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [5][26] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [23][26] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [13] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [14] Market Data and Key Metrics Changes - The data center market is expected to see continued growth, with projections of approximately 10% sequential growth in Q4 [27] - The high-end consumer market is anticipated to decrease by about 3% sequentially, partially offset by market share gains [27] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity [27] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio, including the recent acquisition of the Force Sensing business [6][20] - The strategy includes leveraging R&D resources to expand the portfolio, particularly in LoRa and data center technologies [6][19] - The company aims to strengthen its culture and operational excellence while addressing margin disparities through divestitures of non-core assets [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand pipeline for data center solutions, particularly in AI CapEx and low-power solutions [8][9] - The company anticipates a meaningful contribution from LPO in Q4, with expectations of continued growth in the data center business [46] - Management highlighted the importance of power efficiency in their solutions, positioning the company to lead in ultra-power-efficient technologies [18] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing interest expenses and improving cash flow [24][25] - The acquisition of the Force Sensing business is expected to enhance the company's sensing portfolio and create cross-selling opportunities [14][70] Q&A Session Summary Question: Insights on CopperEdge ramping with lead CSP - Management indicated that CopperEdge is designed into three programs with a ramp expected to start in mid-2026, which will serve as a catalyst for broader adoption among other CSPs [34][36] Question: Size of the ACC opportunity - Management noted that ACC is positioned between DAC and AEC, with significant potential to capture market share due to its power-saving advantages [38][39] Question: Growth expectations for LPO - Management expects LPO to contribute meaningfully in Q4, with a strong ramp anticipated throughout 2026 [46][62] Question: Force Sensing acquisition details - The force sensing technology enhances capabilities for smart wearables and computing, with integration already underway and first products shipped [66][70] Question: Gross margin outlook for ISC business - Management acknowledged that ISC gross margins are expected to be lower due to the mix of cellular modules, but semiconductor gross margins remain healthy [102][103]

Financial Data and Key Metrics Changes - For Q3 2026, net sales were $267 million, up 4% sequentially and up 13% year-over-year, driven by data center and LoRa portfolio momentum [4] - Adjusted operating margins grew 180 basis points sequentially and 230 basis points year-over-year [4] - Adjusted diluted earnings per share were $0.48, up 17% sequentially and 85% year-over-year [25] - Adjusted EBITDA was $62.7 million, up 11% sequentially and 23% year-over-year, with an adjusted EBITDA margin of 23.5% [22] Business Line Data and Key Metrics Changes - Infrastructure net sales were $77.9 million, up 6% sequentially and 18% year-over-year, supported by data center business [7] - Data center net sales reached a record $56.2 million, up 8% sequentially and 30% year-over-year [8] - High-end consumer net sales for Q3 were $41.9 million, up 2% sequentially and 5% year-over-year [12] - Industrial net sales were $147.2 million, up 3% sequentially and 12% year-over-year, driven by strong LoRa performance [13] Market Data and Key Metrics Changes - The data center business is expected to see continued growth, with projections for a 10% sequential increase in Q4 [26] - The high-end consumer market is anticipated to decrease by about 3% sequentially in Q4, partially offset by market share gains [26] - The industrial end market is expected to remain flat, with growth in IoT systems and connectivity [26] Company Strategy and Development Direction - The company is focused on capturing growth opportunities in core assets and optimizing its portfolio [19] - The acquisition of the Force Sensing business is expected to enhance the sensor portfolio and create cross-selling opportunities [5][13] - The company aims to lead in ultra-power-efficient solutions across high-bandwidth data center networking and IoT applications [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the data center business, supported by strong demand for low-power solutions [9][10] - The company is well-positioned to drive LoRa adoption with new capabilities and features [15] - Management highlighted the importance of maintaining a strong balance sheet and reducing interest expenses to support strategic investments [24] Other Important Information - The company completed a $402.5 million convertible note offering, significantly reducing annual interest expenses [23][24] - Operating cash flow for Q3 was $47.5 million, up 60% year-over-year, indicating strong cash generation [25] - The company is actively engaged in divesting non-core assets, with multiple indications of interest from potential acquirers [6][52] Q&A Session Summary Question: What is the outlook for CopperEdge with the lead CSP? - Management indicated that CopperEdge is designed into three programs, with a substantial ramp expected throughout fiscal year 2026 [30][31] Question: How does LPO fit into the market? - Management anticipates a meaningful contribution from LPO in Q4, with strong design wins expected [34] Question: What is the expected gross margin for Q4? - The semiconductor gross margin is projected to be 60.5%, with lower margins anticipated in the IoT systems and connectivity segment [57] Question: What has changed regarding the divestiture of non-core assets? - Management noted increased interest from potential acquirers due to improved geopolitical conditions and business opportunities [52] Question: What is the status of the ACC opportunity? - Management confirmed that there are no reliability issues with ACC, and the ramp is expected to begin in Q4 [60]

Core Insights - Semtech Corporation (NASDAQ:SMTC) is a mid-cap technology company recognized for its innovative semiconductor products and operates in a competitive market alongside firms like LYFT, GTLB, EPAM, and ONTO, which exhibit strong demand trends and potential for significant brokerage upside [1] Market Performance - On November 24, 2025, Morgan Stanley set a price target of $64 for SMTC, indicating a potential downside of approximately -5.79% from the current trading price of $67.93, while SMTC's current price of $68.13 reflects a 6.70% increase, or $4.28, showcasing positive market sentiment [2] - The U.S. stock markets have experienced a bull run since early 2023, with the Dow, S&P 500, and Nasdaq Composite gaining 9.1%, 12.5%, and 15.5% respectively, supporting the growth potential of mid-cap stocks like SMTC [3] Stock Volatility and Metrics - SMTC's stock has demonstrated significant volatility, with a 52-week high of $79.52 and a low of $24.05, and it fluctuated between $64.51 and $68.39 on the current day, with a market capitalization of approximately $5.91 billion and a trading volume of 753,419 shares [4] Investment Strategy - Investing in mid-cap stocks like SMTC is viewed as a beneficial strategy for portfolio diversification, offering the growth potential of small caps combined with the stability of large caps, making them attractive for investors looking to capitalize on current market trends [5]

Q3'26 Financial Performance - Net sales reached $267.0 million, reflecting a 29% contribution from Infrastructure, 16% from High-End Consumer, and 55% from Industrial end markets[15] - Infrastructure net sales were $77.9 million, with a Q/Q increase of 6% and a Y/Y increase of 18%[19] - High-End Consumer net sales were $41.9 million, showing a Q/Q increase of 2% and a Y/Y increase of 5%[23] - Industrial net sales amounted to $147.2 million, with a Q/Q increase of 3% and a Y/Y increase of 12%[27, 28] - GAAP gross margin was 51.9%, while adjusted gross margin was 53.0%[29, 45] - GAAP operating income was $31.1 million, and adjusted operating income was $54.9 million[29, 53] - Adjusted EBITDA reached $62.7 million, resulting in an adjusted EBITDA margin of 23.5%[29] Q4'26 Outlook - Projected net sales are $273.0 million, with a potential fluctuation of +/- $5.0 million[35] - Adjusted gross margin is expected to be 51.2%, with a potential fluctuation of +/- 50 bps[35] - Adjusted operating income is forecasted at $48.6 million, with a potential fluctuation of +/- $3.0 million[35] - Adjusted diluted earnings per share are anticipated to be $0.43, with a potential fluctuation of +/- $0.03[35]

Financial Performance - Record net sales of $267.0 million, representing 13% year-over-year growth[4] - GAAP gross margin of 51.9%, up from 51.1% a year ago, and Non-GAAP adjusted gross margin of 53.0%, up from 52.4% a year ago[4] - GAAP operating margin of 11.6% compared to 7.5% a year ago, and Non-GAAP adjusted operating margin of 20.6% compared to 18.3% a year ago[4] - Non-GAAP adjusted diluted earnings per share of $0.48 compared to $0.26 a year ago[4] - Adjusted EBITDA of $62.7 million, with an adjusted EBITDA margin of 23.5%[5] - Q3'26 adjusted operating income (Non-GAAP) increased to $54.9 million, up from $48.6 million in Q2'26 and $43.4 million in Q3'25, reflecting a year-over-year growth of 26.5%[35] - Q3'26 adjusted EBITDA reached $62.7 million, compared to $56.5 million in Q2'26 and $51.1 million in Q3'25, indicating a 22.5% increase year-over-year[41] - The operating margin (GAAP) for Q3'26 improved to 11.6%, a significant recovery from a loss margin of (6.3)% in Q2'26 and an increase from 7.5% in Q3'25[41] - Q3'26 net loss (GAAP) narrowed to $(2.9) million, a substantial improvement from $(27.1) million in Q2'26 and $(7.6) million in Q3'25[38] - Adjusted diluted earnings per share (Non-GAAP) for Q3'26 was $0.48, up from $0.41 in Q2'26 and $0.26 in Q3'25, representing an 84.6% increase year-over-year[38] - Q3'26 total operating expenses (GAAP) decreased to $107.4 million from $150.3 million in Q2'26, showing a reduction of 28.5%[35] - The company reported an adjusted net income (Non-GAAP) of $44.1 million in Q3'26, compared to $36.7 million in Q2'26 and $20.3 million in Q3'25, marking a 117.8% increase year-over-year[38] Future Outlook - Fourth quarter outlook projects net sales of $273.0 million, with a variance of +/- $5.0 million[6] - Expected adjusted diluted earnings per share for the fourth quarter is $0.43, with a variance of +/- $0.03[6] Cash Flow and Assets - Free cash flow for Q3'26 was $44.6 million, up from $41.5 million in Q2'26 and $29.1 million in Q3'25[30] - Total current assets increased to $620.9 million as of October 26, 2025, compared to $585.5 million on January 26, 2025[28] - Long-term debt decreased to $490.5 million from $505.9 million since January 26, 2025[28] - Cash and cash equivalents rose to $164.7 million from $151.7 million since January 26, 2025[28] Market Position and Strategy - The company is focused on ultra-power-efficient solutions for high-bandwidth data center networking and IoT applications[3] - The company anticipates ongoing growth trends and market position improvements in the IoT and cloud connectivity sectors[19] - The company is focused on empowering solution architects and application developers to create innovative products for various markets[23] Segment Performance - The company reported a segment gross margin of 61.3% for total semiconductor products in Q3'26[32] - Gross profit for Q3'26 was $138.5 million, resulting in a gross margin of 51.9%, compared to 52.1% in Q2'26 and 51.1% in Q3'25[26][32] Interest and Debt - Interest expense (GAAP) for Q3'26 was $26.2 million, significantly higher than $4.7 million in Q2'26 but lower than $20.3 million in Q3'25[38]