Allegro (ALGM) Q1 Revenue Jumps 22%

Core Insights - Allegro MicroSystems reported Q1 FY2026 earnings with revenue of $203.4 million, a 22% increase year-over-year, but missed analysts' GAAP revenue estimates by $33.3 million [1][5] - Non-GAAP earnings per share were $0.09, significantly below the consensus expectation of $0.20, although it represented a 200% increase from the prior year [1][2] - The company highlighted ongoing challenges with demand visibility and market execution despite strong cash generation and growth in key segments [1] Financial Performance - Revenue (GAAP) for Q1 FY2026 was $203.4 million, up from $166.9 million in Q1 FY2025, reflecting a 21.9% year-over-year change [2] - Non-GAAP EPS was $0.09, compared to $0.03 in the same quarter last year, marking a 200% increase [2] - Free cash flow (Non-GAAP) reached $51.0 million, a 119.8% increase from $23.2 million in the prior year [2] Business Segments - The automotive segment generated $144.3 million in revenue, a 13% increase year-over-year, accounting for 71% of total sales [5] - Industrial and other segment revenue was $59.1 million, increasing 50% year-over-year [5] - E-Mobility applications constituted about 50% of automotive segment revenue, reflecting the push for higher semiconductor content in vehicles [5] Margins and Cost Management - Non-GAAP gross margin decreased slightly by 0.6 percentage points year-over-year to 48.2% [2][7] - Operating margin (Non-GAAP) improved to 11.1%, up from 6.0% in the prior year [2][7] - Restructuring efforts are expected to yield $15 million in annualized savings starting in FY2026 [7] Manufacturing and Supply Chain - The company's fabless manufacturing model allowed for adaptability to supply and demand shifts while keeping capital investments modest [8] - Inventory levels decreased by $10.1 million from the previous quarter, indicating improved demand and balanced supply [8] - Voluntary debt repayments of $35 million contributed to a trend of reduced leverage, with over $140 million repaid in the past five quarters [8] Research and Development - R&D spending rose to $46.5 million (GAAP), supporting growth objectives through new design wins in magnetic sensor ICs and power ICs [9] - Competitive wins in biomedical and power applications for electric vehicles were highlighted by management [9] Future Outlook - Management projects Q2 FY2026 revenue between $205 million and $215 million, indicating a midpoint year-over-year growth of 12% [11] - Non-GAAP gross margin is forecasted in the 48–50% range, with EPS expected between $0.10 and $0.14, marking a potential 50% increase over the prior year midpoint [11] - The company remains confident in long-term growth prospects, citing strong bookings and a healthy backlog [11] Investor Considerations - Investors are focused on the company's ability to meet margin targets and sustain sales growth in e-Mobility, automotive, and industrial sectors [12] - Pricing trends in the automotive market and emerging competition in China are noted as areas to monitor [12]