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Image source: The Motley Fool. Tuesday, Aug. 25, 2026 at 4:30 p.m. ET Senior Vice President of Investor Relations - Mitchell Haws President and Chief Executive Officer - Hong Hou Executive Vice President and Chief Financial Officer - Mark Lin Operator: Good day, and thank you for standing by. Welcome to Semtech Corporation's Second Quarter 2027 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mitch Haws, Senior Vice President of Investor Relations for Semtech. Please go ahead. Mitchell Haws: Thank you, and welcome to Semtech's Second Quarter 2027 Financial Results Conference Call. Participants on today's conference call are Hong Hou, President and Chief Executive Officer; and Mark Lin, Executive Vice President and Chief Financial Officer. Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Citibank Global TMT Conference on September 8 and the Benchmark TMT and JPMorgan Rising Tech Leaders Forum, both on September 10 in New York City. In addition, we hope you'll attend our investor event in San Jose on October 15 and during which we'll provide an in-depth overview of Semtech's strategy, differentiated technology portfolio, key growth opportunities and long-term financial targets. The event will also feature panel discussion moderated by Morgan Stanley with industry luminaries from the 650 Group, Meta and General Catalyst. A question-and-answer session, product demonstration and opportunities for in-person attendees to engage with members of the Semtech management will also be part of the agenda. Today, after the market closed, we released our unaudited results for the second quarter ended July 26, 2026, which are posted along with an earnings call presentation to our Investor Relations website at investors.semtech.com. Today's call will include various remarks about future expectations, plans and prospects, which comprise forward-looking statements. Please refer to today's press release and see Slide 2 of the earnings presentation, as well as the Risk Factors section of our most recent annual report on Form 10-K for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call. You should consider these risk factors in conjunction with our other forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call, and we'll also be referring to results for our second quarter of fiscal year 2027, unless otherwise noted. Please see today's press release and Slides 3 and 4 of the earnings presentation for information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures. With that, I will turn the call over to Hong. Hong Hou: Thank you, Mitch. Good afternoon to all of you joining today. The Semtech team executed exceptionally well this quarter, delivering record revenue across our key focus areas, earnings leverage that continue to outpace revenue growth and significant progress on portfolio optimization. Revenue was $342 million, growing 33% year-over-year, and we delivered strong operating leverage with earnings per share of $0.71, growing 73% year-over-year, more than twice as fast as revenue growth. We are at the center of one of the most significant infrastructure build-outs in history, and our portfolio plays an essential role. We are well aligned with the ramp to 1.6T complementing 800-gig growth and demand signals that we are strengthening across every part of data center portfolio: copper, fiber and photonics. We expect this momentum to carry through the second half of the year and into fiscal 2028. We're also reshaping Semtech with purpose. The announced sale of our cellular module business is a significant step in our portfolio optimization, allowing us to more sharply focus on our core growth areas. We are growing in our focus areas, sharpening the portfolio and driving operating leverage with the same goal in mind, building a predictable high-margin and high-return business. Now let me move on a discussion to our end market. Infrastructure net sales were $124 million, up 25% sequentially and 69% year-over-year, driven by outstanding performance in our data center business. Data center revenue was a record $100 million, up 39% sequentially and 91% year-over-year, supported by continued strength in 800-gig, 1.6T CopperEdge and the start of our 1.6T FiberEdge ramp. Our FiberEdge TIA driver solutions remain in exceptionally strong demand, and we continue to deepen our engagement across all the leading hyperscalers. We are now designed into every module provider in our target markets. Several on a sole-source basis, a reflection of technology differentiation and the supply availability we bring across both fully retimed and linear architectures. We're also seeing increasing engagement from a broader array of customers on emerging technologies like NPO and XPO as the networking ecosystem looks to us to align and help define the next generation of high-density, low-power optical architectures in our shared technology road map. On CopperEdge, we believe our linear equalizer solutions are the de facto industry standard. CopperEdge products up to 1.6T are solutions that are ready for volume deployment. We are currently engaging across a number of hyperscalers in cable and onboard applications and in design-in phase at all bandwidth up to 3.2T, thanks to linear equalizers compelling advantage in link margin performance and power savings. Based on strong market demand and the design win momentum, we expect continued revenue growth of 1.6T portfolio with the FiberEdge expected to exceed 50% market share by the end of the fiscal year and the CopperEdge already taking the lion's share of the linear equalizer market. We have made excellent progress in our photonics portfolio, broadening our customer base in both gain chips and high-power CW lasers, addressing both high-speed transceivers and CPO scale-up applications. Feedback from customer evaluations of our high-power CW laser for coherent light and 1.6T transceiver applications has been very positive, citing differentiating over temperature performance and power efficiency. We expect revenue contribution of CW lasers for transceivers to start in the first half of fiscal 2028. We're also pleased to have brought onboard photodiode design resources headed by an industry leader, expanding our photonics portfolio to PD arrays in the near future. Our combined PD and TIA design team has already engaged with the key customers, and we expect to deliver co-optimized high-performance solutions. Our photonics portfolio now spans gain chips, high-power lasers, semiconductor optical amplifiers and high-speed photodiodes for scale-up, scale-out and scale across data center connectivity applications. With this expanded portfolio, we are positioned to develop new growth drivers and grow our content per transceiver from high single-digit dollars to high double-digit dollars as the industry transitions from 800 gig to 3.2T, cementing our position as a true solution provider. On our capacity expansion plan, our team executed very well, securing equipment deliveries for this fiscal year and acquiring clean room space to fulfill strong customer demand. In less than 6 months, we completed a series of photonic acquisitions, procured fab equipment, expanded clean room space and onboarded exceptional management and technical talent. We have established a solid foothold in the photonics space and set a path for strong future growth. Given record backlog we carry into the third quarter, we project a 45% sequential revenue growth in data center, representing approximately 160% growth over the same period last year. We expect accelerating year-over-year growth into fourth quarter and continued momentum throughout fiscal 2028. Now moving to our high-end consumer end market. Net sales for Q2 were $39 million, up 2% sequentially and down 5% year-over-year. Our TVS business grew sequentially and remains very resilient in light of memory constrained pressure across the industry. Revenue growth continued to benefit from our strong share at the premium brand handset manufacturers, where we are expanding our content per device. SurgeSwitch, our newest circuit protection solution, is opening a new layer of TVS opportunity, addressing a gap as rugged mobile devices and high-performance portable systems push towards more demanding power and reliability standards. Our PerSe capacitive sensor design win pipeline continues to grow in specific absorption rate, smart wearable and other consumer applications, expanding with the lead customers on a broadening range of applications. The combined capacitive and force sensing offerings elevate our value proposition, strengthen customer retention and are pulling through sensors and TVS sales within the same customer base. We expect our design win pipeline to support the long-term growth for this business. Now moving to our industrial end market. Q2 industrial net sales were $179 million, up 16% sequentially and up 25% year-over-year, driven by another record quarter for LoRa. LoRa-enabled net sales were $58 million, up 31% sequentially and up 58% year-over-year, another all-time record. Our LoRa Gen 4 platform with the LoRa Plus, other RF protocols continues to gain market traction, and we expect it will be a key driver for the future growth. Gen 4 also delivers dual band capability and expand data throughput to 2.6 megabit per second, while preserving the sensitivity, multi-protocol flexibility and ultra-low power consumption that defines the LoRa advantage. This feature set enables new class of Edge AI applications while maintaining the long battery life and extended reach that our customers depend on and opens up incremental application verticals within smart home and security. We also continue to see LoRaWAN expanding into new use cases. In public safety, sensors can now transmit high-fidelity audio for AI-based verification rather than simple alerts. And in industrial environment, our work with industry leaders demonstrates how LoRaWAN and Edge AI together enable predictive maintenance at a level of the detail that legacy low-power sensors could not support. Amazon Sidewalk continues to build momentum, following Ring's launch of a new line of LoRa-based sensors in the U.S., Sidewalk is now expanding internationally, starting with Canada and Mexico, with Europe, Australia and Japan expected to follow. This is a meaningful step towards mass-market consumer adoption at Amazon's scale. Together, our 3 pillars LoRaWAN for industrial and commercial deployments, LoRa Plus with multi-protocol flexibility for smart home and security and the Amazon Sidewalk for mass-market consumer applications continue to create a solid framework for growth. We project another all-time high for LoRa revenue in Q3 with a growth of about 15% sequentially, equating to year-over-year growth about 65%. Our IoT systems and connectivity business recorded Q2 net sales of $98 million, up 11% sequentially and year-over-year. Our AirLink routers saw strong new business activity across mission-critical applications, driven by growing engagement with the national carrier partners on 5G stand-alone network slicing. This momentum was reinforced by our RX400 and EX400 5G RedCap routers moving into full-scale production this quarter, with wins continue to convert into shipment across a broad range of customers. We also continue to invest in AirLink software platform to provide new security and device management capabilities. These capabilities are giving mission-critical customers greater visibility and control as they manage larger, more complex deployments, reflecting our broader commitment to software R&D as a way to deliver more capability and values to our customers over time. In summary, our second quarter results reflected significant progress in Semtech's transformation, including a strong winning culture. But to be clear, the progress we are making is just the foundation, not a finish line. Our priorities for fiscal 2027 remain the same and are straightforward. First, supporting our unprecedented backlog and growth opportunities, we are actively securing incremental capacity for fiscal 2028 and beyond. Second, intensifying R&D investment to support customer technology road maps in a rapidly advancing market and adding new growth drivers, specifically in solution offerings for lasers, photodiodes, drivers and TIAs for 3.2T coherent light, XPO, NPO and CPO applications. And third, continuing portfolio optimization. We see this as a continuous journey, and there is more work ahead of us as we reshape Semtech. This is such an exciting time for Semtech. The business is just starting to inflect and the opportunities ahead has never been more compelling. With that, I will turn the call over to Mark for additional details on our financial results and our third quarter outlook. Mark? Mark Lin: Thank you, Hong. For Q2, we recorded our 10th consecutive quarter of net sales growth with record net sales of $342 million, above the high end of our outlook range. Net sales grew 17% sequentially and 33% year-over-year. Reflective of leverage in our operating model, we reported adjusted diluted earnings per share of $0.71, which increased at over 2x the rate of net sales growth on both a sequential and year-over-year basis. Net sales trends by end market, reportable segment and geographic region are included in the accompanying earnings presentation. Adjusted gross margin was 54.5%, up 150 basis points sequentially and at the high end of our outlook. Total semiconductor products gross margin was 62.8%, up 210 basis points sequentially and above the high end of our outlook, reflecting particularly strong contribution from 1.6T FiberEdge and CopperEdge and continued growth from our LoRa portfolio. We announced the signing of a definitive agreement to divest our cellular module business, which is recorded as held for sale on the Q2 balance sheet. To facilitate comparability for our go-forward business, we added an adjusted gross margin disclosure in our earnings release and earnings presentation that excludes the held-for-sale business. Excluding the cellular module business, Q2 adjusted gross margin was 59.7% or 520 basis points above consolidated gross margin, reflecting the magnitude of the structural shift on top of the 150 basis points of sequential consolidated gross margin improvement. We expect to provide a gross margin outlook, including and excluding the cellular module business until the close of the divestiture, which is expected to occur in the fourth quarter of the current fiscal year. We also expect the transaction to be EPS neutral on a non-GAAP basis. Adjusted net operating expenses were $103 million, below the low end of our guidance range, reflecting timing of project-related expenses. Demonstrating the operating leverage in our business, a number of metrics were favorable to the high end of our guidance range, including adjusted operating income of $84 million, adjusted operating margin of 24.4%, adjusted EBITDA of $91 million and adjusted EBITDA margin of 26.6%. Reflective of capital structure changes, Semtech remained in a net interest income position in Q2. We recorded adjusted diluted earnings per share of $0.71, above the high end of our guidance range, up 39% sequentially and up 73% year-over-year. Operating cash flow for Q2 was $69 million, up 90% sequentially from $36 million and up 55% from $44 million a year ago. Free cash flow for Q2 was $61 million, up 119% sequentially from $28 million and up 48% from $42 million a year ago. CapEx was 2% of net sales and includes expenditures to grow fab capacity supporting gain chips and CW lasers. We expect CapEx to grow as a percentage of sales, but to remain manageable and generally be below 5% of net sales, though timing of construction and equipment delivery could increase this percentage slightly on a single quarter basis. Our Q2 ending cash and cash equivalents balance was $204 million, and the principal amount of debt was $503 million, and net leverage ratio was 1.1. Now turning to our outlook for the third quarter of fiscal year 2027. We currently expect net sales of $410 million, plus or minus $5 million, up 20% sequentially and up 54% year-over-year at the midpoint, with growth expected across each of our segments. We expect net sales from our infrastructure end market to increase sequentially with projected sequential data center growth of 45% or 160% year-over-year with continued strong contribution from our 800-gig portfolio and a meaningful ramp in 1.6T CopperEdge and FiberEdge. We expect net sales from our high-end consumer end market to increase, benefiting from seasonal trends, market share gain in our TVS products and contributions from our sensing portfolio. We expect net sales from our industrial end market to broadly grow with LoRa revenue increasing about 15% sequentially and 65% year-over-year. Based on expected product mix and net sales levels, we expect adjusted gross margin to be 58.3%, plus or minus 100 basis points. At the midpoint, this equates to an increase of 380 basis points sequentially and 530 basis points year-over-year. Our gross margin outlook, excluding the cellular module business, is expected to be 63.9% at the midpoint, an incremental 560 basis points from the midpoint of the consolidated adjusted gross margin outlook. Adjusted net operating expenses are expected to be $112 million, plus or minus $3 million. Included in this outlook is increased R&D spend to accelerate time to market on key data center projects, along with SG&A that declines as a percentage of revenue. We have demonstrated strong returns on our R&D investment and believe we remain prudent on SG&A spend. This results in consolidated adjusted operating margin at the midpoint of 31%, up 660 basis points sequentially and up 1,040 basis points year-over-year. Adjusted EBITDA is expected to be $134 million, plus or minus $4 million, resulting in adjusted EBITDA margin at the midpoint of 32.8%, up 620 basis points sequentially and up 930 basis points year-over-year. We expect adjusted interest and other expenses net to be approximately $0.5 million. We expect an adjusted normalized income tax rate of 18%, reflecting geographic mix of income. These amounts are expected to result in adjusted diluted earnings per share of $1.05, plus or minus $0.03, up 48% sequentially and up 119% year-over-year at the midpoint, more than 2x revenue growth based on an expected weighted average share count of 99 million shares. I look forward to providing our financial framework and multiyear outlook at our upcoming investor event on October 15. We expect the framework will highlight the operating leverage in our business model, namely increasing gross margin, reflecting strong contributions from data center and LoRa, operating margin that grows with scale and with disciplined spend in G&A helping to support R&D investment and a structural shift in margins following the cellular module divestiture, all of which are expected to support strong EPS, EBITDA and cash flow metrics. With that, I'll turn it back to Mitch. Mitchell Haws: Thank you, Mark. We can now turn the call back over to the operator for the question-and-answer session. Operator: [Operator Instructions] Our first question is from Quinn Bolton with Needham & Company. Quinn Bolton: Congratulations on the strong results. Hong, you mentioned needing to go out and secure capacity for fiscal -- sorry, calendar 2028 and beyond. But the data center business, I think you guided up 160% year-on-year in the third fiscal quarter. It sounds like it accelerates in the fourth fiscal quarter. How are you feeling near term about capacity and your ability to support continued upside in the data center business? And then I've got a follow-on data center question. Hong Hou: We anticipated a very rapid data center revenue growth. We started about 1.5 years ago. And thanks to that work, we're able to have enough capacity in the near term to support the customer ramp and also some drop in orders. So that allow us to expand our market share. Now with the strong booking momentum and record backlog, we see the capacity we have secured may not be enough in supporting the FY '28, especially second half of FY '28. So working with our manufacturing partners, both for front end and back end, back end means the OSAT from testing to packaging and die separation testing, working with the manufacturing partner to increase the capacity. The great news is that we have the financial capability to work with our partners to jointly increase the capacity allocation to Semtech. Quinn Bolton: I guess maybe quickly, just Hong, does that -- would you anticipate that requiring wafer prepurchases or any kind of similar prepurchases of back-end capacity? And then my follow-on question was just it seems like there's growing discussion of NPO solutions across the ASIC landscape, and I think even at the largest GPU provider as we look into the next 12 to 24 months. Can you just give us a brief outline of how Semtech is positioned to support the NPO market as it develops? Hong Hou: Yes. Thank you. So yes, the increase of capacity for the back end is primarily increase the tester capacity by adding more testers and also getting additional manufacturing partners qualified to mitigate the potential geopolitical risk. On the front end, we have been working with a leading partner in increasing capacity. We are mobilizing all different ways in increasing the prepayment, the CapEx or some other means. But I think our goal are the same to bring additional capacity to support the growth. As for your question about NPO, yes, absolutely. That's a strong trend. The primary driver is to increase the bandwidth density. And as the data total capacity increased dramatically, while shoreline space is limited, they need to have the density, high-density packaging. We're going to be benefiting from that. We're currently engaging, I don't know, 10, 15 different programs with all the module manufacturers and some of them we directly tied to the end customers. So net-net, we're going to be benefiting from that. We are already a leading provider of TIA arrays and our laser arrays, especially the linearized version excellent as well. So I just talked about our initiative to start photodiode arrays and by co-optimization between TIAs and photodiode, and we're going to bring to our customers even better solutions. So it's a great opportunity for us that can be translated into a new growth driver for us in the future. Operator: Our next question is from Rick Schafer with Oppenheimer & Company. Richard Schafer: I'll add my congratulations to you guys. Great quarter and even better outlook. If I could, I'll just start with a quick one on LoRa. I mean the run rate there was barely $150 million just a year ago. I mean we heard your guide on that, Hong, I mean, that's close to $60 million a quarter now so well over the $150 million just in the last 12 months. So is 20% still the right bogey because I think you're going to be doing about 3x that growth in the third quarter? Hong Hou: We certainly matched the 20% ceiling with Q3. We're seeing sequential growth of 15%. Year-over-year will be translating into 65%. So that is certainly higher than 20%. And we benefited from now 3 pillars of growth, not just the traditional LoRaWAN in supporting the industrial and commercial applications, but also LoRa Plus in security and smart home, smart buildings. And now with the Amazon and Ring -- the Sidewalk and Ring's strong engagement and their plan to deploy internationally start from North America, expanding into Europe and Australia, we see that is going to be a strong growth driver as well. So I do expect year-over-year growth is going to be better than 20% going forward and it's sustainable. Richard Schafer: And then if I could, I'd love to just get a little bit more color on HieFo. Obviously, you're investing in capacity there. I think you've talked about tripling that capacity by the end of the year. So I don't know if you could level set us on where we are in the process, if there's any sense of a design funnel or revenue funnel or anything you could share on that? And then as part of your answer, I'd be curious, I mean, folks are talking about CW laser channel densities really rising, right, going up. So I'm curious how much does that pull the need or create the need for higher density drivers and TIAs? And then if so, what does that do to the complexity and the barriers to entry there for your competition? Hong Hou: Yes. So first, we start with the HieFo acquisition. Certainly, we have been the proud owner of that asset for the last 5, 6 months. We have made tremendous progress in upgrade the line and also getting more wafer starts reaching out to the customers. And with Semtech behind the asset, the customer confidence level has improved dramatically. So we're not only with the 3 anchor customers increasing -- they are increasing the demand, but we are able to expand into other key customers on the gain chips. Now we have been, as I mentioned in the prepared remarks, sending high-power lasers to 5, 6 module manufacturers, they have been evaluating and really satisfied, really, very excited about our best power conversion efficiency in the beam performance, over temperature performance. Those are pretty ideal in having 1 CW laser split into 4 channels or 8 channels for high-bandwidth transceivers like 1.6T and 3.2T. We also have the product. We start sampling to customers on semiconductor optical amplifiers. That's almost like a gain chip. You get the push current through, you will get amplification. So that is the foundation we are using. And the capacity is limited, as I mentioned. We are going to be increasing capacity by bringing more testers in the back end first. Then for the fab capacity, we're just fortunate to be able to acquire an already fully facilitized fab in the close proximity to the current facility. So that allow us to increase the fab capacity by 3 to 4x by the end of the year. So we're on track for that. As for NPO, the high density, certainly, when you do the high density, the spacing between different elements is become smaller. When you go high speed at the crosstalk and all the other performance, the packaging need is different, it's representing another new set of challenges. That's why we expand not only from the FiberEdge to photonics that will allow us to do co-optimization to improve signal integrity. And definitely, the industry is welcoming our move, and we have increasing engagement with the module manufacturers and hyperscalers because of that expanded capability. Operator: Our next question is from Sean O'Loughlin with TD Cowen. Sean O'Loughlin: I'll add my congratulations on obviously some really strong momentum across the business here. I wanted to start with just a quick -- just a high-level question on data center strength. Really strong outlook in the fourth quarter and talking about acceleration through the back half. But I think in your prepared remarks, both Hong and Mark, you both mentioned the CopperEdge in a high-volume ramp. I think that aligns with some of your past comments. But maybe you could just talk about how to think about the contributors to growth and how that aligns with some of your commentary on TIA share towards the end of this year on 1.6T? Hong Hou: Yes. Thank you, Sean, and that's a good question. So maybe I will use this opportunity to just review the progress we have made in expanding our portfolio in the data center play. So we certainly -- the recent investment community over-indexing on CopperEdge is because that's the first time, I think, the investment community paid attention to Semtech. Two years ago, we developed this redriver equalizer solution, which can be embedded in ACC cable to interconnect to adjacent racks. And so that continues to be a really de facto standard for the industry for 1.6T, 2.4T, 3.2T and going forward. Copper scale-up continues to gain momentum, especially linear equalizer onboard. So we got multiple engagement and some of them will reach the finish line in the near term. Second area, the FiberEdge, 2 years ago, 800 gig, we had a market share about 18%. So over the 2 years, we have grown the market share well over 50% for 800 gig. 1.6T is just inflecting. So 1.6T, as I said in the prepared remarks, we are expecting to exit this fiscal year by January with better than 50% of market share. So now you see the FiberEdge area, not only we are gaining shares, the volume has increased dramatically for 800 gig, for example, transceivers from 2 years ago, what, 20 million units a year to this year, probably 90 million units a year. We're gaining shares. We benefit from increased volume, and we are expanding the product offerings, 800 gig and 1.6T and drivers. The driver revenue is to come. We got a wonderful product in the evaluation will be contributing to the revenue very meaningfully. A few months ago, we acquired HieFo and marked the beginning of our journey into the photonic area, and we're going to be expanding and having meaningful play in that area as well. So now, I'd like to encourage everyone to look at the data center play for Semtech is not just the CopperEdge. CopperEdge will definitely be a significant part of the data center revenue. But think about the FiberEdge, the leading share of the TIA and drivers and photonics offering from gain chip to lasers to photodiode to SOAs. So we're going to be continue to expanding our portfolio to become a key player in this area. Sean O'Loughlin: Great. And just if I could ask a follow-up and get Mark into the party here. The gross margin expansion quarter-over-quarter is striking even if you're just looking at the consolidated and not isolating the held-for-sale business. Just wondering, I guess, question on how much of that can be thought of as mix? And if data center continues to stay at this percent of revenue, is that something we should expect -- levels that we should expect to continue? Or is there some onetime thing? And then maybe as part of that, just talk about the capacity expansion and we've heard some of your suppliers talk about what they're seeing on the pricing side and what's giving you confidence on the margin sustainability? Mark Lin: Yes, Sean, I can address that and try to address that. So the sale of the cellular module business, I expect will result in over 500 basis points of gross margin improvement. That's the structural change. That's a significant structural change that we see in our gross margin profile. And I provided some detail in my prepared remarks, but I think it's helpful to walk through those figures again. So from Q1 to Q2, our consolidated adjusted gross margins increased from 53% to 54.5%. That's 150 basis points largely on mix. Q2 adjusted gross margin, excluding modules, was 59.7%, which is an incremental 520 basis point increase. Then we move to our Q3 guide. Our consolidated adjusted gross margins are projected to increase from 54.5% to 58.3%, 380 basis point increase. And then on top of that, we had 560 basis points to arrive in adjusted gross margin guide, excluding the modules at 63.9%. So you have the 500 basis points plus gross margin improvement just based on the structural change. But the 150 basis points to 380 basis points, that's mix. I think a good starting point post divestiture is that 64% gross margin. And as you're seeing the mix change, I mean mix is quite a powerful driver for Semtech as 1.6T continues to inflect as LoRa continues strong growth and 800 gig maybe just to briefly address pricing, right? We're not really seeing price erosion to 800 gig. That all compounds into some very strong mix changes, which is that 150 to 380 basis points that we demonstrated in Q2 and Q3. Operator: Our next question is from Christopher Rolland with Susquehanna. Christopher Rolland: So this was kind of asked, but maybe more simply, the data center guide or next quarter's guide driven by data center. What exactly are -- like, what did you not anticipate that is driving this? Is it the 1.6T cycle? Is it LPO? Is it really that TIA attach that you're talking about? Or is it CopperEdge? What kind of drove the marginal upside versus perhaps your expectations or even the Street's expectation, guys like me? Hong Hou: Yes. Chris, that's a good question. So if you look at the data center portfolio, we know 800 gig is going very well. We got a lion's share, and we continue the volume increase. We also know the CopperEdge 1.6T timing that has been largely on track and going with the schedule. If you say upside came from a little bit earlier inflection for 1.6T FiberEdge, we know we are in intense engagement with all module manufacturers, as I said, and their customers. So we were just not very sure about the qualification timing, and that's why we're a little conservative in guiding for Q2 at the time. Now we have all the backlog and the customers want parts tomorrow. So we definitely have a very high confidence and conviction for Q3 and Q4. So if you say what's different from a few months ago, I mean, it's just the qualification timing. When customers need a solution, they go out of the way, they accelerate the pace of new technology adoption. So that is -- I've seen that before, but this is really, in a way, it's unprecedented and from the hyperscalers to module manufacturers to the technology providers, component providers, we're working all together to accelerate that pace. Does that make sense? Christopher Rolland: Yes, that totally makes sense. And then perhaps a follow-up, just as you ramp, HieFo -- excuse me, and you have all these new products coming into this portfolio, and you talked about getting to high double-digit per transceiver content for you guys. Can you walk us through just a time frame of when you expect these products to ship in volume to the market, whether it's these high-power CW modules, photodiodes, SOAs or anything else that, that acquisition will be able to provide? Hong Hou: Yes. So Chris, we only get into this area, as I said, for 5 months or so. We certainly have a great plan and great ambition. Right now, the ongoing product shipping in volume is a gain chip, and we're going to be having the CW high-power CW lasers and SOA available for sampling and qualification from the customer side in a couple of months. And -- but the significant increase in content in optical transceivers, as we said before, is more like 3.2T because we see the ramp of the FiberEdge for 1.6T, that means the customers already wrapping up the qualification and getting ready for volume production. If they don't have a solution now, they'll probably be late. We wanted to catch the next wave, so that is 3.2T. And the good old high-power CW laser work still is the most needed for that application. By then, we wanted to make a photodiode available as well because when the data rate going higher than 200 gig, they need every bit of help from electronic component and photonic component. So the co-optimization allows us to provide a cross-reference design solution to customers. That is also very much needed for 3.2T. So to answer your question, really the significant content increase in one optical transceivers will be coincide with the 3.2T transceiver cut in. Operator: Our next question is from Harsh Kumar with BMO Capital Markets. Harsh Kumar: Hong, Mark and Mitch, congratulations on a stellar quarter and stellar guide. I had a one multipart and then another follow-up. Hong, you talked about 3.2T being the catalyst for your products catching growth. Could you talk about what the timing for 3.2T is as you see it in the field? And then I want to push back on your commentary a little bit as well. You talked about your content going from high single to kind of high double digits -- but when I look at all that you have in the pipeline, photodetectors and gain chips and drivers, et cetera, I would think the content would be more than teens. Are you just being somewhat cautious here? Or is there any other reason for that commentary? Hong Hou: Harsh, first of all, thank you for initiating coverage, and we look forward to working with you with your new platform. So probably I confused you, just high double-digit means 80%, 90% instead of 18%, 19%. So that's the content we're talking about. Harsh Kumar: And 3.2T timing, Hong? Hong Hou: 3.2T timing, I would say, probably in the 18 months or so, but I think the design window will start opening up at about in 12 months period of time. So then the early movers, they'll probably be 18 months from now, and -- but I think the meaningful deployment will start probably in 2 years. 1.6T, even 800 gig will have a really very healthy runway over the next 2 years. Harsh Kumar: And then for my follow-up, if I can ask you about ACC and LPO. The reason why I'm asking you, you're coming out as the clear leader in those 2 technologies. You talked about it, I think, a little bit more positively in this call -- can you help us still give an idea of what we should expect the growth rate to be, let's say, exiting this year or at some point in time next year, what can these 2 businesses do? Hong Hou: Yes. So the ACC, we definitely have the clear visibility with the leading hyperscalers. We are going to be having the volume deployment start from Q4. But right now, all the cable manufacturers are ordering and increasing quarter-over-quarter, but the inflection is going to be start from the Q4. Then in the meantime, we're seeing so many design activities of linear equalizer on board. So dynamics, we start understanding this emerging market better now. ACC adoption is more coincide with the new platform design. So they wouldn't be yanking out the AEC currently in use and to put in ACC. But the linear equalizers on board design is happening on the board level. So we got a lot of activities. We continue to be very bullish on that market. As for LPO, it's almost -- we had a meaningful revenue from Q1, and that has been increasing moderately. But that deployment really get the industry, give them the confidence of the linear architecture and it works really well. So that evolved into NPO and some form of CPO and then even the XPO is including the LPO form with a linear equalizer -- well, the linear architecture instead of retimed. So I think in the future, the LPO impact not only as a stand-alone transceiver, but also the proof of the concept, the proof of the technology getting incorporated in more integrated form factor like NPO. Operator: Our next question is from Joe Moore with Morgan Stanley. Joseph Moore: Congratulations. Can you talk about the strength in 800 gig? You talked about that persisting for a while. What's your visibility into that? I know 1.6T is the big ramp, but 800 seems quite strong. Can you talk about that dynamic a little bit? Hong Hou: Yes. So Joe, we enter into the year for 800 gig, the industry is forecasting 50 million transceiver units to be consumed. Now we are hearing the number of 80 million, 90 million. And we have a very healthy backlog for FiberEdge to support 800 gig. And that is a continue. And we're just getting -- picking into our new booking report this morning. So existing customers, they're increasing the demand, not decreasing. In the meantime, the 1.6T is just starting. And so the Q3 will be the first quarter for us to really have a pretty significant revenue, as I said, between 1.6T FiberEdge and 1.6T CopperEdge, we will have -- they will be surpassing 50% of total data center revenue. So 1.6T is gaining a lot of momentum and gaining momentum fast. Joseph Moore: That's very helpful. And then can you just discuss like-for-like pricing? Are you seeing any changes really in any part of your business, but particularly on the optical side, any change in pricing there to note? Hong Hou: Yes. So pricing is very favorable. Typically, as I said before, you offer 2x performance, you may be able to get 100% premium in the beginning, but it settles at a lower level. But right now, availability is more important to the customers and then the pricing is almost -- there are no erosion to be expected in the near term and at least not for any orders we booked in the backlog. Our cost is increasing slightly, and we are able to, in most of the cases, work with the customers and pass along the cost to them. And -- but we are here to build a long-term relationship with our customers. We are very mindful and not being viewed as using the seller advantage to gouge our customers. So we're working with them in a partnership fashion, but we are able to pass along the cost increases. So that's why when Mark talked about the gross margin, we're expecting the trend to continue to grow because of favorable product mix and the new product, we have a higher gross margin. Operator: Our next question is from Tore Svanberg with Stifel. Tore Svanberg: Congratulations on the record quarter. Hong, so you're going to be at $0.5 billion run rate in data center next quarter. I'm just curious as we sort of think about $1 billion in data center revenue, how should we think about the mix between FiberEdge, CopperEdge and all the new products that are coming online? Hong Hou: So that's probably the one we're going to be providing more details in our October Investor Day because we plan to get the different -- the TAM for the different applications and our market share so that you can have a more comprehensive view for multiyear model. I hope you can come to that event, sorry. Tore Svanberg: Sounds good. And as a follow-up and a similar question for Mark. So ex-modem, we'll be at 64% gross margin. How should we think about the margin contribution from some of the newer products like PD, CW lasers and so on and so forth? Are they going to be at that corporate average or perhaps even above? Mark Lin: They should be above. So all the areas that you just mentioned, CW lasers, especially, they're at a data center gross margin, which is accretive to that corporate gross margin average. Operator: Next question is from Craig Ellis with B. Riley Securities. Craig Ellis: Congratulations on the stellar performance. I wanted to look at the business through the 1.6T lens. So this sort of follows up on part of what you got to with Joe. But can you clarify what you're looking for as things get going in the third quarter as a percent of mix? And then, Hong, it sounds like we're starting stronger in FiberEdge and CopperEdge comes along. So how would mix evolve for 1.6T as a percent of total as we look out to next year? Hong Hou: So Craig, thank you for the question. In Q4 -- Q3, the 1.6T is already surpassing 50%. I can just only imagine that it's going to be continue to grow north of 50%. But 800 gig continues to be very strong, and we have the Tri-Edge legacy product continue to kick in very strong. So -- but the trend is going to be growing the percentage of 1.6T is going to be higher and higher. Craig Ellis: Got it. And then I wanted to go back to your comments where you indicated that beyond the near-term 45% Q-on-Q growth for data center in the third quarter and the 160% year-on-year growth, we could see acceleration. And the comment on backlog just suggests that you've got tremendous visibility out into fiscal '28. Can you comment on where that would be relatively greater and what some of the interactions are like with customers that are booking out that far? Is it really just you becoming a lot more strategic to the road map? Or is it that supply sufficiency point? Just help us see what you're seeing. Hong Hou: Yes. Thank you, Craig. And that -- I think it's all of the above. You see our product performance is great, and we can provide availability and also we are providing excellent services. So that has been the key drivers for us to gain shares. Operator: Our next question is from Cody Acree with The Benchmark Company. Cody Grant Acree: Congrats on the progress. Hong, maybe just a follow-up on the last question. With the bookings and backlog accelerating here in the second half, any quick thoughts on what kind of -- how long into '28 does that backlog extend? And any thoughts on what kind of growth that might support next year? Hong Hou: So the backlog for the remaining of this fiscal year, I would say, for our target is all booked. And for the next year, we probably over 70% there. And -- but the momentum is so strong. So we are going out to get more capacity secured. And so far, I would say the visibility side for the next fiscal year, we feel very confident about it. Cody Grant Acree: Do you think, Hong, that you have upside to -- with that capacity addition effort? Do you think there's room in the industry for you to secure more and to continue to service upside? Hong Hou: Yes, between 50% and 100%, there's room for that. And we definitely wanted to be able to provide our customers for the product they need. Cody Grant Acree: And then lastly, you've had a lot of success with your lead hyperscalers for ACC. Any thoughts on the expansion beyond that lead hyperscaler? How broadly do you think this gets adopted? And maybe what are the -- some of the challenges left to full adoption? Is it interoperability, support or cable qualifications? Hong Hou: So yes, at this point, for them, the availability and interoperability, probably more important for them. We have not seen many activities in driving us to interrupt with other industry participants. Cody Grant Acree: Any thoughts on breadth of adoption? Hong Hou: So it's going to be more -- with time, it's going to be broader, and we'll start with the leading one and there are multiple engagement is ongoing. Some of them is going to be reaching to the finish line. So I guess we're at the time, right? But I do encourage -- I know that we still have some in the queue, but come to our October 15 investors event. So we definitely wanted to provide very comprehensive information on our technology road map, differentiation, TAM or share and multiyear model. So that will help you to build a multiyear financial model for us. Operator: Our last question is from Scott Searle with ROTH Capital Partners. Scott Searle: Congrats on the quarter and incredible outlook in terms of data center and LoRa. Data center has been covered pretty thoroughly. So maybe hopping over to LoRa for a second. Just in terms of -- could you calibrate us quickly, you've been moving away from the China mix. It had been down under 50%. I want to just have a better idea about how that was progressing in the July quarter. And looking at the growth that you've seen from the first quarter to guidance now in the third quarter, it's up 50%. How big is Amazon now factoring into that? Are they over a 10% customer and kind of stack ranking the guidance into the third quarter? Is that mostly Amazon? Is it LoRa Plus? Is it something else there that's really driving the outlook? And lastly, to follow up now on the IoT side of the equation with modules now on the path to be divested. Other elements have arguably, periodically been core and then noncore on the router gateway and the IoT platform front. I'm wondering what the current thoughts are in terms of their continued inclusion as a core portion of Semtech going forward? Hong Hou: Thank you, Scott. On LoRa, and the majority of the revenue is still LoRaWAN and LoRa Plus start kicking in, probably representing about 20% to 25% of the total revenue mix. And Sidewalk is still, at this point, is nominal and this year will probably be high single-digit, but again a lot of potential once we are able to piggyback into the consumer at Amazon scale. As for the portfolio optimization, as we mentioned, it's a continued journey. And so far, we like the portfolio we have after the divestiture, but we'll continue to evaluate additional optimization effort. But we are focused on getting the current deal to the finish line and so which lead to the closing of the sale of the cellular module business. Operator: There are no further questions at this time. I'd like to hand the floor back over to Mitch Haws for any closing comments. Mitchell Haws: Thanks, Paul. That concludes today's call. We look forward to seeing you at various investor events during the quarter, including our Analyst Day on October 15. With that, good afternoon, everyone. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you again for your participation. Before you buy stock in Semtech, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Semtech wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $437,097!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,355,077!* Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of September 1, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Semtech (SMTC) Q2 2027 Earnings Call Transcript was originally published by The Motley Fool

Interested in Semtech Corporation? Here are five stocks we like better. Semtech posted strong Q2 results with revenue growth accelerating past 32.5% and adjusted EPS of 71 cents, beating consensus estimates significantly. The company raised guidance well above consensus, forecasting midpoint revenue of $410 million and adjusted EPS of $1.05, driven by strong AI and data center demand. Improving balance sheet trends, heavy institutional buying, and a planned cellular module divestiture support the bullish outlook, though capacity constraints and short interest remain risks. Three forces are set to push Semtech Corporation’s (NASDAQ: SMTC) uptrend higher: accelerating results, raised guidance, and an improving analyst outlook. Bullish stock price action, triggered by the company's Q2 release, confirms that a bottom is in place. With these factors in play, it's only a matter of time before the market regains traction and advances, and the upside potential is robust. → Quantum Computing Is Raising the Stakes for Cybersecurity: 5 Stocks to Watch MarketBeat’s consensus analyst estimate is just over $200, forecasting approximately 45% upside. Initial reactions from analysts following the release included gushing praise for the results and guidance, along with a reaffirmed price target from Needham that aligns with the consensus estimate. Analysts also highlighted the company’s turnaround efforts, which focus on AI and data center business alongside improving profitability and the potential for sustainable growth. → Palantir's Kool-Aid Moment: The Math Behind Karp's Forecast Why is Semtech important for AI? It makes the connections for scale-out and scale-up solutions, linking GPUs and CPUs into clusters, clusters into racks, and racks into data center supercomputers. Semtech had a solid Q2, accelerating revenue growth sequentially and year over year to over 32.5%. More importantly, the company outperformed the analysts' high bar by over 400 basis points. → DICK's Sporting Goods Faces Pain Now for a Bigger Prize Segmentally, Infrastructure grew by 69%, driven by a 39% gain in Data Center and a 64% increase in Signal Integrity. High-End Consumer was weakest at -5%, offset by a 25% increase in Industrial. Core products include optical and high-speed copper connectivity solutions. Margin is a key driver of stock price action. The company leveraged wider margins across the board due to increased revenue leverage and higher-margin business. Key takeaways include a 560 basis point (bps) increase in adjusted operating margin and a 73% increase in adjusted earnings (EPS). Adjusted EPS of 71 cents also beat consensus by more than 1,000 basis points and led to a substantial guidance improvement. Guidance reflects an inflection for this business. Revenue growth is accelerating and outperforming high expectations, and the guidance shows unexpected strength, driven by its most advanced products. The company forecasts a midpoint of $410 million in revenue and $1.05 in adjusted EPS, both well above consensus and likely to be conservative. The company’s products are clearly in demand, with new products launching this half, setting the stage for sustained strength well into next year. Semtech still carries debt and has work to do on its balance sheet, but its Q2 results reflect progress. Balance sheet highlights include improved cash and assets compounded by reduced long-term debt and total liabilities, resulting in a substantial increase in equity. Equity, the measure of shareholder value, increased by more than 35% year to date and is likely to continue improving as the year progresses. In this scenario, the company's capacity for capital returns will continue to improve as it invests in its business shift and growth. No buybacks are expected soon, but they may resume in 2027 after additional debt reduction. MarketBeat’s institutional data reveals solid support from that vector. The group owns more than 99% of the stock and is aggressively accumulating shares. The trailing 12-month balance of accumulation is about $5 to $1, with most buying in early Q3 ahead of the earnings report, foreshadowing the strong release. The likely outcome is that the group will continue to provide support and a launch pad from which price action can advance this fall. Semtech’s biggest risks are execution and capacity constraints. The company has indicated that capacity could fall short of demand sometime in 2028, making execution critical. New equipment and cleanroom space are being converted into manufacturing capacity and are expected to come online over the next few quarters. The question is the timing and whether production can ramp in time to meet demand for next-generation products, which is why short-sellers remain a risk. Short interest isn’t prohibitively high at 7%, but it's high enough to weigh on the stock and keep volatility elevated. Catalysts include Semtech's expected divestiture of its cellular module business. As a small component of the network, the business's sale will have a negligible impact on earnings but will significantly widen gross margin and inject incremental cash. The net result will be a sharper focus on high-conviction business lines and a leaner balance sheet. Long-term, the company’s exposure in edge and IoT sets it up for sustained strength as the AI industry shifts toward physical AI. Physical AI is the endgame, with autonomous machines from cars to robots active in daily life. The article "Semtech Stock Rallies on Strong Q2 Results and Raised Guidance" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Semtech Corporation SMTC shares gained 4% during Tuesday’s extended trading session after the company reported better-than-expected second-quarter fiscal 2027 results. Semtech posted non-GAAP earnings of 71 cents per share, which beat the Zacks Consensus Estimate by 14.5%. The bottom line exceeded management’s guidance of 61 cents (+/-2 cents) and reflected a robust year-over-year improvement of approximately 73.2%. Semtech beat on earnings in each of the trailing four quarters, the average surprise being 9.8%. SMTC’s second-quarter fiscal 2027 revenues of $341.9 million topped the Zacks Consensus Estimate by 4.1% and came above management’s guidance of $328 million (+/- $5 million). The top line jumped 32.7% year over year. Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote Sales from the infrastructure market totaled $123.7 million (36.2% of net sales), exhibiting year-over-year growth of 69%, supported by the expanding data center business. The increase reflected continued strength in 800G products and the early ramp of 1.6T FiberEdge and CopperEdge solutions. Sales from the industrial market amounted to $178.9 million (52.3% of net sales), up 25.1% year over year. Sales from the high-end consumer market totaled $39.2 million (11.5% of net sales), down 4.6% year over year. Signal Integrity (36.9% of net sales) sales totaled $126.2 million, up 64.3% year over year. Analog Mixed Signal & Wireless (34.3% of net sales) sales amounted to $117.4 million, which rose 27.6% year over year. IoT System and Connectivity (28.8% of net sales) sales totaled $98.3 million, up 10.7% on a year-over-year basis. FiberEdge demand remained strong across leading hyperscalers, and Semtech said it is designed into every major module provider in its target markets. The company expects 1.6T FiberEdge market share to exceed 50% by the end of fiscal 2027 and is engaged in CopperEdge design-ins at bandwidths up to 3.2T. LoRa-enabled sales set another record at $58 million, up 58% year over year. The company cited expansion across smart utilities, buildings, cities and asset management, while Amazon Sidewalk is expanding internationally after Ring's U.S. launch of LoRa-based sensors. Semtech is also expanding photonics capacity, with high-power CW laser revenues expected to begin in the first half of fiscal 2028. The non-GAAP gross margin of 54.5% expanded 130 basis points (bps) on a year-over-year basis and 150 bps sequentially. Non-GAAP operating income increased 72% year over year to $83.6 million. The non-GAAP operating margin expanded to 24.4% from 18.8% reported in the year-ago quarter. On a quarter-over-quarter basis, non-GAAP operating income increased 41%, while margin expanded 400 basis points. As of July 26, 2026, cash and cash equivalents totaled $204.1 million, up from $163.3 million as of April 26, 2026. The long-term debt amounted to $394.4 million, down from the previous quarter’s reported figure of $492 million. During the second quarter, Semtech generated operating cash flow and free cash flow of $68.9 million and $61.4 million, respectively. For the third quarter of fiscal 2027, Semtech expects net sales to be $410 million (+/- $5 million). The Zacks Consensus Estimate is pegged at $357.1 million, indicating a year-over-year rise of 33.7%. The non-GAAP gross margin is expected to be 58.3% (+/- 100 bps). The non-GAAP operating margin is anticipated to be 31% (+/- 60 bps). Non-GAAP earnings are expected to be $1.05 (+/- 3 cents) per share. The consensus mark for earnings is pegged at 73 cents per share, indicating a year-over-year rise of 52.1%. Currently, Semtech carries a Zacks Rank #2 (Buy). Some other top-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Applied Materials AMAT, Lam Research LRCX and NVIDIA NVDA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.73 per share, up 8 cents over the past seven days, indicating a year-over-year surge of 35.1%. Applied Materials shares have surged 86.7% year to date (YTD). The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by 17.8% to $9.32 per share over the past 30 days and calls for a year-over-year jump of 60.4%. Lam Research shares have soared 83.8% YTD. The Zacks Consensus Estimate for NVIDIA’s fiscal 2027 earnings has moved upward by 2 cents to $8.92 per share in the past seven days, implying a year-over-year increase of 87%. NVIDIA shares have risen 14.6% YTD. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC) : Free Stock Analysis Report NVIDIA Corporation (NVDA) : Free Stock Analysis Report Lam Research Corporation (LRCX) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

This article first appeared on GuruFocus. Revenue: Record net sales of $342 million, up 17% sequentially and 33% year-over-year. Adjusted Diluted EPS: $0.71, up 39% sequentially and 73% year-over-year. Adjusted Gross Margin: 54.5%, up 150 basis points sequentially. Adjusted Operating Income: $84 million, with an adjusted operating margin of 24.4%. Adjusted EBITDA: $91 million, with an adjusted EBITDA margin of 26.6%. Operating Cash Flow: $69 million, up 90% sequentially and 55% year-over-year. Free Cash Flow: $61 million, up 119% sequentially and 48% year-over-year. Infrastructure Net Sales: $124 million, up 25% sequentially and 69% year-over-year. Data Center Revenue: Record $100 million, up 39% sequentially and 91% year-over-year. High-End Consumer Net Sales: $39 million, up 2% sequentially and down 5% year-over-year. Industrial Net Sales: $179 million, up 16% sequentially and 25% year-over-year. LoRa Enabled Net Sales: $58 million, up 31% sequentially and 58% year-over-year. IoT Systems and Connectivity Net Sales: $98 million, up 11% sequentially and year-over-year. Q3 Outlook - Net Sales: Expected $410 million, plus or minus $5 million, up 20% sequentially and 54% year-over-year. Q3 Outlook - Adjusted Gross Margin: Expected 58.3%, plus or minus 100 basis points. Q3 Outlook - Adjusted Diluted EPS: Expected $1.05, plus or minus $0.03. Warning! GuruFocus has detected 5 Warning Signs with SMTC. Is SMTC fairly valued? Test your thesis with our free DCF calculator. Release Date: August 25, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record revenue of $342 million, up 33% year-over-year, with EPS of $0.71, up 73% year-over-year, demonstrating strong operating leverage. Data center revenue hit a record $100 million, up 91% year-over-year, with strong demand for 1.6 FiberEdge and CopperEdge products, and a projected 45% sequential growth in Q3. LoRa revenue reached an all-time high of $58 million, up 58% year-over-year, with continued momentum from LoRaWAN, LoRaPLUS, and Amazon Sidewalk expansion. Gross margin expansion is significant, with consolidated adjusted gross margin up 150 basis points sequentially to 54.5%, and expected to rise to 58.3% in Q3, driven by favorable product mix. The divestiture of the cellular module business is expected to structurally improve gross margins by over 500 basis points, with the deal expected to close in Q4 and be EPS neutral. Strong backlog and customer demand provide high visibility into fiscal 2028, with over 70% of next year's revenue already booked, supporting confidence in continued growth. Expansion into photonics, including CW lasers and photodiodes, positions Semtech to increase content per transceiver from high single-digit to high double-digit dollars, driving future growth. Capacity constraints are a concern, with the company needing to secure additional manufacturing capacity for fiscal 2028, which may require significant capital investment. The high-end consumer end market saw a 5% year-over-year decline, indicating weakness in this segment despite sequential growth. The company faces potential pricing pressure in the data center market, although current pricing is favorable, there is a risk of erosion as competition intensifies. The divestiture of the cellular module business, while beneficial for margins, may create operational disruptions and requires careful execution to avoid EPS dilution. The company's reliance on a few key hyperscaler customers for data center growth poses a concentration risk, and any slowdown in their spending could impact revenue. The photonics portfolio is still in early stages, with significant revenue contribution expected only with 3.2T transceivers, which are about 18 months away, creating a gap in near-term growth. Operating expenses are expected to increase in Q3, driven by higher R&D spend, which could pressure margins if revenue growth does not meet expectations. Q: What drove the upside in the data center business, and how are you addressing capacity constraints to support continued growth into fiscal 2028? A: Hong Hou, President and CEO, explained that the upside came from an earlier-than-expected inflection in 1.6 FiberEdge, as customers accelerated qualification timelines. He noted that while 800-gig and 1.6 copper edge were on track, the 1.6 fiber edge ramp was faster than anticipated. To support the record backlog and strong demand, Semtech is working with manufacturing partners to increase capacity, including adding more testers, qualifying additional OSAT partners to mitigate geopolitical risk, and expanding fab capacity. He confirmed the company has the financial capability to work with partners on prepayments and CapEx to secure additional capacity for fiscal 2028, particularly the second half. Q: Can you provide more color on the gross margin expansion, and is the 64% gross margin (excluding the cellular module business) a sustainable level going forward? A: Mark Lin, CFO, detailed that the gross margin improvement is driven by two factors: a structural shift from divesting the cellular module business (adding over 500 basis points) and favorable product mix. He walked through the progression: Q2 consolidated gross margin was 54.5%, but excluding modules it was 59.7%. For Q3, the consolidated guide is 58.3%, and excluding modules it is 63.9%. He stated that 64% is a good starting point post-divestiture, and as the mix continues to shift toward 1.6, LoRa, and 800-gig, the mix-driven margin expansion (150 to 380 basis points) should continue. Q: How is Semtech positioned to support the emerging NPO (near-package optics) market, and what is the timing for 3.2T transceivers? A: Hong Hou stated that NPO is a strong trend driven by the need for higher bandwidth density. Semtech is already engaging in 10-15 different programs with module manufacturers, some tied directly to end customers. The company is a leading provider of TIA arrays and laser arrays for linear architectures. He also noted that the expansion into photodiodes, combined with co-optimization between TIAs and photodiodes, will provide better solutions. For 3.2T timing, he estimated the design window will open in about 12 months, with early movers shipping in roughly 18 months, and meaningful deployment starting in about two years. He emphasized that 800-gig will still have a healthy runway over the next two years. Q: With the strong data center outlook, can you clarify the mix between FiberEdge, CopperEdge, and new photonics products as you approach the $1 billion revenue run rate? A: Hong Hou declined to provide specific mix details, deferring to the October 15 investor event where the company will provide a comprehensive multiyear model, including TAM by application and market share. However, he reiterated that 1.6 products (both fiber and copper edge) will surpass 50% of total data center revenue in Q3, and this percentage will continue to grow. He also emphasized that Semtech's data center story is not just about copper edge, but also includes FiberEdge (TIAs and drivers) and the expanding photonics portfolio (gain chips, CW lasers, photodiodes, and SOAs). Q: Can you provide an update on the HFO (photonics) acquisition, capacity expansion, and the timeline for new products like CW lasers and photodiodes to contribute to revenue? A: Hong Hou reported significant progress since acquiring HFO five to six months ago. The company has upgraded the line, increased wafer starts, and expanded beyond the three anchor customers. High-power CW lasers are being evaluated by five to six module manufacturers with positive feedback on power conversion efficiency and over-temperature performance. The company is on track to triple or quadruple fab capacity by the end of the year by acquiring a fully equipped facility near the current one. CW lasers for transceivers are expected to contribute revenue in the first half of fiscal 2028. He clarified that the significant increase in content per transceiver (from high single-digit to high double-digit dollars) will coincide with the 3.2T transceiver ramp, as co-optimization between electronic and photonic components becomes critical at data rates above 200 gig. Q: Is the 20% growth target for LoRa still accurate, given the strong 65% year-over-year growth expected in Q3? A: Hong Hou confirmed that LoRa growth will significantly exceed the 20% target. The Q3 guide implies 65% year-over-year growth, driven by three pillars: traditional LoRaWAN for industrial/commercial, LoRaPLUS for security and smart home, and Amazon Sidewalk expanding internationally. He stated that year-over-year growth better than 20% is sustainable going forward. He also noted that LoRa revenue is expected to be another all-time high in Q3, with LoRaPLUS representing about 20-25% of the mix, while Sidewalk is still nominal (high single digits) but has significant potential at Amazon's scale. Q: How is pricing trending across the data center portfolio, and are you seeing any price erosion in 800-gig? A: Hong Hou stated that pricing is very favorable, with no erosion expected in the near term for orders in the backlog. Availability is more important to customers than price right now. While costs are increasing slightly, Semtech is able to pass along cost increases to customers. He emphasized that the company is mindful of not gouging customers and is working in a partnership fashion, but the favorable product mix and new products with higher gross margins should continue to drive margin growth. Q: Can you elaborate on the strength in 800-gig and your visibility into that market, given the strong ramp of 1.6? A: Hong Hou noted that the industry forecast for 800-gig transceivers was 50 million units at the start of the year, but it is now tracking to 90 million units. Semtech has a very healthy backlog for FiberEdge supporting 800-gig, and existing customers are increasing demand. He added that 1.6 is just starting to ramp, and Q3 will be the first quarter with significant revenue contribution from both 1.6 fiber edge and copper edge, which together will surpass 50% of total data center revenue. Q: How far does the current backlog extend into fiscal 2028, and what level of For the complete transcript of the earnings call, please refer to the full earnings call transcript.

For the quarter ended July 2026, Semtech (SMTC) reported revenue of $341.9 million, up 32.7% over the same period last year. EPS came in at $0.71, compared to $0.41 in the year-ago quarter. The reported revenue compares to the Zacks Consensus Estimate of $328.37 million, representing a surprise of +4.12%. The company delivered an EPS surprise of +14.52%, with the consensus EPS estimate being $0.62. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Semtech performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Net Sales by major end markets- High-End Consumer: $39.3 million versus $39.96 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a -4.6% change. Net Sales by major end markets- Industrial: $178.9 million versus $170.55 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +25.1% change. Net Sales by major end markets- Infrastructure: $123.7 million versus $118.29 million estimated by three analysts on average. Compared to the year-ago quarter, this number represents a +68.6% change. Net Sales by reportable segment- Signal Integrity: $126.2 million compared to the $125.46 million average estimate based on two analysts. The reported number represents a change of +64.3% year over year. Net Sales by reportable segment- Analog Mixed Signal and Wireless: $117.4 million compared to the $109.99 million average estimate based on two analysts. The reported number represents a change of +27.6% year over year. Net Sales by reportable segment- IoT Systems and Connectivity: $98.3 million versus $92.71 million estimated by two analysts on average. Compared to the year-ago quarter, this number represents a +10.7% change. View all Key Company Metrics for Semtech here>>> Shares of Semtech have returned -0.5% over the past month versus the Zacks S&P 500 composite's +3.3% change. The stock currently has a Zacks Rank #2 (Buy), indicating that it could outperform the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Semtech Corporation SMTC used its fiscal second-quarter 2027 earnings call to emphasize a sharper data center inflection, with management pointing to 1.6T adoption, record backlog and rising capacity needs into fiscal 2028. The call also highlighted a structural margin reset from the planned cellular module divestiture, while LoRa remained another growth engine. Adjusted earnings were 71 cents per share, which topped the Zacks Consensus Estimate of 62 cents. Revenues of $341.9 million exceeded the $328.4 million estimate. Semtech Corporation Price, Consensus and EPS Surprise Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote President and CEO Hong Hou said data center revenues reached a record $100 million, up 39% sequentially and 91% year over year, supported by 800-gig strength and the start of the 1.6T FiberEdge ramp. Executive vice president and CFO Mark Lin guided third-quarter net sales to $410 million, plus or minus $5 million, up 20% sequentially and 54% year over year at the midpoint. Hou expects data center revenues to rise 45% sequentially and about 160% year over year. President and CEO Hong Hou said 1.6T FiberEdge should exceed 50% market share by fiscal year-end, while CopperEdge linear equalizers already command what management described as the lion's share of that market. Semtech is broadening its photonics portfolio into gain chips, high-power continuous-wave lasers, semiconductor optical amplifiers and photodiodes. Hou said content per transceiver could rise from high-single-digit dollars to high-double-digit dollars as the industry moves toward 3.2T. In Q&A, a BMO Capital Markets analyst asked about 3.2T timing. Hou said the design window should open in about 12 months, with early deployments around 18 months and meaningful deployment in roughly two years. President and CEO Hong Hou said near-term capacity is sufficient for current ramps, but bookings indicate existing capacity may not cover fiscal 2028 demand, particularly in the second half. Management is working with front-end and back-end manufacturing partners to add testers, qualify additional partners and secure greater capacity. Hou said prepayments and capital support are among the options under consideration. A Benchmark analyst asked about backlog visibility. Hou said the company's remaining fiscal-year target is fully booked and Semtech is probably more than 70% booked for the next fiscal year. Executive vice president and CFO Mark Lin said adjusted gross margin reached 54.5% in the second quarter, while the figure excluding the held-for-sale cellular module business was 59.7%. For the third quarter, Lin guided adjusted gross margin to 58.3%, plus or minus 100 basis points, and 63.9% excluding cellular modules. He described roughly 64% as a useful post-divestiture starting point. A TD Cowen analyst pressed management on margin durability. Lin said the divestiture creates more than 500 basis points of structural improvement, while favorable data center and LoRa mix provide additional support. President and CEO Hong Hou said LoRa-enabled sales reached a record $58 million, up 31% sequentially and 58% year over year. Hou expects third-quarter LoRa revenues to rise about 15% sequentially and 65% year over year. LoRa Plus accounts for about 20% to 25% of the mix, while Amazon Sidewalk remains a smaller contributor this year. An Oppenheimer analyst asked whether the prior 20% growth benchmark still applied. Hou said year-over-year growth should remain above 20% going forward, supported by LoRaWAN, LoRa Plus and Sidewalk expansion. President and CEO Hong Hou described the cellular module divestiture as part of an ongoing portfolio optimization effort. Executive vice president and CFO Mark Lin said the transaction is expected to be closed in the fourth quarter of fiscal 2027 and be neutral to non-GAAP earnings per share. Management's broader focus remains on securing capacity, increasing R&D investment and concentrating resources on higher-growth businesses. The October investor event is expected to provide multiyear financial targets and additional data center detail. SMTC currently carries a Zacks Rank #2 (Buy), accompanied by a Value Score of F, a Growth Score of A and a Momentum Score of A. Its VGM Score is C. Under the Zacks framework, the strong Growth and Momentum scores indicate favorable characteristics in those styles, while the Value Score points to a comparatively weaker valuation profile. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Rank #2 provides a positive estimate-revision signal, while the C VGM Score reflects a more balanced combined assessment across value, growth and momentum than the individual Growth and Momentum scores alone. Zacks generally views A or B Style Scores as the strongest complements to top-ranked stocks. The Zacks Rank can change as analysts revise their earnings estimates following the newly reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Semtech (SMTC) came out with quarterly earnings of $0.71 per share, beating the Zacks Consensus Estimate of $0.62 per share. This compares to earnings of $0.41 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +14.52%. A quarter ago, it was expected that this chipmaker would post earnings of $0.45 per share when it actually produced earnings of $0.51, delivering a surprise of +13.33%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Semtech, which belongs to the Zacks Semiconductor - Analog and Mixed industry, posted revenues of $341.9 million for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 4.12%. This compares to year-ago revenues of $257.6 million. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Semtech shares have added about 64.1% since the beginning of the year versus the S&P 500's gain of 11.8%. While Semtech has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Semtech was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.73 on $357.07 million in revenues for the coming quarter and $2.66 on $1.36 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Semiconductor - Analog and Mixed is currently in the top 14% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the broader Zacks Computer and Technology sector, Credo Technology Group Holding Ltd. (CRDO), is yet to report results for the quarter ended July 2026. The results are expected to be released on September 1. This company is expected to post quarterly earnings of $1.16 per share in its upcoming report, which represents a year-over-year change of +123.1%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Credo Technology Group Holding Ltd.'s revenues are expected to be $470.73 million, up 111% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC) : Free Stock Analysis Report Credo Technology Group Holding Ltd. (CRDO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Record net sales of $341.9 million, up 17% sequentially and up 33% year-over-year GAAP gross margin of 53.8% and Non-GAAP adjusted gross margin of 54.5% GAAP operating margin of 16.3% and Non-GAAP adjusted operating margin of 24.4% GAAP diluted earnings per share of $1.59 and Non-GAAP adjusted diluted earnings per share of $0.71 CAMARILLO, Calif., August 25, 2026--(BUSINESS WIRE)--Semtech Corporation (Nasdaq: SMTC), a leading provider of high-performance semiconductors powering AI data center networking and intelligent, connected Internet of Things ("IoT") devices worldwide, announced today unaudited financial results for its second quarter of fiscal year 2027, which ended July 26, 2026. "The Semtech team executed exceptionally well, delivering record revenue across our key focus areas, earnings leverage that continued to outpace revenue growth and significant progress on portfolio optimization," said Hong Hou, president and CEO. "Accelerating bookings and record backlog point to a strong inflection in growth with new revenue drivers and visibility expected to extend well into next fiscal year. Growing our focus areas and expanding margins all serve the same goal: building a predictable, high-margin and high-return business." "This was another quarter of disciplined execution, converting record revenue, margin expansion and diluted earnings per share growth into strong operating and free cash flow," said Mark Lin, executive vice president and chief financial officer. "We enter the third quarter with conviction, expecting broad-based bookings strength to translate into sustained revenue, margin and earnings growth." Second Quarter of Fiscal Year 2027 Results Third Quarter of Fiscal Year 2027 Outlook The Company is unable to include a reconciliation of forward-looking non-GAAP results to the corresponding GAAP measures as they are not available without unreasonable efforts due to the high variability and low visibility with respect to the impact of transaction, integration and restructuring expenses, share-based awards, amortization of acquisition-related intangible assets and other items that are excluded from these non-GAAP measures. The Company expects the variability of the above charges to have a potentially significant impact on its GAAP financial results. Webcast and Conference Call Semtech will be hosting a conference call today to discuss its second fiscal quarter 2027 results at 1:30 p.m. Pacific time. The dial-in number for the call is (877) 407-0312. Please use conference ID 13761388. An audio webcast and supplemental earnings materials for the quarter will be available on the Investor Relations section of Semtech's website at investors.semtech.com under "News & Events." A replay of the call will be available through September 22, 2026 at the same website or by calling (877) 660-6853 and entering conference ID 13761388. Non-GAAP Financial Measures To supplement the Company's consolidated financial statements prepared in accordance with GAAP, this release includes a presentation of select non-GAAP financial measures. The Company's non-GAAP measures of adjusted gross margin, total semiconductor products gross margin, adjusted gross margin, excluding business held for sale, adjusted product development and engineering expense, adjusted selling, general and administrative expense, adjusted operating expenses, net, adjusted operating income, adjusted operating margin, adjusted interest (income) expense, net, adjusted net income, adjusted diluted earnings per share, adjusted normalized tax rate, adjusted EBITDA and adjusted EBITDA margin exclude the following items, if any and as applicable, as set forth in the reconciliations in the tables below under "Supplemental Information: Reconciliation of GAAP to Non-GAAP Results." Share-based compensation Intangible amortization Transaction and integration related costs or recoveries Restructuring and other reserves, including cumulative other reserves associated with historical activity including environmental, pension, deferred compensation and right-of-use asset impairments Litigation costs or dispute settlement charges or recoveries Equity method income or loss Investment gains, losses, reserves and impairments, including interest income from debt investments Write-off and amortization of deferred financing costs Interest rate swap termination Induced conversion expense Loss on extinguishment of debt Debt commitment fee Goodwill and intangible impairment Amortization of inventory step-up In this release, the Company is providing a total semiconductor products gross margin metric, defined as the combined segment gross margin for the Signal Integrity and Analog Mixed Signal and Wireless reportable segments. For further information, please see the Segment Information footnote of the Company's Form 10-Q for the quarter ended July 26, 2026. The Company is also providing an adjusted gross margin, excluding business held for sale metric, defined as adjusted gross margin excluding the results of the Company's cellular module business, classified as held for sale as of period end. The Company also presents adjusted EBITDA, adjusted EBITDA margin and free cash flow. Adjusted EBITDA is defined as net income (loss) plus interest expense, interest income, (benefit) provision for income taxes, depreciation and amortization, and share-based compensation, and adjusted to exclude certain expenses, gains and losses that the Company believes are not indicative of its core results over time. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of net sales. The Company considers free cash flow, which may be positive or negative, a non-GAAP financial measure defined as cash flows provided by operating activities less net capital expenditures. Management believes that the presentation of these non-GAAP measures provides useful information to investors regarding the Company's financial condition and results of operations. These non-GAAP financial measures are adjusted to exclude the items identified above because such items are either operating expenses that would not otherwise have been incurred by the Company in the normal course of the Company's business operations, or are not reflective of the Company's core results over time. These excluded items may include recurring as well as non-recurring items, and no inference should be made that all of these adjustments, charges, costs or expenses are unusual, infrequent or non-recurring. For example: certain restructuring and integration-related expenses (which consist of employee termination costs, facility closure or lease termination costs, and contract termination costs) may be considered recurring given the Company's ongoing efforts to be more cost effective and efficient; certain acquisition and disposition-related adjustments or expenses may be deemed recurring given the Company's regular evaluation of potential transactions and investments; and certain litigation expenses or dispute settlement charges or gains (which may include estimated losses for which the Company may have established a reserve, as well as any actual settlements, judgments, or other resolutions against, or in favor of, the Company related to litigation, arbitration, disputes or similar matters, and insurance recoveries received by the Company related to such matters) may be viewed as recurring given that the Company may from time to time be involved in, and may resolve, litigation, arbitration, disputes, and similar matters. Notwithstanding that certain adjustments, charges, costs or expenses may be considered recurring, in order to provide meaningful comparisons, the Company believes that it is appropriate to exclude such items because they are not reflective of the Company's core results and tend to vary based on timing, frequency and magnitude. These non-GAAP financial measures are provided to enhance the user's overall understanding of the Company's comparable financial performance between periods. In addition, the Company's management generally excludes the items noted above when managing and evaluating the performance of the business. Certain non-GAAP financial measures are also used in the Company's compensation programs. The financial statements provided with this release include reconciliations of these non-GAAP financial measures to their most comparable GAAP measures for the first and second quarters of fiscal year 2027 and the second quarter of fiscal year 2026. The Company adopted a full-year, normalized tax rate for the computation of the non-GAAP income tax provision in order to provide better comparability across the interim reporting periods by reducing the quarterly variability in non-GAAP tax rates that can occur throughout the year. In estimating the full-year non-GAAP normalized tax rate, the Company utilized a full-year financial projection that considers multiple factors such as changes to the Company's current operating structure, existing positions in various tax jurisdictions, the effect of key tax law changes, and other significant tax matters to the extent they are applicable to the full fiscal year financial projection. In addition to the adjustments described above, this normalized tax rate excludes the impact of share-based awards and the amortization of acquisition-related intangible assets. For the first two quarters of fiscal year 2027, the Company applied a non-GAAP normalized tax rate of 17%. For the remaining quarters of fiscal year 2027, the Company's projected non-GAAP normalized tax rate is 18%. The Company's non-GAAP normalized tax rate on non-GAAP net income may be adjusted during the year to account for events or trends that the Company believes materially impact the original annual non-GAAP normalized tax rate including, but not limited to, significant changes resulting from tax legislation, acquisitions, entity structures or operational changes and other significant events. These additional non-GAAP financial measures should not be considered substitutes for any measures derived in accordance with GAAP and may be inconsistent with similar measures presented by other companies. To provide additional insight into the Company's third quarter outlook, this release also includes a presentation of forward-looking non-GAAP financial measures. See "Third Quarter of Fiscal Year 2027 Outlook" above for further information. Forward-Looking and Cautionary Statements This press release contains "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on the Company's current expectations, estimates and projections about its operations, industry, financial condition, performance, results of operations, and liquidity. Forward-looking statements are statements other than historical information or statements of current condition and relate to matters such as future financial performance including the third quarter of fiscal year 2027 outlook; future operational performance; the anticipated impact of specific items on future earnings; the Company's expectations regarding near term growth trends and market position; and the Company's plans, objectives and expectations. Statements containing words such as "may," "believes," "see," "anticipates," "expects," "intends," "positions," "plans," "targets," "projects," "objectives," "estimates," "develops," "should," "could," "will," "designed to," "projections," or "outlook," or other similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results and events to differ materially from those projected. Potential factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: the volatility of our financial results or impact of the cyclical nature of our industry, including due to a growing concentration of demand in artificial intelligence-related semiconductors, during industry downturns or due to periodic economic uncertainty; the historical rapid decrease of the average selling prices of certain products; disruptions in U.S. or foreign government operations, funding or incentives; changes in export restrictions and laws affecting the Company's trade and investments, including tariffs or retaliatory tariffs; interruption or loss of supplies or services from the limited number of suppliers and subcontractors we rely upon; our suppliers' manufacturing capacity constraints or other supply chain disruptions; failure to successfully develop and sell new products, meet new industry standards or requirements or anticipate changes in projected or end market users; failure to adequately protect our intellectual property rights; failure to make the substantial investments in research and development that are required to remain competitive in our business or to properly anticipate competitive changes in the marketplace; the likelihood of our products being found defective or risk of liability claims asserted against us; business interruptions, such as natural disasters, acts of violence and the outbreak of contagious diseases; adverse changes to general economic conditions in China; the loss of any one of our small number of customers or failure to collect a receivable from them; competition from new or established IoT, cloud services and wireless service companies or from those with greater resources; the difficulties associated with integrating ours and Sierra Wireless, Inc.'s businesses and operations successfully as well as difficulties executing other acquisitions or divestitures, including the pending divestiture of our cellular module business and attendant risks; discovery of additional material weaknesses in our internal control over financial reporting in the future or otherwise failing to achieve and maintain effective disclosure controls, procedures and internal control over financial reporting; changes in our effective tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities, or material differences between our forecasted annual effective tax rates and actual tax rates; the Company's ability to comply with, or pursue business strategies due to, our level of indebtedness or the covenants under the agreements governing our indebtedness; and adverse developments affecting the financial services industry. Additionally, forward-looking statements should be considered in conjunction with the cautionary statements contained in the risk factors disclosed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Company's Annual Report on Form 10-K for the fiscal year ended January 25, 2026, filed with the SEC on March 23, 2026 as such risk factors may be amended, supplemented or superseded from time to time by other reports the Company files with the SEC. In light of the significant risks and uncertainties inherent in the forward-looking information included herein that may cause actual performance and results to differ materially from those predicted, any such forward-looking information should not be regarded as representations or guarantees by the Company of future performance or results, or that its objectives or plans will be achieved or that any of its operating expectations or financial forecasts will be realized. Reported results should not be considered an indication of future performance. Investors are cautioned not to place undue reliance on any forward-looking information contained herein, which reflect management's analysis only as of the date hereof. These forward-looking statements speak only as of the date hereof. Except as required by law, the Company assumes no obligation to publicly release the results of any update or revision to any forward-looking statement that may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated or future events, or otherwise. Amounts reported in this press release are preliminary and subject to the finalization and filing of our unaudited financial results on Form 10-Q for the three months ended July 26, 2026. In the reported results, Q2'27 refers to the quarter ended July 26, 2026, Q1'27 refers to the quarter ended April 26, 2026 and Q2'26 refers to the quarter ended July 27, 2025. Reported amounts may not foot precisely due to rounding. About Semtech Semtech Corporation (Nasdaq: SMTC) is a leading provider of high-performance semiconductors powering AI data center networking and intelligent, connected IoT devices worldwide. Our global teams are committed to empowering solution architects and application developers to develop breakthrough products for the infrastructure, industrial and consumer markets. To learn more about Semtech technology, visit us at Semtech.com. Semtech and the Semtech logo are registered trademarks or service marks of Semtech Corporation or its subsidiaries. SMTC-F View source version on businesswire.com: https://www.businesswire.com/news/home/20260825691875/en/ Contacts Mitch HawsSemtech [email protected]