10-Q · May 27, 2026
Semtech Corporation reported impressive Q1 FY2027 results, driven by strong demand across all segments, particularly in infrastructure and industrial end markets. Revenue reached $291 million, a 16% increase…
Earnings analysis · 10-Q
SMTC earnings analysis
Filed August 26, 2026 · Our reading of the company's report
The latest report
Semtech delivered strong second-quarter execution, with revenue up 32.7% year over year to $341.9 million, gross margin expanding to 53.8%, and all three reportable segments growing. Cash generation also improved, with…
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Semtech delivered strong second-quarter execution, with revenue up 32.7% year over year to $341.9 million, gross margin expanding to 53.8%, and all three reportable segments growing. Cash generation also improved, with six-month operating cash flow of $105.1 million, while $204.1 million of cash and $356.6 million of undrawn capacity support liquidity. The principal offsets are lower IoT Systems and Connectivity margin, concentration in data-center demand, substantial tax-benefit support to GAAP earnings, and execution risk surrounding the planned $62.0 million cellular-module divestiture.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
What stood out
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Revenue accelerates on infrastructure demand
Second-quarter net sales were $341.9 million, up 32.7% from $257.6 million in the prior-year quarter. Growth was driven primarily by stronger demand and higher volume in infrastructure and industrial markets.
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All segments deliver year-over-year growth
All three reportable segments grew year over year: Signal Integrity increased 64% to $126.2 million, Analog Mixed Signal and Wireless increased 27% to $117.4 million, and IoT Systems and Connectivity increased 11% to $98.3 million.
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Gross margin expands despite IoT mix pressure
Gross profit rose to $183.8 million from $134.1 million, while consolidated gross margin expanded to 53.8% from 52.1%. Signal Integrity margin improved to 65.3% from 62.4%, although IoT Systems and Connectivity declined to 34.0% from 39.5%.
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Operating leverage returns
Operating income was approximately $55.8 million, calculated from $183.8 million of gross profit less $128.0 million of operating expenses, implying a 16.3% operating margin. Operating expenses declined 15% year over year, primarily because the prior-year quarter included a $42.0 million goodwill impairment.
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Cash generation improves meaningfully
Six-month operating cash flow increased to $105.1 million from $72.2 million. Capital expenditures were $15.7 million versus $4.5 million, implying six-month operating cash flow less capex of approximately $89.4 million.
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Strong liquidity and lower interest burden
Liquidity remained solid with $204.1 million of cash and cash equivalents and $356.6 million of available undrawn revolving capacity at July 26, 2026. The company had $402.5 million of 2030 Notes outstanding and no revolving loans outstanding.
What to watch
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Cellular module divestiture execution risk
Semtech agreed to sell its cellular module business to Compal for approximately $62.0 million in cash, with closing expected in the fourth quarter of fiscal 2027. The business represents a substantial portion of the $98.3 million IoT Systems and Connectivity segment, creating execution, separation, customer-retention and potential impairment risks.
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IoT profitability remains under pressure
IoT Systems and Connectivity gross margin fell to 34.0% from 39.5% year over year, primarily due to unfavorable product mix. Managed connectivity sales also declined approximately $2.1 million in the quarter, increasing pressure on the segment's profitability ahead of the divestiture.
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Trade and geographic concentration risk
The company is exposed to tariff and trade-policy volatility while 85% of second-quarter sales were outside the United States and approximately 70% were to Asia-Pacific customers. Sales through independent distributors represented 75% of quarterly revenue, adding channel and demand-visibility risk.
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GAAP earnings contain substantial tax benefit
Second-quarter income tax benefit was $101.4 million, including a $112.4 million non-cash benefit from releasing a U.S. valuation allowance. Management stated that future changes in profitability estimates could cause valuation-allowance adjustments and significant effective tax-rate volatility.
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Data-center demand concentration
Infrastructure growth was highly concentrated in data centers: quarterly infrastructure sales increased $50.4 million, including an approximately $47.4 million increase in data center sales. A reversal in AI or data-center demand could therefore have a disproportionate effect on growth.
Management's outlook
The 10-Q MD&A does not provide quantitative quarterly or full-year guidance. Q3 outlook was provided in the August 25, 2026 earnings release rather than in the filing.
Earlier filings 4
10-K · March 23, 2026
Semtech reported fiscal 2026 net sales of $1,049,975,000 (up 15% vs. $909.3M in 2025) with gross profit of $542,144,000 and gross margin expanding to 51.6% from 50.2%. Operating cash flow was strong at $181,168,000…
10-K · March 25, 2025
Semtech reported fiscal 2025 net sales of $909.3 million, up 5% from $868.8 million in fiscal 2024, driven by a 48% increase in Signal Integrity and 24% growth in Analog Mixed Signal and Wireless. Gross profit recovered…
10-Q · December 3, 2024
Semtech reported quarterly net sales of $236,825,000 (up $35,926,000 vs. $200,899,000 a year ago) and delivered operating income of $17,785,000 versus an operating loss of $(12,373,000) in the prior-year quarter.…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.