Semtech Lifts Q3 Outlook, Maps $3.2B FY2030 Path on AI Data Center Growth

Key Points

• Semtech raised its fiscal Q3 2027 outlook to $417.5 million in revenue at the midpoint, up 56% year over year, with 59% adjusted gross margin and $1.14 in adjusted diluted EPS. The cellular modules divestiture is still expected to close in fiscal Q4, pending regulatory approvals.
• The company’s balance sheet has improved significantly: net debt fell to $299 million from $1.3 billion in fiscal 2024, while net leverage declined to 1.1 times from 10.5 times. Semtech expects leverage to drop below one times and ultimately reach net cash.
• AI data-center connectivity and LoRa are driving Semtech’s growth strategy. The company targets $3.2 billion in fiscal 2030 revenue, including $2.1 billion from data centers, alongside 70% adjusted gross margin, 48%–50% operating margin and adjusted EPS of $12.40–$13.

Semtech NASDAQ: SMTC raised its fiscal third-quarter 2027 outlook and outlined long-term financial targets through fiscal 2030, citing growth in data center connectivity and LoRa products, higher-margin portfolio mix and a substantially improved balance sheet.

During the company’s analyst day, Semtech said it expects fiscal Q3 2027 revenue of $417.5 million at the midpoint, representing 56% year-over-year growth. The outlook calls for consolidated adjusted gross margin of 59%, or 64% excluding the cellular modules business that Semtech expects to divest, as well as adjusted operating margin of 33% and adjusted diluted earnings per share of $1.14.

The company said it continues to expect regulatory clearances for the cellular modules divestiture and anticipates closing the transaction in its fiscal fourth quarter.

Balance Sheet Transformation

Semtech highlighted progress in reducing leverage and interest expense since fiscal 2024. The company said net cash interest costs were $82 million in fiscal 2024, while free cash flow was negative $123 million. As of the second quarter of fiscal 2027, annual free cash flow was $193 million, according to the presentation.

Net debt declined to $299 million at the end of Q2 2027 from $1.3 billion at the end of fiscal 2024, while net leverage fell to 1.1 times from 10.5 times. Semtech reported $503 million in debt and $204 million in cash and cash equivalents at the end of the quarter, alongside $357 million of availability under its line of credit.

The company said $100.5 million of debt comes due in fiscal 2028, with no scheduled maturities in fiscal 2029 or fiscal 2030. The remaining $402.5 million is due in fiscal 2031. Semtech expects its net leverage ratio to move below 1 times, with a longer-term maintenance target below zero net leverage.

Data Center and LoRa Drive Portfolio Shift

Semtech said data center and LoRa each represented about 7% of total revenue in fiscal 2024. For fiscal Q3 2027, excluding the cellular modules business, the company expects data center products to account for 40% of revenue and LoRa products to represent 19%.

Data center revenue was $61 million for all of fiscal 2024 and is expected to reach $145 million in fiscal Q3 2027 alone. LoRa revenue also totaled $61 million for fiscal 2024 and is expected to be $68 million in the third quarter of fiscal 2027.

Hong Hou, Semtech’s president and chief executive officer, said the company sees expanding LoRa opportunities across smart buildings, security, drone control, edge AI connectivity and Amazon Sidewalk. He said next-generation LoRa products are intended to offer lower standby current, higher data-transmission rates and software development kits designed to facilitate deployment.

Hou also discussed demand for connectivity solutions in AI infrastructure. He said near-package optics, or NPO, is expected to begin entering volume production near the end of next year, followed by co-packaged optics, or CPO. He described NPO as offering much of the power-saving benefit of CPO while retaining flexibility through an open socket architecture.

Imran Sherazi, senior vice president and general manager of Semtech’s Signal Integrity Products Group, said the company is focused on supplying linear redrivers across formats, including active copper cables, flyover cables and line-card applications. Sherazi said the company increased its share in a cited market from 18% to more than 50% and intends to continue pursuing share gains.

Fiscal 2030 Framework

Semtech expects revenue to reach $3.2 billion in fiscal 2030, implying a 38% compound annual growth rate from fiscal 2026. The fiscal 2026 base excludes $166 million in cellular module revenue associated with the business slated for divestiture.

• Data center revenue is expected to compound at a 75% rate to $2.1 billion by fiscal 2030.
• LoRa revenue is expected to compound at a 30% rate through fiscal 2030.
• Adjusted gross margin is targeted at 70% in fiscal 2030.
• Adjusted operating margin is expected to be 48% to 50%.
• Free cash flow is expected to equal 35% of revenue.
• Adjusted diluted EPS is projected at $12.40 to $13, representing a 64% to 66% compound annual growth rate.

The company said its fiscal 2030 EPS framework assumes a 20% non-GAAP tax rate and 104 million weighted-average diluted shares outstanding.

Investment and Capital Allocation

Semtech said research and development spending increased 27% between fiscal 2025 and the trailing 12 months ended in Q2 2027, while selling, general and administrative expense increased 8% over the same period. The company said it has focused R&D spending on customer-aligned, higher-return projects while maintaining an affordability framework.

Its capital allocation priorities are organic R&D investment, capability-driven acquisitions and balance-sheet strength. Semtech cited its March acquisition of Semtech Photonics Products, also referred to as HieFo, as an example of its approach. The acquisition added domestic indium phosphide manufacturing expertise and expanded the company’s AI connectivity portfolio into photonics, according to the presentation.

Hou said the company’s objective is to pursue high-bandwidth, low-power and low-latency connectivity opportunities while expanding earnings and cash flow through a more differentiated portfolio.

About Semtech (NASDAQ:SMTC)

Semtech Corporation is a global semiconductor and technology company that designs and supplies analog and mixed-signal products for communications, industrial, automotive, consumer, and infrastructure applications. Its solutions are used to manage, protect, connect, and transmit data in electronic systems.

The company's portfolio includes signal-integrity products, protection devices, power-management components, optical and high-speed connectivity solutions, and video-processing technologies.

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