Lattice Semiconductor Q1 Earnings Call Highlights

Key Points

• Lattice reported Q1 revenue of $170.9 million, up 42% YoY, with Compute & Communications (62% of sales) showing record strength from data‑center AI demand and a backlog that management says extends into 2027.
• Profitability improved materially—non‑GAAP EPS of $0.41 (≈+80% YoY), non‑GAAP gross margin of 70% and operating margin of 34.4%—and the company guided Q2 revenue of $175–195M while finishing the quarter with $140M cash and no debt.
• Lattice agreed to buy firmware/platform manager AMI for $1.65 billion ($1.0B cash + $650M equity), a strategic deal management says will be immediately accretive and could expand the company’s serviceable market to about $12B over 3–4 years.

Lattice Semiconductor NASDAQ: LSCC reported first-quarter 2026 results that management said exceeded expectations, pointing to strong momentum in data center AI-related demand and improving trends in industrial end markets. The company also outlined second-quarter guidance and discussed a planned acquisition of AMI, a platform firmware and systems manageability provider, which executives described as a strategic step toward a broader system-level solutions portfolio.

Q1 results show strength in Compute and Communications

CEO Jim Anderson said the company delivered “an excellent start to 2026,” highlighting both market tailwinds and execution. Lattice reported first-quarter revenue of $170.9 million, up 42% year-over-year and 17% sequentially. Anderson said strength was broad-based across end markets, with record revenue in Compute and Communications driven by “continued momentum in data center AI applications.”

Beginning this quarter, Lattice streamlined its financial reporting into two primary markets: Compute and Communications and Industrial and Embedded, with its consumer business now included within Industrial and Embedded. Anderson said 62% of Q1 revenue came from Compute and Communications products.

In prepared remarks, CFO Sherri Luther (introduced as “Lorenzo” during the call) said Compute and Communications revenue rose 86% year-over-year and 15% sequentially, while Industrial and Embedded grew 21% quarter-over-quarter, driven primarily by “increased demand in factory automation, robotics, and medical applications.”

Margins, EPS, and cash flow

Profitability grew faster than revenue, according to management. Anderson said EPS rose 86% year-over-year, reflecting operating leverage. Luther reported non-GAAP EPS of $0.41, up more than 80% year-over-year and 30% sequentially, and above the high end of the company’s prior guidance.

Non-GAAP gross margin in Q1 was 70%, up 60 basis points sequentially and 100 basis points year-over-year, which Luther said reflected product differentiation and value. Non-GAAP operating expenses were $60.8 million, up roughly 8% sequentially and 18% year-over-year, with the sequential increase attributed largely to performance-based bonuses and commissions as results exceeded expectations. Non-GAAP operating margin expanded to 34.4% and EBITDA margin increased to 39.6%, both “a little better than expected,” Luther said.

Cash flow declined sequentially, which Luther attributed to the prior year’s annual bonus payout and quarterly revenue linearity. GAAP net cash flow from operating activities was $50.3 million versus $57.6 million in Q4, and free cash flow was $39.7 million versus $44.0 million in Q4. Lattice repurchased $15 million of stock during the quarter and ended Q1 with $140 million in cash and no debt.

Inventory, demand visibility, and backlog

Anderson said channel inventory declined from three months in the prior quarter to “close to two months,” and he said management expects inventory to trend to “under two months” in Q2. He also said accelerated bookings are supporting a “strong backlog that extends well into 2027,” alongside “healthy design win momentum.”

In the Q&A, Anderson framed the inventory reduction as a multi-quarter execution milestone, noting inventory levels were “closer to 6” when he joined, with a plan to reach 3 months by the end of last year and move into the “twos” thereafter. Luther added that reducing channel inventory is “no longer a business imperative,” and said the focus is now maintaining the right mix at distributors to serve customer needs and improve visibility into end demand.

Q2 guidance (standalone) and supply chain commentary

Lattice’s second-quarter 2026 guidance reflects the company on a standalone basis, as management targets closing the AMI acquisition in Q3. The company guided:

• Revenue: $175 million to $195 million (midpoint $185 million, up nearly 50% year-over-year and 8% sequentially)
• Non-GAAP gross margin: 70% ± 1%
• Non-GAAP operating expenses: $64 million to $67 million (with most growth in R&D)
• Non-GAAP tax rate: 4% to 6%
• Non-GAAP EPS: $0.42 to $0.46 (midpoint $0.44)

On supply, Anderson said Lattice has been able to secure supply, though “it comes at a cost,” and said the company is working with customers and suppliers to address changing costs. Luther said Lattice’s wafer supply is less constrained because it uses “more legacy node wafers,” while the back end remains the main pressure point, prompting added supplier diversity and capacity expansion. She said lead times are beginning to come down as that expanded supply comes online.

On gross margin, management reiterated its current framework. Luther said the company has worked with customers to offset cost increases, while also expecting cost pressure to “continue and increase” in the second half relative to the first half. In response to questions about whether margins could structurally move higher, Anderson said the company does not “intend to go much above” the current level, while noting there may be opportunities to pursue additional business.

Planned AMI acquisition: rationale, price, and expectations

Lattice announced it has signed a definitive agreement to acquire AMI, which Anderson described as “a leader in firmware, orchestration, and system-level manageability.” He said combining Lattice’s low-power programmable hardware with AMI’s BIOS, BMC, and platform security offerings would create “the industry’s most complete secure management and control platform,” aimed at accelerating development and simplifying integration for customers across AI servers, advanced compute, communications infrastructure, and industrial applications.

Luther said the deal’s total consideration is expected to be $1.65 billion, consisting of $1.0 billion in cash and $650 million of equity, or approximately 5.4 million shares based on the May 1 closing price. She said Lattice expects the acquisition to be “immediately accretive to gross margin, free cash flow, and EPS on a non-GAAP basis,” and emphasized the company is “not dependent upon synergies” to achieve accretion, citing AMI’s high gross margin and “asset-light” model. She also said AMI’s EBITDA margin is close to Lattice’s and “maybe slightly above” at present.

In the Q&A, Anderson said Lattice expects its serviceable available market to double from about $6 billion to about $12 billion over the next three to four years, with the main increase coming from the Compute and Communications segment. He also provided business mix metrics: server revenue contribution has grown from the teens a couple of years ago to an expected 38% of total revenue in 2026, while AI-related revenue is expected to be about 25% of revenue in 2026, up from the mid-teens in 2024 and high teens last year.

AMI CEO Sanjoy Maity told investors AMI plans to maintain the “open, silicon-agnostic, multi-vendor” support customers value, while aligning with Lattice on execution and margin discipline. Anderson also said the two companies have worked together since 2019 and that “there is no place where we compete,” describing the combination as complementary. On the equity portion of the deal, management said there is a lockup “12 months from close,” with 25% per quarter.

Separately, management clarified that Lattice’s previously discussed target of exceeding a $1 billion annual revenue run rate by the end of 2026 is exclusive of AMI, while Luther said that with AMI included, the company expects revenue to exceed a $1 billion annual run rate by the end of “this year.”

About Lattice Semiconductor NASDAQ: LSCC

Lattice Semiconductor Corporation is a U.S.-based semiconductor company specializing in low-power, small-footprint programmable logic devices. The company's product portfolio centers on field-programmable gate arrays (FPGAs), programmable logic devices (PLDs) and related intellectual property cores that enable customers to implement custom digital functions in applications where energy efficiency and compact size are critical. Lattice's solutions are widely used to accelerate edge computing, support video and sensor interfaces, and provide flexible I/O connectivity across a variety of end markets.

The company offers a range of FPGA families, including the iCE40 series for ultra-low power mobile and consumer applications, the MachXO series for embedded control and security, and the ECP5 series for midrange performance in communications, industrial automation and automotive domains.

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