Lattice Semiconductor NASDAQ: LSCC reported record second-quarter revenue as demand from AI data centers, traditional cloud infrastructure and industrial applications lifted results, while the company also completed its acquisition of firmware and infrastructure manageability provider AMI.
Revenue for the second quarter of 2026 reached $201 million, up 18% sequentially and 62% from a year earlier. Non-GAAP earnings per share were $0.53, rising more than 120% year over year and 29% sequentially. The company said its results exceeded the high end of its guidance.
“Lattice delivered exceptional financial results this quarter, reflecting a healthy market environment, compelling catalysts, and our own strong execution,” President and CEO Ford Tamer said during the company’s earnings call.
Data Center and Industrial Demand Drive Growth
Lattice’s compute and communications business posted record revenue, growing 18% sequentially and 83% year over year. Tamer attributed the performance to continued momentum in data-center AI applications, along with demand from supporting server, networking, storage and cloud infrastructure.
The company said it is benefiting from higher capital spending, rising AI content per server, increasing FPGA attach rates, growing security requirements and more complex disaggregated system architectures. Tamer said the company continues to see rising attach rates and average selling prices for certain newer products, including products supporting more complex security needs.
Management also cited applications involving power and cooling systems, alongside the company’s low-latency, deterministic processing and broad I/O capabilities.
Industrial and embedded revenue increased 17% sequentially and 36% year over year. The company pointed to improving demand across industrial automation, aerospace and defense, medical, robotics and other physical AI applications.
Tamer said channel inventory had returned to healthy levels and that new design wins were beginning to ramp. He added that supply availability, rather than channel inventory, had become a greater focus for the business.
“We’re not focused as much on the channel inventory anymore as we’re focused on supply being the main focus,” Tamer said.
The company said it is seeing assembly-side constraints across the industry, though Tamer said Lattice has capacity agreements and new capacity qualifications underway. He said management expects supply and demand to come into balance by September, with the company expecting to be in good shape in the fourth quarter and through 2027.
Margins and Cash Flow Expand
Second-quarter non-GAAP gross margin was 71.7%, up 170 basis points from the first quarter and 240 basis points from the prior year. CFO Lorenzo Flores said favorable product and customer mix supported gross margin performance.
Non-GAAP operating expenses were $67.1 million, increasing about 10% sequentially and 30% year over year, primarily due to continued research and development investment. Performance-based bonuses and commissions tied to higher revenue and profitability also contributed to the increase.
Non-GAAP operating margin expanded 390 basis points sequentially to 38.3%, while EBITDA margin increased 340 basis points to 43%.
- GAAP operating cash flow was $88.3 million, compared with $50.3 million in the first quarter.
- Free cash flow was $81.3 million, compared with $39.7 million in the first quarter.
- Free cash flow margin reached 40.4%, up from 23.2% in the prior quarter.
Flores said improved cash flow reflected the company’s financial performance as well as the payment of its 2025 annual bonus in the first quarter.
AMI Acquisition Adds Revenue and Expands Market Opportunity
Lattice closed its acquisition of AMI near the end of July. Tamer said the combination of Lattice’s low-power programmable FPGAs and AMI’s firmware and infrastructure management portfolio positions the company to build a secure management and control platform for AI data center infrastructure.
The company expects the acquisition to double its addressable market. Tamer said Lattice had engaged with about 100 hyperscalers, original equipment manufacturers, original design manufacturers and ecosystem partners since announcing the transaction, receiving positive feedback on the time-to-market and value potential of joint solutions.
AMI generates revenue through firmware licensing, royalties, recurring maintenance and subscription revenue, platform enablement services, and infrastructure manageability offerings. Management said roughly 60% of AMI revenue comes from boot firmware and 40% comes from infrastructure manageability solutions.
Lattice expects AMI to exit 2026 at an annual revenue run rate above $200 million, excluding a noncore low-margin hardware pass-through business that AMI had already begun to divest. The company expects that business to be fully exited by the end of 2026.
Management expects AMI’s ongoing gross margins to be in the mid-to-high 70% range, with EBITDA margin above 40%. Flores said AMI should begin contributing meaningful EPS accretion in the fourth quarter. The company expects AMI revenue to grow about 25% in 2027 from the more than $200 million base, excluding anticipated revenue synergies.
Lattice acquired AMI for $1 billion in cash and 5.2 million shares of stock. The cash portion was funded with $925 million of financing and $75 million from the company’s balance sheet. Its credit facility includes a $950 million term loan, of which $925 million was drawn, and a $200 million revolving credit facility. The company plans to reduce leverage to below two times EBITDA by the end of 2027.
Third-Quarter Outlook
For the third quarter, Lattice forecast FPGA revenue of $210 million to $230 million. The company expects approximately two months of AMI revenue to contribute $33 million to $37 million, resulting in total revenue guidance of $245 million to $265 million.
At the midpoint, the total outlook implies $255 million in revenue, while the FPGA business midpoint represents approximately 65% year-over-year growth, according to Tamer.
Lattice expects combined non-GAAP gross margin of 69.5%, plus or minus 1 percentage point, reflecting the temporary impact of AMI’s hardware pass-through business. It forecast non-GAAP operating expenses of $83 million to $90 million, a non-GAAP tax rate of 4% to 6%, and non-GAAP EPS of $0.54 to $0.58.
Tamer said the company expects to exit 2026 at a $1.2 billion annualized revenue run rate and reiterated its longer-term aspiration of reaching $3 billion by 2030.
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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