Semtech Q2 Earnings Call Highlights

Key Points

• Record results: Semtech reported fiscal Q2 revenue of $342 million, up 33% year over year, while adjusted EPS rose 73% to $0.71. Data center revenue reached a record $100 million, driven by strong demand for 800G and 1.6T products.
• LoRa momentum continued: LoRa-enabled revenue climbed 58% year over year to a record $58 million, and the company expects roughly 65% year-over-year LoRa growth in Q3.
• Growth and margin outlook strengthened: Semtech forecast Q3 revenue of $410 million at the midpoint, up 54% year over year, and expects the cellular-module divestiture to improve adjusted gross margin by more than 500 basis points.

Semtech NASDAQ: SMTC reported record fiscal second-quarter revenue and projected further growth in its data center, LoRa and consumer businesses, while advancing a planned divestiture of its cellular module operation.

For the quarter ended July 26, 2026, the company reported revenue of $342 million, up 17% sequentially and 33% from a year earlier. Adjusted diluted earnings per share were $0.71, up 39% sequentially and 73% year over year. President and CEO Hong Hou said the results reflected record revenue in the company’s key focus areas, growing operating leverage and progress in portfolio optimization.

Adjusted gross margin was 54.5%, an increase of 150 basis points from the prior quarter. Adjusted operating income totaled $84 million, while adjusted EBITDA was $91 million. Semtech generated operating cash flow of $69 million and free cash flow of $61 million during the quarter. It ended the period with $204 million in cash and cash equivalents, $503 million in principal debt and a net leverage ratio of 1.1.

Data Center Business Drives Infrastructure Growth

Infrastructure revenue was $124 million, up 25% sequentially and 69% year over year, led by a record $100 million in data center revenue. Data center sales increased 39% from the prior quarter and 91% from a year earlier, supported by 800G products, 1.6T CopperEdge products and the initial ramp of 1.6T FiberEdge offerings.

Hou said Semtech is seeing strong demand for FiberEdge transimpedance amplifier and driver solutions, along with broader customer engagement around emerging optical architectures including MPO and XPO. He said the company expects FiberEdge to exceed 50% market share in its targeted 1.6T market by the end of the fiscal year.

The company also said its CopperEdge linear equalizer products are in design-in phases for applications extending to 3.2T. Hou described the products as the “de facto industry standard” for linear equalizers and said volume deployment of active copper cable applications is expected to begin in the fourth quarter.

Semtech is expanding its photonics portfolio through gain chips, high-power continuous-wave lasers, semiconductor optical amplifiers and high-speed photodiodes. Hou said the company expects CW laser revenue from transceiver applications to begin in the first half of fiscal 2028. He also said the company expects 3.2T transceiver deployments to begin roughly two years from now, with design activity starting over the next 12 months.

To support demand, Semtech is pursuing additional front-end and back-end manufacturing capacity for fiscal 2028 and beyond. Hou said the company has sufficient near-term capacity to support customer ramps and some additional orders, but that current capacity commitments may not meet expected demand in the second half of fiscal 2028.

LoRa Posts Another Record Quarter

Industrial revenue was $179 million, up 16% sequentially and 25% year over year. LoRa-enabled revenue reached a record $58 million, rising 31% sequentially and 58% from the prior-year period.

Hou said the company’s LoRa Gen 4 platform, which combines LoRa with other radio-frequency protocols, is gaining traction in smart-home, security and edge artificial-intelligence applications. Semtech said Gen 4 provides dual-band capability and data throughput of up to 2.6 megabits per second while maintaining low-power and long-range characteristics.

The company also cited growing adoption of LoRaWAN in public safety and industrial predictive-maintenance applications. Amazon Sidewalk is expanding internationally following Ring’s launch of LoRa-based sensors in the U.S., with Canada and Mexico next and Europe, Australia and Japan expected to follow, according to Semtech.

For the third quarter, Semtech expects LoRa revenue to rise about 15% sequentially and approximately 65% year over year. During the question-and-answer session, Hou said the company now expects LoRa’s year-over-year growth rate to remain above its prior 20% benchmark.

Cellular Module Sale Reshapes Margin Profile

Semtech announced a definitive agreement to divest its cellular module business, which was classified as held for sale on the second-quarter balance sheet. The company expects the deal to close during the fourth quarter of the current fiscal year and to be non-GAAP EPS neutral.

Chief Financial Officer Mark Lin said adjusted gross margin excluding the cellular module business was 59.7% in the second quarter, or 520 basis points above the consolidated figure. He said the divestiture is expected to create a structural margin improvement of more than 500 basis points.

“We see this as a continuous journey,” Hou said of portfolio optimization, adding that the company will continue evaluating its portfolio after completing the cellular module transaction.

Third-Quarter Outlook Calls for Accelerating Growth

Semtech forecast third-quarter revenue of $410 million, plus or minus $5 million. At the midpoint, that would represent 20% sequential growth and 54% year-over-year growth. The company expects growth in each of its operating segments.

• Data center revenue is expected to increase 45% sequentially and 160% year over year.
• Adjusted gross margin is projected at 58.3%, plus or minus 100 basis points.
• Adjusted gross margin excluding the cellular module business is expected to be 63.9% at the midpoint.
• Adjusted operating margin is forecast at 31% at the midpoint.
• Adjusted EBITDA is expected to be $134 million, plus or minus $4 million.
• Adjusted diluted EPS is forecast at $1.05, plus or minus $0.03.

Semtech plans to provide a longer-term financial framework and additional information on its technology roadmap, addressable markets and growth strategy at an investor event in San Jose on Oct. 15.

About Semtech (NASDAQ:SMTC)

Semtech Corporation is a leading supplier of high-performance analog and mixed-signal semiconductors and advanced algorithms. The company's products address a broad range of applications in the Internet of Things (IoT), data center and telecom, industrial, home automation, automotive, and aerospace markets. Semtech's portfolio includes power management, signal integrity, protection devices, wireless and sensing technologies that enable smarter, more connected systems worldwide.

A core offering from Semtech is its LoRa® technology, a low-power, long-range wireless communication platform that has become a de facto standard for global IoT deployments.

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