What Allegro MicroSystems (ALGM) Said on Its Q2 Earnings Call

Key Points

• Strong quarterly performance: Allegro MicroSystems reported fiscal Q2 sales of $277 million, up 29% year over year, while non-GAAP EPS doubled to $0.26. Bookings rose 45% year over year, and design wins increased nearly 40%.
• Automotive and data-center demand drove growth: Automotive bookings benefited from electrification and advanced driver-assistance programs, while data-center revenue jumped more than 150% year over year as AI infrastructure increased demand for current sensors.
• Positive outlook: Allegro expects fiscal Q3 sales of $278 million to $288 million and non-GAAP EPS of $0.25 to $0.29. Management anticipates continued automotive and data-center strength, though some large data-center programs have been delayed by one or two quarters.

Allegro MicroSystems NASDAQ: ALGM reported continued sales and booking momentum in its fiscal second quarter of 2027, with revenue exceeding the high end of its guidance range and growth across automotive, industrial and data center markets.

Second-quarter sales totaled $277 million, up 7% sequentially and 29% from a year earlier. Non-GAAP earnings per share were $0.26, up 13% sequentially and 100% year over year. Chief Executive Officer Mike Doogue said the company recorded its seventh consecutive quarter of sequential sales growth.

“Our four demand signals are flashing green,” Doogue said, citing record design-win activity, an expanding backlog and higher bookings. Total design wins increased nearly 40% year over year, while bookings rose for an eighth consecutive quarter, increasing 45% year over year.

Automotive sales and design wins

Automotive revenue was $173 million, rising 4% from the prior quarter and 11% from the prior-year period. The segment has now recorded six consecutive quarters of double-digit year-over-year growth, according to management. Automotive bookings increased 33% sequentially and 50% year over year.

Doogue said more than 75% of automotive design wins during the quarter were tied to electrified vehicles and advanced driver-assistance systems. The company cited a design win with a North American electric-vehicle manufacturer for a next-generation onboard charger platform using Allegro’s 5 MHz current sensors, as well as a motor-driver win for the customer’s vehicle cooling system. Initial shipments for those programs are expected within 12 months.

Allegro also secured an electronic power-steering design with a Japanese automaker using its automotive safety-grade magnetic position sensors. Doogue said the transition toward higher-autonomy steering and braking architectures is increasing the company’s content opportunity per vehicle. He noted that Allegro’s content per braking system can rise by roughly four times when customers move to electromechanical braking systems.

Chief Financial Officer Derek D’Antilio said automotive inventories remained lean and the company did not see restocking during the quarter. Management said it is hearing more customer discussions around raising inventory levels from low levels, though substantial restocking activity has not yet occurred.

Industrial and data center expansion

Industrial and other sales reached a record $104 million, up 11% sequentially and 79% year over year. Data center revenue was also a record at $46 million, growing more than 150% year over year. D’Antilio said Allegro remains on track to more than double its data center sales during fiscal 2027.

Management attributed data center demand to increasing power density and voltage requirements in AI-related computing infrastructure. Doogue said the company’s magnetic current sensors are being adopted in high-density power supplies, where legacy measurement components can generate excess heat or occupy more space.

During the quarter, Allegro won more than 10 current-sensor designs with Taiwanese power-supply providers for hyperscaler power supply units, battery backup units and uninterruptible power systems. The systems span 5-kilowatt to 30-kilowatt designs, including new 800-volt architectures. Current-sensor design wins for data center applications more than doubled sequentially, the company said.

Management said quarterly data center growth was tempered by the timing of larger programs that were pushed out by one or two quarters, including certain 800-volt hyperscaler programs. Doogue said the delays were timing-related and that the programs remain expected to ramp in the near future.

Allegro also highlighted growth opportunities in automation, robotics and energy infrastructure. The company won business with Asian and Chinese humanoid robotics developers for current sensors and inductive position sensors. One humanoid program is expected to use approximately 60 ICs per robot and ramp to production within six months, Doogue said.

In energy infrastructure, Allegro’s silicon carbide high-voltage gate driver received its first major design win with a solar provider for next-generation inverters. Management said second-generation isolated gate-driver products are sampling in the current quarter.

Margins, cash flow and outlook

Second-quarter non-GAAP gross margin was 51.5%, up 40 basis points sequentially and 190 basis points from a year earlier. Operating margin was 20.6%, while adjusted EBITDA margin was 25%. D’Antilio attributed margin expansion largely to operating leverage.

The company is also pursuing manufacturing cost reductions, including transitions from gold to copper wire where technically feasible, and is implementing price increases. Pricing was not a meaningful contributor to second-quarter results, D’Antilio said, but increases are expected to have a larger effect in industrial businesses in the third quarter and in automotive contracts beginning Jan. 1.

Allegro ended the quarter with $201 million in cash, $285 million in term-loan debt and net debt of $84 million. Cash flow from operations was $37 million, capital expenditures were $6 million and free cash flow was $31 million. Inventory days declined to 117 from 128 in the first quarter.

For the fiscal third quarter, the company expects sales of $278 million to $288 million, with the midpoint representing 23% year-over-year growth. Allegro forecast non-GAAP gross margin of 51.5% to 52.5% and non-GAAP EPS of $0.25 to $0.29. The midpoint of the earnings forecast implies 80% year-over-year growth.

Management said it expects third-quarter growth to be led by automotive sales and continued data center strength, while broader industrial markets typically experience seasonal softness late in the calendar year.

About Allegro MicroSystems (NASDAQ:ALGM)

Allegro MicroSystems, Inc is a semiconductor company that develops and manufactures magnetic sensing and power-management solutions. Its products are designed to help monitor motion, position, speed, current and temperature, as well as control power in electronic systems.

The company's portfolio includes Hall-effect and other magnetic sensors, current sensors, motor drivers, regulators, LED drivers and related integrated circuits. These products are used in automotive applications such as advanced driver-assistance systems, vehicle electrification, powertrain systems, comfort features and safety systems, as well as in industrial and consumer equipment.

Founded in 1990 and headquartered in Manchester, New Hampshire, Allegro serves customers globally through its international operations and distribution network.

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