Semtech Earnings Show Record Q2 Revenue
Semtech earnings beat on record Q2 sales and $0.71 adjusted EPS as AI data-center demand lifts margins and firms near-term growth positioning.
KEY TAKEAWAYS
- Record net sales of $341.9 million and tenth consecutive quarter of growth.
- Adjusted EPS rose to $0.71, beating consensus by $0.10 and showing operating leverage.
- Data center revenue reached about $100 million and drove margin expansion.
HIGH POTENTIAL TRADES SENT DIRECTLY TO YOUR INBOX
Add your email to receive our free daily newsletter. No spam, unsubscribe anytime.
Semtech Corporation (Nasdaq: SMTC) reported record net sales for the quarter ended July 26, 2026, as AI data-center networking and LoRa demand boosted margins and produced guidance implying faster third-quarter revenue and profit growth.
Record Quarter Results
Semtech said in a press release dated Aug. 25, 2026, that net sales for the second quarter of fiscal 2027 reached $341.9 million, up about 33% year over year and 17% sequentially. The company described this as record quarterly revenue and its tenth consecutive quarter of net-sales growth, exceeding consensus estimates by roughly 4%.
Non-GAAP adjusted diluted earnings per share (EPS) rose about 73% year over year to $0.71, beating consensus by approximately $0.10. On a GAAP basis, diluted EPS was $1.59, with net income near $160.1 million.
Margins expanded as well. Non-GAAP gross margin was 54.5%, up 150 basis points sequentially, while GAAP gross margin was 53.8%. Semiconductor-product gross margin reached about 62.8%, rising roughly 210 basis points sequentially. GAAP operating income was approximately $55.8 million, a 16.3% operating margin. Adjusted operating income was about $84 million, or 24.4% on a non-GAAP basis.
The company generated operating cash flow of roughly $69 million and free cash flow near $61.4 million. It ended the quarter with $204 million in cash and principal debt of about $503 million, resulting in a net leverage ratio around 1.1 times.
Data Center Growth and Outlook
Data-center-related products drove the quarter’s growth. Management said data center revenue reached about $100 million, up roughly 91% year over year and 39% sequentially, supported by demand for AI data-center networking and products such as the 1.6T FiberEdge and CopperEdge. Infrastructure segment net sales totaled about $124 million, rising 25% sequentially and 69% year over year.
LoRa-enabled sales hit a record $58 million, up about 58% year over year and 31% sequentially. Management attributed this growth to ongoing LoRaWAN and LoRaPLUS deployments, including expansions like Amazon Sidewalk, with backlog and pipeline described as healthy.
Post-call commentary and company presentations implied third-quarter revenue would grow about 20% sequentially and 54% year over year, with adjusted gross margin targeted near 58.3%. Management expects adjusted EPS to increase faster than revenue due to operating leverage and a favorable product mix.
Semtech is advancing a planned divestiture of its cellular module business, expected to close in fiscal Q4 and be EPS neutral. Management said the transaction should raise structural gross margin by more than 500 basis points once fully reflected. Over 70% of next year’s revenue is already booked, providing visibility into fiscal 2028 and momentum into the coming year.
