Semtech (SMTC) Q2 2027 Earnings Report

The call presents a strongly positive performance and outlook: sizable revenue and EPS beats, significant margin expansion (structural improvement after the planned divestiture), record data center and LoRa growth, robust cash generation and confident forward guidance. Key risks are largely execution and capacity-related (scaling photonics fabs, tester/back-end capacity and ensuring qualification timing with hyperscalers), plus near-term consumer softness and comparability effects from the module divestiture. On balance, the upbeat results, high-growth guidance and structural margin improvement outweigh the operational and scaling risks.

Semtech guided Q3 fiscal 2027 net sales of $410 million ± $5 million (≈ +20% sequential, +54% year‑over‑year at the midpoint), driven by data center revenue (projected +45% sequential, ~+160% YoY), LoRa (about +15% sequential, ~+65% YoY) and consumer/industrial growth; they expect adjusted gross margin of 58.3% ±100 bps (ex‑cellular‑module: 63.9% at midpoint), adjusted net operating expenses of $112 million ± $3 million, adjusted operating margin of 31% at the midpoint (+660 bps sequential, +1,040 bps YoY), adjusted EBITDA of $134 million ± $4 million (32.8% margin, +620 bps sequential, +930 bps YoY), adjusted diluted EPS of $1.05 ± $0.03 (+48% sequential, +119% YoY) on ~99 million weighted average shares, adjusted interest & other net of ≈$0.5 million and an adjusted normalized tax rate of 18%; management said the cellular module divestiture is expected to close in Q4 and be non‑GAAP EPS neutral, CapEx should remain generally below 5% of sales (Q2 was 2%), and they are securing incremental capacity for FY2028 with CW lasers expected to begin contributing in H1 FY2028.