Second quarter of fiscal year 2027
Filed Aug 25, 2026Record net sales of $341.9 million, up 17% sequentially and up 33% year-over-year, with GAAP diluted earnings per share of $1.59 and Non-GAAP adjusted diluted earnings per share of $0.71.
Record revenue grew 17% sequentially and 33% year-over-year, while GAAP and non-GAAP operating margins expanded to 16.3% and 24.4%, respectively. The company also guided to $410.0 +/- $5.0 million of Q3 net sales and a 31.0% +/- 60 bps non-GAAP adjusted operating margin.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net salesGAAP | $341.9 million | up 17% | up 33% |
| Gross profitGAAP | $183.8 million | – | – |
| Gross marginGAAP | 53.8% | – | – |
| Adjusted gross marginnon-GAAP | 54.5% | – | – |
| Operating expenses, netGAAP | $128.0 million | – | – |
| Product development and engineering expenseGAAP | $60.6 million | – | – |
| Selling, general and administrative expenseGAAP | $67.3 million | – | – |
| Operating income (loss)GAAP | $55.8 million | – | – |
| Operating marginGAAP | 16.3% | – | – |
| Adjusted operating expenses, netnon-GAAP | $102.8 million | – | – |
| Adjusted operating incomenon-GAAP | $83.6 million | – | – |
| Adjusted operating marginnon-GAAP | 24.4% | – | – |
| Interest expense, netGAAP | $1.0 million | – | – |
| Goodwill impairmentGAAP | $— | – | – |
| Net income (loss)GAAP | $160.1 million | – | – |
| Adjusted net incomenon-GAAP | $69.5 million | – | – |
| Diluted earnings (loss) per shareGAAP | $1.59 | – | – |
| Adjusted diluted earnings per sharenon-GAAP | $0.71 | – | – |
| Adjusted EBITDAnon-GAAP | $91.1 million | – | – |
| Adjusted EBITDA marginnon-GAAP | 26.6% | – | – |
| Net cash provided by operating activitiesGAAP | $68.9 million | – | – |
| Net capital expendituresother | $(7.5) million | – | – |
| Free cash flownon-GAAP | $61.4 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Signal IntegrityNo segment-specific revenue driver was stated. | $126.2 million | – | – |
| Analog Mixed Signal and WirelessNo segment-specific revenue driver was stated. | $117.4 million | – | – |
| Total Semiconductor ProductsDefined by the company as the combined segment revenue of Signal Integrity and Analog Mixed Signal and Wireless. | $243.5 million | – | – |
| IoT Systems and ConnectivityNo segment-specific revenue driver was stated. | $98.3 million | – | – |
Third quarter of fiscal year 2027 outlook
- Revenue$410.0 +/- $5.0
- Gross marginAdjusted gross margin: 58.3% +/- 100 bps; Adjusted gross margin, excluding business held for sale: 63.9% +/- 100 bps
- Operating expensesAdjusted operating expenses, net: $112.0 +/- $3.0
- Tax rateAdjusted normalized tax rate: 18%
- NoteAdjusted operating income: $127.0 +/- $4.0
- NoteAdjusted operating margin: 31.0% +/- 60 bps
- NoteAdjusted interest and other expense, net: $0.5
- NoteAdjusted diluted earnings per share: $1.05 +/- $0.03
- NoteAdjusted EBITDA: $134.3 +/- $4.0
- NoteAdjusted EBITDA margin: 32.8% +/- 60 bps
- NoteNon-GAAP diluted share count: 99.0
What drove it
- The company reported record net sales of $341.9 million.
- Management cited record revenue across its key focus areas, accelerating bookings, record backlog, new revenue drivers and visibility expected to extend well into the next fiscal year.
- Signal Integrity segment gross margin was 65.3%, Analog Mixed Signal and Wireless segment gross margin was 60.1%, Total Semiconductor Products segment gross margin was 62.8%, and IoT Systems and Connectivity segment gross margin was 34.0%.
- The company classified its cellular module business as held for sale as of period end. This business contributed net sales of $48.1 million and adjusted gross profit of $10.9 million in Q2'27.
- GAAP gross margin was 53.8%, while adjusted gross margin excluding business held for sale was 59.7%.
- The GAAP income tax line was a $(101.4) million benefit in Q2'27.
Concerns
- IoT Systems and Connectivity segment gross margin was 34.0%, below the 62.8% gross margin reported for Total Semiconductor Products.
- The company identified the pending divestiture of its cellular module business as a risk, and reported $132.2 million of assets held for sale and $70.7 million of liabilities held for sale.
- The company stated that forward-looking GAAP reconciliations are unavailable without unreasonable efforts because of variability and low visibility for transaction, integration and restructuring expenses, share-based awards, acquisition-related intangible amortization and other excluded items.
- The company cited risks including cyclical industry conditions, demand concentration in AI-related semiconductors, historical average selling price declines, export restrictions, tariffs, supply-chain disruptions, customer concentration, competition, indebtedness and divestiture execution.
What to watch
- Execution against Q3'27 net-sales outlook of $410.0 +/- $5.0.
- Delivery of Q3'27 adjusted gross margin of 58.3% +/- 100 bps and adjusted gross margin excluding business held for sale of 63.9% +/- 100 bps.
- Delivery of Q3'27 adjusted operating margin of 31.0% +/- 60 bps and adjusted diluted earnings per share of $1.05 +/- $0.03.
- Whether management's cited accelerating bookings and record backlog translate into the expected sustained revenue, margin and earnings growth.
- Progress on the pending divestiture of the cellular module business and the associated impact on reported gross margin and portfolio mix.
- The Q3'27 adjusted normalized tax rate of 18%, versus the 17% non-GAAP normalized tax rate applied in the first two quarters of fiscal year 2027.
Balance sheet and cash flow
- Cash and cash equivalents were $204.1 million as of July 26, 2026, compared with $195.2 million as of January 25, 2026.
- Accounts receivable, net, were $169.9 million as of July 26, 2026, compared with $160.6 million as of January 25, 2026.
- Inventories were $170.8 million as of July 26, 2026, compared with $195.7 million as of January 25, 2026.
- Assets held for sale were $132.2 million and liabilities held for sale were $70.7 million as of July 26, 2026.
- Current portion of long-term debt was $143.4 million as of July 26, 2026.
- Long-term debt was $349.4 million as of July 26, 2026, compared with $491.2 million as of January 25, 2026.
- Stockholders' equity was $748.9 million as of July 26, 2026, compared with $549.7 million as of January 25, 2026.
- Net cash provided by operating activities was $68.9 million, net capital expenditures were $(7.5) million, and free cash flow was $61.4 million in Q2'27.
Analysis
Semtech reported record Q2'27 net sales of $341.9 million, up 17% sequentially and 33% year-over-year. GAAP gross margin improved to 53.8% from 52.0% in Q1'27 and 52.1% in Q2'26, while non-GAAP adjusted gross margin improved to 54.5% from 53.0% and 53.2%, respectively. The company attributed its outlook to accelerating bookings, record backlog and new revenue drivers, while characterizing revenue performance as broad across its key focus areas.
Operating leverage was material. GAAP operating income rose to $55.8 million from $25.8 million in Q1'27, and GAAP operating margin increased to 16.3% from 8.9%. Non-GAAP adjusted operating income reached $83.6 million and adjusted operating margin reached 24.4%, compared with $59.3 million and 20.4% in Q1'27. Adjusted EBITDA rose to $91.1 million, with a 26.6% margin, compared with $66.4 million and 22.8% in the prior quarter.
Segment economics remained differentiated. Total Semiconductor Products generated $243.5 million of revenue and a 62.8% segment gross margin, including 65.3% in Signal Integrity and 60.1% in Analog Mixed Signal and Wireless. IoT Systems and Connectivity produced $98.3 million of revenue at a 34.0% segment gross margin. The cellular module business, classified as held for sale, accounted for $48.1 million of net sales and $10.9 million of adjusted gross profit; adjusted gross margin excluding that business was 59.7% in Q2'27.
GAAP net income was $160.1 million and GAAP diluted EPS was $1.59, supported by a $(101.4) million income-tax benefit. Non-GAAP adjusted net income was $69.5 million and adjusted diluted EPS was $0.71. Cash generation strengthened, with operating cash flow of $68.9 million and free cash flow of $61.4 million. Cash and cash equivalents were $204.1 million, while the current portion of long-term debt was $143.4 million and long-term debt was $349.4 million at quarter end.
The Q3'27 outlook calls for $410.0 +/- $5.0 million of net sales, adjusted gross margin of 58.3% +/- 100 bps, adjusted operating margin of 31.0% +/- 60 bps and adjusted diluted EPS of $1.05 +/- $0.03. Management expects broad-based bookings strength to support sustained growth. The guide also introduces an 18% adjusted normalized tax rate for the remaining quarters of fiscal 2027, compared with the 17% rate applied in the first two quarters.
Management, verbatim
The Semtech team executed exceptionally well, delivering record revenue across our key focus areas, earnings leverage that continued to outpace revenue growth and significant progress on portfolio optimization.
Hong Hou, president and CEO
Accelerating bookings and record backlog point to a strong inflection in growth with new revenue drivers and visibility expected to extend well into next fiscal year.
Hong Hou, president and CEO
We enter the third quarter with conviction, expecting broad-based bookings strength to translate into sustained revenue, margin and earnings growth.
Mark Lin, executive vice president and chief financial officer
Not in the filing
stated, not guessed- Previous-quarter outlook was not provided, so comparison of Q2'27 actual results with prior guidance is unavailable.
- GAAP forward revenue, gross margin, operating expenses, operating income, operating margin, tax rate and EPS guidance were not provided.
- Share repurchases were not reported.
- Dividends were not reported.
- Capital-return amounts were not reported.
- Segment revenue year-over-year and sequential percentage changes were not reported.
- Segment-specific revenue drivers were not reported.
- GAAP diluted share-count guidance was not provided.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.