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Introduction & Market Context
Semtech Corporation (NASDAQ:SMTC) released its Q1 fiscal year 2026 earnings presentation on May 27, 2025, highlighting strong year-over-year growth across key segments. The semiconductor company reported net sales of $251.1 million, essentially flat from the previous quarter but up significantly from $206.1 million in the same quarter last year. The stock closed at $37.28, up 4.02% in regular trading, though it declined 3.3% in after-hours to $37.50.
The company’s results demonstrate continued momentum in high-growth markets, particularly in data center and IoT connectivity solutions, as Semtech focuses on portfolio optimization and strategic R&D investments to drive margin expansion.
Quarterly Performance Highlights
Semtech’s Q1 2026 performance showed significant year-over-year improvements across all major segments. The company’s net sales of $251.1 million were distributed across three primary end markets: Industrial (57%), Infrastructure (29%), and High-End Consumer (14%).
As shown in the following breakdown of Semtech’s Q1 revenue by end market and segment:
The Infrastructure end market delivered particularly strong results, with net sales of $72.8 million representing a 5% sequential increase and 30% year-over-year growth. The standout performer within this segment was data center, which achieved record sales of $51.6 million, up 3% sequentially and an impressive 143% year-over-year.
"We delivered solid first-quarter results, reflecting our continued focus on strengthening Semtech’s financial foundation while making strategic investments in our growth drivers," said Hong Hou, president and chief executive officer, as quoted in the presentation.
The Industrial end market, Semtech’s largest segment at 57% of total revenue, generated $142.8 million in net sales. While this represented a 3% sequential decline, it marked a robust 24% increase year-over-year. Within this segment, LoRa-enabled solutions continued to show strong momentum with sales of $38.9 million, up 5% sequentially and 81% year-over-year.
Detailed Financial Analysis
Semtech’s financial results demonstrated meaningful improvements in profitability metrics compared to the prior year, though with some sequential moderation. The company reported a GAAP gross margin of 52.3%, up from 48.3% in Q1 2025, and an adjusted gross margin of 53.5%, compared to 49.8% in the year-ago quarter.
The comprehensive financial summary shows the company’s performance across key metrics:
Operating income on a GAAP basis reached $36.0 million, a significant improvement from just $3.1 million in Q1 2025. Adjusted operating income was $47.6 million, representing a 19.0% operating margin, compared to $25.2 million and 12.2% in the prior-year period. However, this marked a slight sequential decline from Q4 2025’s $49.8 million and 19.9% margin.
Adjusted EBITDA for Q1 2026 was $55.4 million with a 22.1% margin, compared to $57.8 million and 23.0% in the previous quarter, and $33.1 million and 16.1% in Q1 2025.
The reconciliation of operating margin shows the consistent improvement trend:
Similarly, the EBITDA performance demonstrates Semtech’s enhanced profitability compared to the prior year:
Strategic Initiatives
Semtech’s presentation outlined key strategic priorities focused on long-term growth and profitability. The company is emphasizing three core initiatives for fiscal year 2026: portfolio optimization and simplification, strategic investment in research and development, and driving margin expansion.
As highlighted in the CEO’s message:
In the data center segment, Semtech is leveraging its analog solutions to address power and thermal challenges in AI data centers, which has contributed to the segment’s exceptional growth. The company also demonstrated its optical connectivity solutions at the Optical Fiber Communications Conference and is engaging with anchor customers for its CopperEdge technology.
For IoT applications, Semtech continues to build on its expertise in ultra-low power RF devices with LoRa technology. The company identified robotics and unmanned aerial vehicles as emerging markets for LoRa applications, while also noting growing 5G adoption rates benefiting its hardware business.
Forward-Looking Statements
Looking ahead to Q2 2026, Semtech provided a positive outlook with expected sequential growth. The company projects net sales of $256.0 million (±$5.0 million), representing a modest increase from Q1.
The detailed Q2 2026 outlook provides comprehensive guidance across key metrics:
Adjusted gross margin is expected to be 53.0% (±50 bps), while adjusted operating expenses are projected at $87.5 million (±$1.0 million). This translates to an anticipated adjusted operating income of $48.2 million (±$3.0 million) and adjusted operating margin of 18.8% (±80 bps).
Adjusted earnings per share are forecast at $0.40 (±$0.03), in line with the previous quarter’s performance. Adjusted EBITDA is projected at $56.0 million (±$3.0 million) with a 21.9% margin.
By end market, Semtech expects the Infrastructure segment to increase sequentially, the High-End Consumer segment to be up slightly reflecting typical seasonality, and the Industrial segment to be flat to slightly down.
The company’s net sales schedules provide a comprehensive view of historical performance by segment and geography:
With continued strength in data center and LoRa technologies, coupled with disciplined execution on margin expansion initiatives, Semtech appears well-positioned to build on its recent momentum throughout fiscal year 2026.
Full presentation:
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