Semtech Q2 2026 slides: data center sales surge 92% YoY, debt reduced by $879M

Introduction & Market Context

Semtech Corporation (NASDAQ:SMTC) presented its second quarter fiscal 2026 results on August 25, 2025, showcasing solid revenue growth and significant progress in strengthening its balance sheet. The semiconductor company reported net sales of $257.6 million, continuing its growth trajectory from the previous quarter while making substantial headway in reducing debt.

Despite beating expectations, Semtech’s stock dipped 0.74% in after-hours trading to $50.71, following a marginal 0.18% decline during regular trading hours. This reaction comes despite the company’s strong year-over-year growth across all segments and positive outlook for the upcoming quarter.

Quarterly Performance Highlights

Semtech’s Q2 2026 performance was marked by balanced growth across its business segments, with particularly impressive results in its data center business. The company’s CEO, Hong Hou, highlighted three key priorities that have been guiding Semtech’s strategy: strengthening the balance sheet, rationalizing the portfolio with increased investments in core assets, and revitalizing the company’s winning culture.

The most notable achievement on the financial front was the reduction of debt by $879 million since June 2024, significantly improving the company’s balance sheet position. This aligns with management’s stated priority of financial strengthening.

As shown in the following breakdown of net sales by end market and segment:

The company’s revenue was well-distributed across its three main end markets, with Infrastructure accounting for 56% ($257.6 million), Industrial for 28%, and High-End Consumer for 16%. By segment, IoT Systems and Connectivity led with 36% of total revenue, followed by Analog Mixed Signal & Wireless at 34%, and Signal Integrity at 30%.

Segment Analysis

The Infrastructure end market was a standout performer, with net sales of $73.4 million representing a 39% increase year-over-year, though just a modest 1% sequential growth. Within this segment, data center sales reached a record $52.2 million, surging 92% compared to the same period last year.

The following slide details the Infrastructure segment’s performance:

In the High-End Consumer end market, Semtech reported net sales of $41.2 million, growing 16% sequentially and 11% year-over-year. Consumer TVS (Transient Voltage Suppression) products were particularly strong at $29.9 million, up 22% quarter-over-quarter and 15% year-over-year, outpacing overall handset volume growth in the market.

The consumer segment’s performance is illustrated here:

The Industrial end market, Semtech’s largest by revenue, generated $143.0 million in net sales, flat sequentially but up 14% year-over-year. Within this segment, LoRa-enabled solutions contributed $36.9 million (down 5% sequentially but up 29% year-over-year), while IoT systems hardware delivered $64.8 million (up 2% sequentially and 24% year-over-year).

The Industrial segment breakdown is shown below:

Financial Results

Semtech’s financial results showed significant differences between GAAP and non-GAAP figures, indicating substantial one-time or non-operational expenses. On a GAAP basis, the company reported an operating loss of $16.2 million and a net loss of $27.1 million for Q2’26. However, after adjustments, the non-GAAP operating income was $48.6 million with adjusted EBITDA of $56.5 million.

The company’s gross margin reached 52.1% on a GAAP basis and 53.2% on an adjusted basis, showing improvement in profitability metrics. This performance continues the positive trend seen in Q1, where Semtech reported a 53.5% adjusted gross margin.

The comprehensive financial summary is presented in this table:

The reconciliation between GAAP and non-GAAP figures provides important context for understanding Semtech’s true operational performance:

Forward Guidance

Looking ahead to Q3 2026, Semtech provided an optimistic outlook, projecting net sales of $266.0 million (±$5.0 million), which would represent a sequential increase of approximately 3.3% at the midpoint. The company expects adjusted gross margin to remain steady at 53.0% (±50 bps) and forecasts adjusted operating income of $52.2 million (±$3.0 million).

Semtech anticipates adjusted diluted earnings per share of $0.44 (±$0.03) for the third quarter. By segment, management expects sequential growth in the Infrastructure end market, slight increases in both High-End Consumer and Industrial segments, with LoRa sales projected to remain flat.

The detailed Q3 outlook is presented here:

Strategic Initiatives

CEO Hong Hou’s message emphasized the company’s strategic focus on three key priorities that are driving Semtech’s transformation:

Beyond debt reduction, the company highlighted its portfolio rationalization efforts, with investments concentrated on core assets that are driving sales momentum. Management also pointed to increased clarity in the company’s vision and improved employee engagement as signs of a revitalized corporate culture.

In the Infrastructure segment, Semtech is capitalizing on strong opportunities for its FiberEdge products, while securing design wins for linear pluggable optics and delivering CopperEdge active copper cables. The company is well-positioned to benefit from increasing bandwidth requirements in data centers.

For the Consumer segment, Semtech is expanding the deployment of its PerSe sensing technology across multiple applications, while in the Industrial segment, the company continues to extend LoRa technology’s reach across markets with dual-band capability to facilitate adoption.

With these strategic initiatives and the positive momentum across its business segments, Semtech appears well-positioned for continued growth in the coming quarters, building on the solid foundation established in the first half of fiscal 2026.

Full presentation:

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