Earnings call transcript: Lattice Semiconductor’s Q2 2025 sees steady growth

Lattice Semiconductor Corporation (LSCC) reported its Q2 2025 earnings, aligning closely with market expectations. The company posted an earnings per share (EPS) of $0.24, matching forecasts, while revenue slightly exceeded projections at $124 million. The stock saw a modest uptick in aftermarket trading, rising by 1.1% to $49.53. According to InvestingPro data, LSCC currently trades above its Fair Value, with a market capitalization of $6.67 billion. The stock has experienced significant volatility recently, declining 9.3% in the past week alone.

Key Takeaways

• Lattice’s Q2 revenue was $124 million, flat year-over-year but up 3% quarter-over-quarter.
• The EPS of $0.24 met market expectations, showing consistent performance.
• Non-GAAP gross and operating margins expanded, indicating improved operational efficiency.
• AI-related revenue is expected to grow significantly, with a focus on small to mid-range FPGAs.
• The stock price increased by 1.1% in aftermarket trading following the earnings release.

Company Performance

Lattice Semiconductor’s Q2 2025 performance showed stability with revenue remaining flat year-over-year but improving by 3% from the previous quarter. The company’s focus on small to mid-range FPGAs and AI-related products appears to be paying off. The communications and computing segment, in particular, demonstrated robust growth, with a 20% sequential and 26% year-over-year increase.

Financial Highlights

• Revenue: $124 million, flat year-over-year, up 3% quarter-over-quarter.
• Earnings per share: $0.24, up from $0.22 in the previous quarter.
• Non-GAAP Gross Margin: 69.3%, expanded 30 basis points both year-over-year and quarter-over-quarter.
• Non-GAAP Operating Margin: 27.5%, expanded 150 basis points.
• Free Cash Flow: $31.3 million, representing a 25.2% margin, up from $23.3 million in Q1.

Earnings vs. Forecast

Lattice Semiconductor’s Q2 EPS of $0.24 met the forecast, while revenue marginally surpassed expectations with a slight surprise of 0.27%. This performance is consistent with the company’s historical trends of meeting market expectations, indicating stable financial health.

Market Reaction

Following the earnings announcement, Lattice’s stock rose by 1.1% in aftermarket trading, reaching $49.53. This increase reflects investor confidence in the company’s steady performance and positive outlook for AI-related revenue growth. The stock remains within its 52-week range, with a high of $70.55 and a low of $34.69.

Outlook & Guidance

Looking ahead, Lattice projects Q3 2025 revenue between $128 million and $138 million, with a non-GAAP gross margin of 69.5% ± 1%. The company anticipates non-GAAP EPS to range from $0.26 to $0.30. Lattice aims for 15-20% revenue growth in 2026, driven by a strong recovery in the industrial and automotive segments. InvestingPro data shows analysts maintain a strong buy consensus with a price target range of $50-$75, suggesting potential upside. Discover detailed valuation metrics and access the comprehensive Pro Research Report, available for LSCC and 1,400+ other US stocks on InvestingPro.

Executive Commentary

CEO Ford Tamer emphasized the company’s trajectory, stating, "We are on track to continue to exceed our forecast of high teens in 2025 from new products." CFO Lorenzo Flores added, "The fundamental dynamic for the longer term is supportive of these gross margin levels," highlighting confidence in sustained profitability.

Risks and Challenges

• Potential supply chain disruptions could impact production and delivery timelines.
• Market saturation in key segments may pressure revenue growth.
• Macroeconomic pressures, such as potential tariffs, could affect cost structures.
• Competition from other semiconductor companies remains a constant challenge.
• Inventory normalization efforts may take longer than anticipated, affecting short-term financials.

Q&A

During the earnings call, analysts inquired about the company’s outlook on AI infrastructure spending, to which Lattice responded positively, citing strong bookings and backlog into Q4 2025 and Q1 2026. Additionally, the company expressed confidence in minimizing the impact of potential tariffs and achieving inventory normalization by year-end.

Full transcript - Lattice Semiconductor Corporation (LSCC) Q2 2025:

Conference Operator: Greetings and welcome to the Lattice Semiconductor’s Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Rick Moucher, Lattice Semiconductor’s Vice President of Investor Relations.

You may begin.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor: Thank you, operator, and good afternoon, everyone. With me today are Ford Tamer, Lattice’s CEO and Lorenzo Flores, Lattice’s CFO. We will provide a financial and business review of the 2025 and the business outlook for the 2025. If you have not obtained a copy of our earnings press release, it can be found at our company website in the Investor Relations section at latticesemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward looking statements regarding future events or the future financial performance of the company.

We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents that the company files with the SEC, including our 10 Ks, 10 Qs and eight Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements. This call includes and constitutes the company’s official guidance for the 2025. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call.

We will refer primarily to non GAAP financial measures during this call. By disclosing certain non GAAP information, management intends to provide investors with additional information to permit further analysis of the company’s performance and underlying trends. For historical periods, we provided reconciliations of these non GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latticesemi.com. Let me now turn the call over to our CEO, Ford Tamer.

Ford Tamer, CEO, Lattice Semiconductor: Thank you, Rick, and thank you everyone for joining us on our call today. Let me begin by saying that Q2 was a solid quarter for Lattice with results in line with expectations. We continue to execute our long term strategy, leverage our competitive position and expand our growth opportunities. We continue to see the adoption for Lattice products increasing across our core markets, demonstrated by our record level of design wins and expanded opportunities with our partners. At a high level, we delivered Q2 revenue of $124,000,000 up 3% over Q1 and flat with the year ago period.

Our non GAAP gross margin remained strong at 69.3, and our adjusted EBITDA expanded to 34.1%. We achieved these impressive results in an uncertain market, underscoring our continued discipline, execution and strength of our differentiated product portfolio. We exited Q2 with increased optimism about the market environment versus Q1. Our confidence is based on several factors. Communications and compute demand remains strong with normalized inventory and continued growth expected through the second half and beyond.

Industrial and automotive continues to perform as expected. We believe we’ve passed the bottom with channel inventory levels decreasing as we continue to recognize revenue under channel point of sales outflows. We remain on track to be at normalized inventory levels by year end as we previously indicated. We expect the companionship opportunity will become an increasingly significant growth driver for us. We are seeing impactful growth opportunities from major design wins alongside AI accelerators in cloud data centers, wired communications, industrial robotics, ADAS, infotainment, and far edge AI applications.

In customer meetings throughout Q2, we’re energized to see how Lattice is increasingly enabling innovations for our customer strategic applications. Of particular note was the recent successful Asia Tech Summit, where we’re able to engage with over 100 customers and showcase our leadership in low power program innovation alongside key partners. We reinforced our Lattice FPGAs, our complementary ASICs and MCUs, with a clear focus on Lattice’s sweet spot in small to mid range FPGAs. At that same conference, we highlighted our expanded draw as a companionship in AI and other advanced use cases, supporting functions such as bridging, sensor fusion, and board management. In Far Edge AI, our solutions are optimized for applications requiring less than one TOPS per second, under one watts of power, making them ideal for industrial and automotive deployments.

We are also increasingly convinced of our value propositions in emerging areas like humanoids, industrial robotics, vision systems, and security. With respect to end markets, in the 2025, communications and computing grew 20% sequentially, which was Lattice’s highest sequential growth for the segment in five years, and grew 26% on a year over year basis. Both subsegments were up double digits, both sequentially and year over year. The growth in computing is driven by our expanded footprint in both general purpose and AI optimized servers. And the growth in communications is primarily driven by related strengths in data center infrastructure, including network interface cards, switches, routers and security appliances.

In line with the macro market, our industrial and automotive segment declined sequentially as we continue to ship under true demand to normalize channel inventory. As I previously stated, we are confident we’re past the bottom and we remain on track for channel inventory to be back to normal by end of this year. This is consistent with what we previously said. Please note that while automotive is slower to recover, it continues to be the much smaller portion of this segment. And with additional share gains in multiple applications, including smart factory, robotics, medical and aerospace and defense, we expect industrial will again be a strong growth driver for Lattice in 2026.

Finally, total revenue for our new products continues to grow at a strong rate and we’re on track to exceed our 2025 goal that we’ve discussed on prior earnings calls. We are encouraged by this momentum, which reflects both the strength of our products and our deep customer relationships. Turning to Q3 guidance, we now expect $133,000,000 in revenue at the midpoint or 7.2% sequential growth, the largest we’ve achieved in three years. We also expect a continued improvement in channel inventory, strong gross margin with a 69.5% midpoint and EPS of $0.28 at the midpoint, which is above current expectations. This shows the strength and leverage of our financial model, where normalized revenue delivers higher benefits to the bottom line.

To summarize, we delivered another strong quarter in Q2, with broad based growth across key financial metrics and record design wins. We executed well, stayed laser focused on innovation and deepened our customer engagements. The Lattice team is energized and committed to delivering on our long term strategy. Our Q3 guidance reflects our expectation for strong growth in both revenue and profitability. As you can see, for the past four quarters, we told you what we’re going to do and we did what we said we would.

And we are confident we can continue to do more of the same in the future. Let me now turn the call over to Lorenzo for a detailed review of our Q2 results. Lorenzo?

Lorenzo Flores, CFO, Lattice Semiconductor: Thank you, Ford, and good afternoon, everyone. We will begin with a brief overview of our second quarter twenty twenty five financial performance, followed by our third quarter outlook. We are pleased to report that Lattice has delivered on expectations. Revenue, gross margin, operating profit and earnings per share were all in line with our outlook for the quarter. In Q2 twenty twenty five, revenue increased 3% to $124,000,000 This was flat compared to the year ago period.

Our gross margin expanded by 30 basis points quarter on quarter and year on year to 69.3% on a non GAAP basis. This performance continues to reflect the durability of our business model with continued growth in higher margin new products and markets and anticipated share gain at strategic customers. Non GAAP operating expense was slightly up to $51,800,000 roughly 1% sequential growth, but four percent lower on a year over year basis. We continue to invest in growth opportunities in a disciplined manner. Our non GAAP operating margin expanded 150 basis points to 27.5% and our EBITDA margin increased 70 basis points to 34.1.

We delivered non GAAP EPS of $0.24 which was at the midpoint of our guidance and up from $0.22 in Q1 and $0.23 in the year ago period. GAAP net cash flow from operating activities for the 2025 increased to $38,500,000 up from $31,900,000 in Q1. GAAP operating cash flow margin of 31.1% was up from 26.5% in Q1. Free cash flow in Q2 was 31,300,000 with a 25.2% free cash flow margin, up from $23,300,000 and 19.4%, respectively, in Q1. This is a focus area for us, and we expect the trend of increased free cash flow margin to continue.

We are expanding our cash flow while selectively investing in CapEx in support of R and D and operational improvement projects. Channel inventory continues to decline. Channel inventory for comps and compute is already at normalized levels, and for industrial and automotive, we are tracking to plan. Now let me turn to capital allocation. Our balance sheet remains strong.

We are debt free and have ready access to capital if we need it. We are well positioned to navigate macro uncertainties and invest for future growth. Given our balance sheet strength and our business model, returning capital to shareholders remains a key component of our capital allocation strategy. During the quarter, we repurchased approximately $46,000,000 common stock under our existing buyback program. Through the 2025, we’ve repurchased $71,000,000 of common stock, which equates to 100% of our operating cash flow.

Now to guidance. For Q3 twenty twenty five, we expect revenue to grow into the range of $128,000,000 to $138,000,000 with gross margin expected to be 69.5% plus or minus 1% on a non GAAP basis. Non GAAP operating expenses are expected to be between $52,000,000 and $54,000,000 The income tax rate for Q3 is expected to be between 56% on a non GAAP basis. Non GAAP EPS is expected to grow into the range of $0.26 to $0.30 per share. These expectations are based on our current thinking around the macro and geopolitical environment, including tariffs.

In closing, we remain focused on executing our strategy and we are confident that we are well positioned for revenue growth near and long term. We are driving shareholder value by prioritizing investments in our product roadmap, revenue generation and customer support. Operator, that concludes our formal remarks. We can now open the call for questions.

Conference Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Our first question today comes from Ruben Roy of Stifel. Please proceed with your question.

Ruben Roy, Analyst, Stifel: Yes, hi. Thanks for letting me ask a question. And nice to see the progress in the second half of the year guys. Ford, I want to start with maybe a high level question and drill in a little bit on your comments around the companionship opportunity and some of the comments you made on data center infrastructure. Within the context of what’s going on with hyperscale spend over the last week and a half, we’ve gotten increasing CapEx yet again, and it seems like that trend is going to continue into next year.

So I guess when we take a step back and think about your positioning, would you say that as you speak to customers and think about some of these opportunities, certainly on the companionship side, that Lattice is in a position to benefit as we think about exiting 2025 and into ’26 as the AI infrastructure spend continues to grow? That’s the first question. Thank you.

Ford Tamer, CEO, Lattice Semiconductor: Thank you, Ruben. Yes, we absolutely believe that our comms and compute segment grew 20% quarter over quarter, and 26% year on year, And within that segment, the server was the star of the show, with server segment growing year on year 85% Q2 twenty five over Q2 twenty twenty four, and more than doubling 2025 over first half twenty twenty four. So as you can see, we’ve got some very strong growth in the server segment, fueling the strengths in the comms and compute, and we expect that to continue in the second half twenty twenty five and 2026. And if I were to drill down into a bit more detail, there are four factors driving the growth. Number one, the overall CapEx increase was post earning expectation for the major cloud guys to be over 50% year on year, whereas it was like 38 pre earnings.

The second one, our attach rate continues to grow into server. The third one, our average selling price ASP for various products continue to grow. And the last one, we continue to gain share in AI server versus traditional server. We’re growing both, actually, but our AI server attach rate is growing fast. So these four factors are contributing to the growth of our server and hence the growth of our comms and compute.

Ruben Roy, Analyst, Stifel: Thanks for that detail, Ford. And I guess as a follow-up, how are the conversations going relative to sort of new products versus sort of I hate to use the word legacy, but core products at Lattice? And if we could bring Lorenzo into that discussion and think about mix into next year, potential margin gross margin impacts as we think about new products kind of flowing into that data center segment? That’s all I had. Thank you.

Ford Tamer, CEO, Lattice Semiconductor: Thanks, Ruben. Let me address the first half of the question and then turn it over to Lorenzo to address the gross margin impact. So the first part of the question is we are on track to continue to exceed our forecast of high teens in 2025 from new products, and we’re on track to get to or exceed mid-20s percent of new product revenue next year in 2026. We’re also on track this would imply we’re on track to have about a 70% growth year on year between 24% to 25% in new products revenue. And then let me turn to Lorenzo to discuss gross margin impact.

Lorenzo Flores, CFO, Lattice Semiconductor: Right. So Ruben, what I got from your question is, you want some near term color, but really a view longer term on gross margin. Is that right?

Ruben Roy, Analyst, Stifel: Yeah, that’s right, Lorenzo. And also thinking through as industrial inventories normalize, just sort of how to think about margin.

Lorenzo Flores, CFO, Lattice Semiconductor: That’s great. So we obviously saw gross margin improvement this quarter and without going into all the detail, something that starts with the value we provide to our customers and the products. And as you can tell from the growth that Ford illustrated in his comments around what’s going on in the server market, clearly there’s strong demand for what we have. So we are seeing that the overall balance of business that we have is supportive of the gross margins we have this quarter. And as you know, from our guide, see an improvement into next quarter.

We think that the fundamental dynamic for the longer term is supportive of these gross margin levels. So we are not giving any specific guidance about 2026 just yet. But what you said is really important. If you look at where we are today with the relative strength of the comps and compute business, and knowing that we have a coming rebound in the industrial and auto, we’re very comfortable where our gross margins are. We look to continue to drive expansion, but we’re not providing specific guidance just yet.

I think the key to what you said about the industrial auto is right now, one thing Ford didn’t hit is we’re under shipping true demand in industrial auto. And so we think as go through the rest of the year, we’ll start to see some significant growth there. And as you indicated, find that supportive to gross

Ford Tamer, CEO, Lattice Semiconductor: margins. Very helpful. Thanks, guys.

Conference Operator: The next question is from Melissa Weathers of Deutsche Bank. Please proceed with your question.

Melissa Weathers, Analyst, Deutsche Bank: Hi, there. Thank you. I guess for my first one, I’ll also keep it pretty high level. This one’s for Lorenzo. You’ve now been in the seat for a few months now and gotten to know the business a lot more closely.

So can you just give us an update on how you’re thinking about the business? What is your confidence in the business model that’s been established at Lattice? And what opportunities do you see for the company going forward?

Lorenzo Flores, CFO, Lattice Semiconductor: I’ll try not to burn the rest of our time in answering the question. I knew coming in, looking at it from the outside that the characteristic strength of the FPGA business model was well represented at Lattice. Again, high value product, a broad base of customers demanding that product in broad base of sectors. So you have a lot of comfort on the durability of the top line. As you can see this past quarter, the revenue from industrial and auto was down, but more than offset by the fact that we have a very strong presence in the emerging comms compute applications that Ford talked about.

So, great durability on the revenue line and as Ruben’s question indicated, as industrial starts to manifest itself in our revenue, we should see acceleration of growth. And all this is supportive of the strong gross margins that we have. But very importantly to me, as I’ve become familiar with Lattice is structure underneath the operational focus on driving profitability and our focus across the management team and through the organization on improving it. Lots of activities on price and cost at the gross margin level. But if you look just for example, at this year, this time, our OpEx for very similar amount of revenue than last Q2, we’re lower by a couple of million.

This is based on actions the team’s taken to drive profitability. And what that sets us up for is near term, we’re seeing expansion of all our profitability metrics, operating income, EBITDA is up to over 34%, as I said. But if you look just quarter on quarter, our revenue is up 3.2, and our operating income is up 8%. So this is what we’re trying to set the table for as we go forward and recapture the revenue growth across the board of the business and accelerate our profitability growth into the end of this year and through next year. So I hope that answers your question.

Melissa Weathers, Analyst, Deutsche Bank: Yep, definitely. And we’re definitely happy to have you on board. I guess for my second question and maybe a less friendly question, I think last quarter you guys had indicated in 2026 that you should get back to your 15% to 20% revenue growth target. It seems like things are tracking as you planned, if not maybe a little bit better on the comms and compute side. So, is 15% to 20% still a viable target for how you guys are thinking about 2026 revenues?

Ford Tamer, CEO, Lattice Semiconductor: Yes, absolutely. We’ve indicated the strengths in comms and compute, but we also are undershipping through demand in the industrial automotive, which is allowing us to continue to bring the channel inventory down and our own inventory down. So we’re still very positive on that segment going back to growth in 2026. And there’s a range of new applications driving it. Like, For example, just in robotics, we’re very excited about all the applications that were being designed in, a range of new applications, robotics, for example, all the way from electronics, EV production, logistics, warehouse automation, agriculture, industrial automation, aerospace, grocery logistics, smart city, oil and gas, and last but not least, the category we’re most excited about, humanoids.

So you can see that we’re just on this one area, industrial and automotive, pretty excited about the growth prospect and believe 2026 will be a strong year, and we’re past the bottom in that segment.

Melissa Weathers, Analyst, Deutsche Bank: Perfect. Thank you.

Conference Operator: The next question is from Christopher Rolland of Susquehanna International Group. Please proceed with your question.

Christopher Rolland, Analyst, Susquehanna International Group: Hey, guys. Thanks for the question. So we’ve been examining some XPU racks at what I think is or maybe your largest hyperscale customer. And the XPU FPGA attached seemed pretty high, seemed like a massive opportunity for you. So I guess my first question is, could other first of did this surprise you?

Secondly, could other hyperscalers and their engagements potentially rival this one? And then lastly, like how should we think about this largest XPU customer versus the GPU opportunity versus other XPU hyperscale opportunities? Like how should we size this? Or what are you most excited about, etcetera? Thank you.

Ford Tamer, CEO, Lattice Semiconductor: Thank you, Chris. We’re doing actually quite well across all the hyperscaler because of our low power, small size, and cost effective solutions. If you have as many FPGAs as you’re discussing, you do want the three attributes of power, size, and cost to be adequate, and we’re actually superior in every aspect. And this is causing us to have a leadership in server. In addition, we’re also processor agnostic, so we’re Switzerland from that point of view.

The complexity of the board is increasing, so you’re seeing more of these FPGAs per rack. Security and post quantum cryptography are driving more attach, they’re driving higher ASP, and you’re seeing more servers having more cards because of this AI system. So, in general, for hyperscaler architecture, they range from 40 to 60 servers per rack, and we can range anywhere from 70 to 130 FPGAs per rack, depending on the configuration. And so we’re seeing this across the board, whether it’s XPU or GPU or other AI accelerators, they’re all driving that content, and they’re driving strong attach rate, strong ASP, and strong revenue growth for us. This address your question, Chris?

Christopher Rolland, Analyst, Susquehanna International Group: No, I think that was some great color, Ford. Maybe as a follow-up on disty inventory in particular, I saw disty was up as a percentage of total to I think 91%, but also so that means sell in was pretty high, but you guys are also saying sell through was even higher as you guys are burning inventory. I don’t know if you’re able to tell us or give us a rough idea of the difference, how much inventory was burned? It sounds like a lot of it was in I and A. How much of I and A is left?

And are you guys definitely on track for that to be normalized, particularly in I and A by the end of the year?

Ford Tamer, CEO, Lattice Semiconductor: Yes. Thank you for the question. Our inventory in comms and compute, as we discussed, has already been normalized. As you are alluding to, our inventory in industrial, automotive, or I and A, is on track to be normalized by midyear. We’re making very good progress month to month, quarter on quarter, and we’re not breaking up the exact number, but we continue to substantially ship over the revenue.

So the point of sale outflows from our channel inventory from a channel partner is definitely continuing to be higher than revenue, and will continue to be so until end of the year, at which point we should be normalized in Industrial Automation and give us really strong growth and strong headwinds, some tailwinds actually, into 2026, given that inventory will be normalized.

Christopher Rolland, Analyst, Susquehanna International Group: Super. Thanks, Ward.

Conference Operator: The next question is from Blayne Curtis of Jefferies. Please proceed with your question.

Blayne Curtis, Analyst, Jefferies: Hi, Ezra Weiner on for Blayne. Thanks for taking my question. I guess first one would be we’ve seen pretty mixed commentary from the rest of your peers in terms of industrial and auto. And you’re talking a lot about growth next year and normalization at the end of this year. Can you just talk about what you’re seeing from, I guess, a regional basis and maybe break up industrial and auto into what gives you that confidence on timing?

Ford Tamer, CEO, Lattice Semiconductor: Yes, for sure. So we were actually more cautious in the last earnings call, and we’re more optimistic on this one. So it’s a bit different. And then the rest of our peers that some of them were flipped. And I think that what gives us that confidence is we continue to a few factors.

Number one, we continue to have outflows from our channel inventory be higher than revenue, and the demand is extremely strong right now. We are starting starting backlog that are record high level, not only for Q3, but also for Q4, and we’re starting to see that for Q1. So billings and backlog, including starting backlog, is extremely strong. The book to bill is the highest it’s been for a couple of years. As we talked about, inventory on both the channel inventory and our own inventory continued to go down.

And then record design wins. So I think what’s also giving us confidence is we’ve got record design wins across all segments, not only compute, but also very strong in industrial automotive and very strong across the new products. So the new product funnel has almost doubled over the past twelve months, with very strong wins in hyperscalers, in robotics, and industrial automation. And in that segment, automotive is the smallest area. So automotive is less than 10% of that segment, so less than 5% of our revenue.

So some of the other peers are probably talking about weakness coming from automotive. We’re actually seeing automotive being strong for us, driven by China and somewhat in the rest of Europe. But really, it’s not a big factor in our revenue, because only less than 5% of revenue there.

Blayne Curtis, Analyst, Jefferies: Got it. Actually, that’s it. Thank you.

Conference Operator: The next question is from David Williams of Benchmark Company. Please proceed with your question.

David Williams, Analyst, Benchmark Company: Hey, good afternoon and certainly appreciate you letting me ask a question here. I guess maybe first, you’ve touched on the ASP trends. And just kind of curious, is that a dynamic where you’re just seeing some pricing power come back in? Or are you seeing just a mix shift in terms of your new products, more AVANT or the higher end products versus maybe some of your prior platforms?

Ford Tamer, CEO, Lattice Semiconductor: Yeah, we’re definitely a mix shift, not only to products like NexSys Navon, but also within our Mac XO family going from XO2 to XO3 to XO4 to XO5. So I think we’re continuing to provide products that are being driven by things like security, things like post quantum cryptography, by higher number of interfaces. So, that ASP is definitely benefiting from what I just mentioned.

David Williams, Analyst, Benchmark Company: And then maybe secondly, just kind of thinking about AVANT’s contribution and the way that that is ramping, can you give any color there around on the new product side, how much of that growth is driven by AVANT versus some of the newer Nexus products?

Ford Tamer, CEO, Lattice Semiconductor: Yeah. So look, the short term is going be a Nexus story, including 2026, and Avant becomes a bigger factor in ’twenty six and into ’twenty seven. So that’s the progression. So I would say the small FPGA is really what’s driving the short term and medium term revenue into 2026. And Avant becomes a much bigger contributor as we go into second half twenty twenty six and really into 2027.

Conference Operator: Our next question comes from Gary Mobley of Loop Capital. Please proceed with your question.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor0: Good afternoon, everybody. Thanks for taking my question. That $133,000,000 revenue guide for Q3, Approximately, how much are you undershipping as you draw down the continued excess inventory in industrial and automotive? And then, I guess, conversely, is there any sort of constraint on communications and compute as perhaps your inventory might be running too lean or you might have extended lead times?

Lorenzo Flores, CFO, Lattice Semiconductor: I’ll take the under shipping question, Gary. Sorry, I’m not going to give you a specific amount because we’re just, we’re not doing that in part because it requires some estimation. But also, when we do provide a forecast in the future, will incorporate what’s happened in the channel. But there are, you know, there’s a similar amount in our Q3 forecast that we saw in Q2. And we think that’s going to be consistent until about the end of the year when we should be normalized across the channel.

We are seeing, and I’ll hand this over to Ford on the second part of your question. We are seeing turns in the comms and compute business within the quarter right now.

Ford Tamer, CEO, Lattice Semiconductor: Yeah, Lorenzo said, comms and compute continues to be strong, our goal is to be a good supplier to our customers and do the best we can to meet supply. Obviously, it gets challenging with some of the upsides.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor0: Appreciate that color. Lorenzo, I know this wasn’t your target as it was given back in 2023, but I think the long term stated goal is to have OpEx somewhere in the range of 30% of revenue. And I know that the recent restructuring, you know, perhaps isn’t necessarily under your guard as well. But to climb back to that OpEx goal revenue has to increase from, you know, has to increase 35% from current levels. You know, it the strategy now to just remain patient and wait for the top line to recover?

Or do you feel like you’ve got some more OpEx rightsizing to go?

Lorenzo Flores, CFO, Lattice Semiconductor: So I’m glad you let me out in a way, Gary. I appreciate that. But I will say at the same time, if I’m free to define longer term, I don’t think it’s a bad objective. I do look at what we’re doing in our OpEx investment as the driver of growth of the future. And I think that’s just the inherent nature of the FPGA business.

We have done, as you indicated, a significant action last year in order to get our OpEx run rate down. We continue to tune our operation structures to optimize what we’re doing. We just have gone through an exercise in middle of the year of refocusing over where we’re investing and trying to invest in the right things. So, no, I don’t think it’s a bad objective or actually, let me rephrase that. I think it’s the right objective, but I’m not yet at the point of telling you when we think that’s going to happen.

Given the revenue growth that you alluded to, I do think it’s feasible.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor0: Appreciate the color. Thank you.

Conference Operator: The next question is from Clayton Bolton of Needham and Company. Please proceed with your question.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor1: Hey, guys. Thanks for letting me ask the question. I guess Ford and Lorenzo, you’ve talked about undershipping demand in the industrial automation sorry, auto and industrial segment. I’m wondering if you’ve actually started to see POS in that end market starting to increase or has POS been pretty flat and you guys are just under shipping more of a stable POS level?

Lorenzo Flores, CFO, Lattice Semiconductor: In short, Gwen, POS is increasing.

Ford Tamer, CEO, Lattice Semiconductor: Excellent. Okay.

Lorenzo Flores, CFO, Lattice Semiconductor: So that’s good news, right?

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor1: Yes. No, that’s great. Thank you for that. I just wanted to clarify. Ford, I’m going to ask you what may be a tough question, but, you know, like Nick said, we’re going to get Section two thirty two within about the next week or so.

How are you guys preparing for Section two thirty two? Do you have sort of a sense where do think those tariffs may land? And how do you handle that uncertainty?

Ford Tamer, CEO, Lattice Semiconductor: Number one, our understanding is the country specific tariffs supersede two thirty two. So we get a fair amount of our supply from Japan, South Korea, and Malaysia. And so those are already in place, so no change on that front. Number two, a lot of our channel partners bring inventory from Mexico into a free trade zone and ship from there out of The US. So the percent that is coming into The US is a small percent of our business.

And at this point, we haven’t seen any direct impact from tariffs, and we’ll wait and see. But some of these factors are going to mitigate any potential February impact.

Lorenzo Flores, CFO, Lattice Semiconductor: Yeah, let me just leverage what Ford said. The direct impact as we see it on our business doesn’t seem to be significant in terms of changing our cost structures based on the way our supply chains are oriented and the way our customer flows work. However, do, as everybody else, we do look out for bigger macro level impacts on the overall demand. But right now, as you see in what we’ve guided, we see strength in our end markets and given what’s driving that strength. If you look at, for instance, the hyperscaler CapEx, we were hoping that the indirect impact of tariffs are minimized on us.

We have a good supply chain structure in order to deal with this flexibly. And we’ve been working with our customers over the past several months as this has become an issue in order to help them optimize their supply chains as well.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor1: Got it. Thank you for that.

Conference Operator: The next question is from Duxin Zhang of Bank of America. Please proceed with your question.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor2: Hi. Thank you for squeezing me in. On comms and compute, Ford, I know you mentioned a lot of growth drivers, some of which are secular and some of which are more specific to Lattice. Is there any way to sort of force rank those four contributions that you mentioned? So say, the market growing versus your wins or your attach rate versus content, that would be very helpful.

Ford Tamer, CEO, Lattice Semiconductor: So, you’d like us to rank the four factors that are the overall CapEx increase that the cloud hyperscaler have indicated on the earnings call being one, our attach rates being two, the ASP being three, and our attached AI servers being four. And these are all related and intertwined. Number five I forgot to mention is the record design wins we’re having with hyperscalers. And so that is a strong number five, if you wish. And number six, as I think about the sort of ecosystem that we use to sell into that market, We sell, if you wish, to four different constituents.

One is the ODMs that are building for the hyperscaler and OEMs. Two, we sell directly with AI accelerators. Three, we sell directly with some of the related wired communication type of providers. And number four, the server OEMs directly as well. And so we’ve got these four constituents also going strong.

Daksin, I’m not sure there’s a scientific way to break this. We have all the data, but I’m not sure. We could take it offline and come back to you. But quite a few factors that are helping us grow the comms and compute.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor2: Yeah, understood. And then the second question on industrial and auto. So I know you mentioned the strong recovery outlook, but then the channel has been elevated for quite some time and you said you’ve been under shipping demand for a time as well. So do you anticipate once the inventory actually normalize, do you expect the market to go back to shipping in line with the demand? Or do you expect it to be a little bit more conservative?

Lorenzo Flores, CFO, Lattice Semiconductor: I would expect it would be in line with demand. And as our design wins take hold, our new design wins take hold, and these products in these sectors ramp, we should have quite strong growth.

Ford Tamer, CEO, Lattice Semiconductor: Got it. Thank you. The

Conference Operator: next question is from Joshua Buchalter of TD Cowen. Please proceed with your question.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Hey guys, thank you for taking my question. Maybe following up on Quinn’s earlier about the geopolitical backdrop. Maybe it’s a thing it hasn’t come up, but any changes you’ve observed in your customers order patterns specifically in China over the last ninety days given all the volatility? I think in the queue it said China was up like 11% sequentially. So it doesn’t seem like anything egregious, but we’d just be curious to hear your thoughts on the geopolitical backdrop from the tariff angle.

Thank you.

Lorenzo Flores, CFO, Lattice Semiconductor: The short answer is we have not seen anything and we keep looking. And we’re very wary of that to make sure that we understand what is true demand. But one of the things that you should put into context of that question is our growth that we’re forecasting and Ford’s earlier comments about where bookings are. So, the phenomenon you’re asking for is that we see a pull in and then are expecting a drop off. We just don’t see that in our data.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Got it. Thank you, Renzo. I appreciate the color there. And then as we think about the new product growth, think you said 70% this year. Given the upside you saw in comms and computing this quarter, mean, should we think about new products being more tied to comms and computing as you see faster design cycle times in that end market too?

And then kind of squeezing a second one from any outlook you can give us on sequential growth by end market in the guidance on that note? Thank you.

Ford Tamer, CEO, Lattice Semiconductor: As we indicated, we do believe that industrial and auto will start outperforming as we get into end of this year into next year. And so we should see growth across both end markets, both the comms and compute, as well as industrial and auto. So we’re seeing one we’re seeing both of them grow into next year.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Thank you.

Conference Operator: Our next question is from Kevin Garrigan of Rosenblatt Securities. Please proceed with your question.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Yes. Hey, good afternoon all. Congrats on the strong results. Ford, you had mentioned that several edge AI growth areas that will benefit the company. Looking at the market in your business, can you just give us a sense of what applications you see developing more in the near term that you’ll benefit from and what is more on the longer tailed end?

Ford Tamer, CEO, Lattice Semiconductor: Yeah, for sure. So on Edge AI, we’re on track to achieve high teens of revenue coming from AI in ’twenty five, and expect this to grow to mid-twenty percent of revenue in ’twenty six. So that’s positive and aligned with what we had indicated in the past. And the way we break it up by end segments, we see about 60% of this AI related revenue coming from compute and comms, and about 40% of this AI revenue coming from the industrial, automotive, and consumer type markets. By application, we see about 55% of these applications, where we are a companionship to AI accelerators and GPUs and switches, etcetera.

And we see about 45% that our application, where we’re either on the data pass or are running Edge AI into our chip for tiny AI models. So that should give you a color of that AI revenue.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Yep. Okay. That’s perfect. And then you delivered another record quarter for design wins. Ford, you’re coming up on your one year at the company.

So what are you seeing at Lattice that helps with capturing design wins versus the rest of the market?

Ford Tamer, CEO, Lattice Semiconductor: I think what’s helping us is a very single-minded focus on small and mid range FPGAs, which we believe is a sweet spot of growth in the FPGA market. And we’re actually clarifying our positioning to be a companionship to AI accelerator, networking chips, NIC cards, etcetera, versus our competitors trying to do this in the midrange and high large FPGA, in a way, competing with some of our customers or their customers’ ASICs. So we are more of a pure play FPGA in the sense that this small to mid range is more of a companionship. If we run AI on our chip, this is, as I said, less than one tera ops, less than one watt. So very focused type of approach.

We call this Far Edge AI, near sensor AI, as opposed to the competitors, larger competitors, larger PGA, trying to go after what they call Near Edge AI, which in a way competes with our customers. So we see ourselves as a companionship, for example, to image processor AI, where we can be fed input from various sensors. It could be image sensors, it could be radar, it could be LiDAR, it could be infrared cameras. And many of these could be ten, twelve, 15 different sensors being fed into our FPGA, where we preprocess the data and sort of make that near edge AI inferencing chip more effective. And so, in that companion role, we are adding value to our customers because they’re spending a ton of money on these AI accelerators, and we make those AI accelerators more efficient because of our low power, small size, cost effective solution near the sensor.

Our customer called this contextual intelligence. So that intelligence is contextual to that sensor and helps that main AI chip.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor3: Yes, absolutely. I appreciate the color. Thanks, Ward.

Conference Operator: Our last question today comes from Christopher Rolland of Susquehanna International Group. Please proceed with your question.

Christopher Rolland, Analyst, Susquehanna International Group: Hey guys, thanks for the follow-up. I guess first of all, just want to know forward what you meant by the country tariffs superseding the Section two thirty two. So I guess that means you don’t think there will be any additional semiconductor tariffs on top of country specific, but just wanted you to elaborate there. And then also, if you guys had any more color on Q4 or 2026 based on the positive bookings backlog commentary, that would be great as well.

Ford Tamer, CEO, Lattice Semiconductor: Sure. So on the first question, our understanding is if you look at tariffs, for example, from Japan or South Korea, where we procure wafers or Malaysia, we procure assembly and test stuff, is that those, let’s say, 15% in the case of Japan and South Korea would supersede a two thirty two if two thirty two were to be higher. So let’s say a two thirty two comes in at 20%. Our understanding is that the Japan 15% or South Korea 15% would supersede that 20% and stay valid. So that’s number one.

On number two, on the question on Q4 and 2026, as I said, we see strong backlog actually into Q4 now and starting into Q1 of next year. So this is way above where we have been and probably some of the best bookings and backlog for the past three years.

Christopher Rolland, Analyst, Susquehanna International Group: Excellent. And then Ford, maybe just a high level technical discussion as to where you see opportunities. When we think about scale up AI, particularly networking, just because that was your background, are there any opportunities for things like scale up or retimers or DSP or SerDes or IO chips or anything like that? Or are these FPGAs including AVANT too small for some of these functions? I’m just wondering if there could be expanded opportunities just in your heritage of networking.

Ford Tamer, CEO, Lattice Semiconductor: Well, look, today we are getting increasingly confident in our positioning of being the companionship to all of the above, right? So not just somebody asking about XPU and GPU and AI accelerator and switches and NIC cards and retimer and even board management controller and NIC storage, we are actually being companionship to all of the above. And all of these chips are driving the AI infrastructure. AI infrastructure is not just the accelerator, but also all of the chips that you’re mentioning that are companionship to these AI accelerators, we companionship to these companionships. So I think right now we are benefiting from being in Switzerland and being a very important support role in all of these deployments.

And this companionship role is going to increase because there is a tremendous amount of complexity increase in DZai. There is a tremendous amount of pressure to reduce system design costs, to the speed at which the system go to market, and a lot of these functions are typically better done in FPGA, and these are not these big, large FPGA power hungry expensive. These are the small to mid range FPGAs that are going to fit in these systems when you talk about tens of FPGAs per rack. So we’re happy with the role we have and feel like this can be a very big opportunity for us.

Christopher Rolland, Analyst, Susquehanna International Group: Thanks, Ford, and congrats on the improvements.

Ford Tamer, CEO, Lattice Semiconductor: Thank you.

Conference Operator: This concludes our question and answer session. I would like to turn the floor back over to Rick Moucher for closing comments.

Rick Moucher, Vice President of Investor Relations, Lattice Semiconductor: Yeah. Thanks, everyone, for joining us today. For a copy of our earnings release, please visit us on our Investor Relations website. We’ll be attending the following conferences this quarter: the Jefferies Semi IT Hardware and Communications Tech Conference in Chicago on August 26 the Evercore Semiconductor IT hardware and networking conference also in Chicago on August 27, and the Benchmark Annual Tech Media Telecom Conference in New York on September 3. This completes our call.

Thank you again very much for your participation.

Conference Operator: You may now disconnect your lines at this time. Have a wonderful day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.