Semtech (SMTC) shares surged more than 16% after the California-based chipmaker reported fiscal second-quarter results that beat Wall Street expectations.
The company also highlighted accelerating demand from AI-driven data centers.
For the quarter ended July 27, Semtech delivered adjusted earnings of $0.41 per share, edging past consensus by a penny. Revenue climbed nearly 20% year-over-year to $257.6 million, essentially matching analyst estimates. Profitability saw an even sharper rebound: earnings were up more than 270% from the same period last year, while free cash flow swung from negative to a healthy $41.5 million. Adjusted EBITDA hit $56.5 million, exceeding forecasts by nearly 14%.
The upbeat results immediately lifted shares, with the stock climbing near $60 in early Tuesday trading.
Data Center Sales Fuel Growth
The quarter’s standout performance came from infrastructure markets, where net sales grew 39% to $73.4 million. Within that category, data center sales nearly doubled to $52.2 million, setting a company record. The surge was powered by strong adoption of Semtech’s CyberEdge optical products, which are increasingly in demand as cloud providers scale up capacity for artificial intelligence workloads.
Management signaled confidence that momentum will continue through year-end, citing accelerating orders from North American cloud service providers. New design wins and ramping production of next-generation products such as 800G Linear-drive Pluggable Optics and Active Copper Cables—promising up to 50% power savings—position Semtech to capture a sizable slice of the $50 billion-plus interconnect market.
While Chinese orders remain constrained by limited GPU availability, Semtech noted improving bookings in recent weeks, hinting at a potential inflection point in that market.
The quarter’s standout performance came from infrastructure markets, where net sales grew 39% to $73.4 million. Within that category, data center sales nearly doubled to $52.2 million, setting a company record. The surge was powered by strong adoption of Semtech’s CyberEdge optical products, which are increasingly in demand as cloud providers scale up capacity for artificial intelligence workloads.
Management signaled confidence that momentum will continue through year-end, citing accelerating orders from North American cloud service providers. New design wins and ramping production of next-generation products such as 800G Linear-drive Pluggable Optics and Active Copper Cables—promising up to 50% power savings—position Semtech to capture a sizable slice of the $50 billion-plus interconnect market.
While Chinese orders remain constrained by limited GPU availability, Semtech noted improving bookings in recent weeks, hinting at a potential inflection point in that market.
Diversified Growth Beyond Data Centers
Semtech’s strength wasn’t limited to cloud infrastructure. In the high-end consumer segment, sales rose 11% to $41.2 million, supported by strong demand in premium TVs and smartphones. Consumer TV revenues climbed 15% to nearly $30 million, benefiting from product ramps at blue-chip device makers.
The industrial segment also proved resilient, advancing 14% to $143 million. LoRa-enabled solutions, central to applications like smart cities, asset tracking, and industrial automation, posted a 29% increase to $36.9 million. PerSe sensing technology gained traction across smartphones, wearables, and smart glasses, expanding Semtech’s footprint in consumer electronics.
This diversification has provided the company with multiple growth engines, offsetting margin pressure in certain lower-growth segments and underscoring the benefits of its portfolio optimization strategy.
Semtech’s strength wasn’t limited to cloud infrastructure. In the high-end consumer segment, sales rose 11% to $41.2 million, supported by strong demand in premium TVs and smartphones. Consumer TV revenues climbed 15% to nearly $30 million, benefiting from product ramps at blue-chip device makers.
The industrial segment also proved resilient, advancing 14% to $143 million. LoRa-enabled solutions, central to applications like smart cities, asset tracking, and industrial automation, posted a 29% increase to $36.9 million. PerSe sensing technology gained traction across smartphones, wearables, and smart glasses, expanding Semtech’s footprint in consumer electronics.
This diversification has provided the company with multiple growth engines, offsetting margin pressure in certain lower-growth segments and underscoring the benefits of its portfolio optimization strategy.
Analysts Raise Targets as Guidance Stays Firm
Looking ahead, Semtech guided for adjusted earnings of $0.44 per share on revenue of roughly $266 million in the current quarter—essentially in line with Wall Street estimates. Management also forecast third-quarter EBITDA of $60 million, topping expectations.
The results prompted a wave of analyst upgrades. Piper Sandler raised its price target to $65 from $55, while CFRA Research reiterated a “buy” rating with the same target, citing Semtech’s expanding data center portfolio and LoRa opportunities.
CEO Hong Hou emphasized balance sheet improvements, pointing to $879 million in debt reduction and a stronger leverage profile. The financial flexibility, he said, allows the company to increase investment in next-generation technologies while maintaining operating discipline.
Looking ahead, Semtech guided for adjusted earnings of $0.44 per share on revenue of roughly $266 million in the current quarter—essentially in line with Wall Street estimates. Management also forecast third-quarter EBITDA of $60 million, topping expectations.
The results prompted a wave of analyst upgrades. Piper Sandler raised its price target to $65 from $55, while CFRA Research reiterated a “buy” rating with the same target, citing Semtech’s expanding data center portfolio and LoRa opportunities.
CEO Hong Hou emphasized balance sheet improvements, pointing to $879 million in debt reduction and a stronger leverage profile. The financial flexibility, he said, allows the company to increase investment in next-generation technologies while maintaining operating discipline.
Positioned for an AI-Driven Cycle
Semtech’s earnings report underscores the company’s role as a beneficiary of the AI infrastructure boom. Record-setting data center sales, rising adoption of LoRa and PerSe platforms, and ongoing portfolio optimization suggest the company is entering a multiyear growth cycle.
While volatility remains a feature of the stock—trading nearly 24% below its 52-week high—the latest quarter shows that Semtech is carving out a durable position in fast-growing markets. For investors betting on the continued buildout of AI and IoT ecosystems, Semtech appears well-positioned to capitalize.
Semtech’s earnings report underscores the company’s role as a beneficiary of the AI infrastructure boom. Record-setting data center sales, rising adoption of LoRa and PerSe platforms, and ongoing portfolio optimization suggest the company is entering a multiyear growth cycle.
While volatility remains a feature of the stock—trading nearly 24% below its 52-week high—the latest quarter shows that Semtech is carving out a durable position in fast-growing markets. For investors betting on the continued buildout of AI and IoT ecosystems, Semtech appears well-positioned to capitalize.
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