Semtech Q2’27 slides: data center, LoRa drive record revenue

Semtech Corporation (NASDAQ:SMTC) reported record revenue and profitability improvements in its fiscal second quarter of 2027, ending on August 25, 2026. The company's net sales reached $342 million, a 33% increase year-over-year, marking the tenth consecutive quarter of growth. Adjusted diluted earnings per share climbed to $0.71, showcasing a 73% year-over-year growth rate.

Semtech's shares responded positively, rising 5.47% in regular trading to $127.52, and an additional 3.65% in after-hours trading to $132.17. The company's strong performance was driven by two key growth factors: data center products and LoRa-enabled solutions. Data center net sales hit a record $100 million, up 39% sequentially and 91% year-over-year, fueled by the success of 800G products and the early rollout of 1.6T technology.

LoRa-enabled net sales also achieved an all-time high of $58 million, growing 31% quarter-over-quarter and 58% year-over-year. President and CEO Hong Hou emphasized Semtech's pivotal role in one of the largest infrastructure build-outs ever, highlighting record revenue, earnings leverage, and significant progress in portfolio optimization.

The company's financial performance exhibited robust operating leverage, as adjusted diluted EPS grew at nearly double the rate of net sales growth, indicating improved cost management and favorable shifts in product mix. In the Infrastructure end market, which included data center, PON/FTTH, wireless, and circuit protection products, Semtech generated $124 million in net sales, a 25% sequential increase and 69% year-over-year surge.

Data center products alone contributed $100 million, driven by robust demand for FiberEdge TIA and driver solutions, and strong traction with leading hyperscalers and design wins across major module providers. The company's photonics portfolio, covering gain chips, high-power CW lasers, SOAs, and high-speed photodiodes, positions Semtech for substantial growth as the industry transitions from 800G to 3.2T speeds.

In the Industrial end market, LoRa products demonstrated impressive momentum, with net sales totaling $179 million, a 16% sequential increase and 25% year-over-year growth. Notable expansion was seen in Smart Utilities, Smart Building, Smart City, and asset management applications. Semtech's LoRa Gen 4 platform offers dual-band capability, doubling data throughput to 2.6 Mbps, and maintaining ultra-low power consumption.

LoRaWAN, along with emerging applications like Amazon Sidewalk, continues to fuel sustained growth momentum. The company's comprehensive financial results display an improved adjusted gross margin of 54.5% in Q2'27, up 150 basis points sequentially and 130 basis points year-over-year. Adjusted operating income reached $83.6 million with a 24.4% operating margin, up from 20.4% in Q1'27 and 18.8% in Q2'26.

Cash generation also strengthened, with operating cash flow growing to $68.9 million, a 90% sequential increase and 55% year-over-year jump. Free cash flow hit $61.4 million, a 119% sequential increase and 48% year-over-year growth, providing Semtech with enhanced financial flexibility for growth investments and debt reduction. The company's current balance sheet shows total debt at $503 million and cash reserves of $204.1 million, resulting in a net debt of $299 million, and a net leverage ratio of 1.1x based on adjusted EBITDA of $277.5 million, down from 1.4x in the previous quarter.

Looking ahead, Semtech provided guidance for fiscal Q3'27, projecting net sales of $410 million (plus or minus $5 million), representing a 54% year-over-year growth rate and 20% sequential increase.