Allegro MicroSystems, Inc. (ALGM) | The Buildout — AI Infrastructure
The Verdict
Allegro MicroSystems designs sensor integrated circuits and application-specific power integrated circuits that sense position, speed, and current; drive motors; regulate power; and isolate high-voltage control signals. In AI infrastructure, its fan motor drivers, current sensors, and emerging isolated gate drivers sit in the power and cooling systems around high-power AI racks and robotics platforms.
| Market Cap | — |
| Revenue (TTM) | $946M |
| Revenue Growth | +24.2% |
| EBITDA Margin (TTM) | 13.4% |
| Net Debt | $125M |
| Earnings Beats | 6 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Data center revenue more than quadrupled in FY2026 to roughly 10% of total sales, and Q4 share hit a record 14%.
- Current sensors grew from essentially zero to about 20% of data center revenue by Q4 FY2026, and management now calls them a meaningful new growth pillar.
- Management frames data center content scaling from approximately $150 per rack today to over $425 in next-generation AI configurations.
- FY2026 design wins rose more than 30% YoY, led by Focus Auto and data center, and backlog exited the year at a multiyear high.
- FY2026 non-GAAP gross margin improved 140 basis points to 49.4% despite an approximately 200-basis-point gold headwind; Q4 gross margin was 50.0%.
What We’re Watching
- Data center sequential growth is guided to 20–25% in Q1 FY2027, down from Q4 FY2026's 41%; management calls this base-effect normalization.
- Liquid cooling could displace GPU/TPU fan-driver sockets faster than fans proliferate into power supplies and networking equipment.
- Automotive remains 71% of FY2026 revenue, and management sees no broad restocking evidence; Q1 auto is expected up only a couple of percentage points sequentially.
- Isolated gate-driver material data center revenue is still 18–24 months out, and robotics shipment volume is not expected until 2027.
The operating evidence is strengthening: data center mix is at records, current sensors are ramping as a second leg, pricing is turning higher, and backlog is building. The open question is whether data center and robotics can scale quickly enough to reduce dependence on a still-71% automotive revenue base before commodity, supply-chain, or architecture risks slow the shift.
Earnings Beat
Allegro reported Q4 FY2026 revenue of $243.2M, up 26% year over year. GAAP gross margin was 47.1%, while non-GAAP gross margin was 50.0%, up from 45.6% a year earlier. Data center revenue reached a record 14% of total sales, up from 10% in Q3 FY2026.
| Metric | Q1 FY2027 | Q4 FY2026 | Q1 FY2026 | YoY |
|---|---|---|---|---|
| Revenue | $259M | $243M | $203M | +27.4% |
| Gross margin | 48.5% | 47.1% | 44.9% | +360bps |
| EBITDA | $42M | $35M | $14M | +213.3% |
| EPS | $0.08 | $-0.09 | $-0.07 | −218.4% |
I wouldn’t call it a slowdown. It’s the law of large numbers.— Derek D’Antilio, CFO, May 7, 2026
Management tone: Management was confident and more quantitative than in the prior quarter, shifting from directional language to concrete numbers on data center, pricing, backlog, and capacity. Data center language hardened to a meaningful new growth pillar, backlog language moved from multi-quarter highs to a multiyear high, and management quantified the gold cost headwind at about 200 basis points.
Management Guidance
Management guided Q1 FY2027 revenue to $245M–$255M, non-GAAP gross margin to 50%–51%, OpEx to $80M ± $2M, and non-GAAP diluted EPS to $0.19–$0.23. It also expects data center to reach 16–17% of total sales, implying 20–25% sequential data center growth, and auto to rise a couple of percentage points sequentially.
Trajectory
Recent revenue stepped from $214.3M in Q2 FY2026 to $229.2M in Q3, $243.2M in Q4, and $259.2M in Q1 FY2027, with GAAP gross margin expanding from 46.3% to 48.5% over that stretch. The driver is mix: Industrial & Other grew 38% in FY2026 and data center share rose from 8% in Q2 to 14% in Q4, while automotive grew 17%.
The Model
The model projects FY+1 revenue of $1,100M and EBITDA of $222M, or 20.2% of revenue. FY+2 revenue is projected at $1,300M with EBITDA of $309M, or 23.8% of revenue. The near-term anchor is the data center mix shift and current sensor ramp; the outer year depends on data center growth staying well above 20%, robotics volumes beginning, and the isolated gate-driver timeline.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $890M | $1.1B | $1.3B |
| YoY Growth | — | +23.6% | +18.2% |
| EBITDA | $98M | $222M | $309M |
| EBITDA Margin | 11.0% | 20.2% | 23.8% |
Projections are the median of 5 independent model runs. The model’s revenue sits 4.0% above analyst consensus.
Management guided Q1 FY2027 revenue to $245M–$255M, non-GAAP gross margin to 50%–51%, OpEx to $80M ± $2M, and non-GAAP diluted EPS to $0.19–$0.23. It also expects data center to reach 16–17% of total sales, implying 20–25% sequential data center growth, and auto to rise a couple of percentage points sequentially.
What Could Go Right — and Wrong
- Data center share remains above 15% and grows through FY2027, with current sensors staying above 20% of data center revenue.
- Isolated gate-driver revenue pulls ahead of the 18–24 month timeline, adding 2–3x dollar content.
- Robotics shipments begin in calendar 2026 and volumes ramp in 2027, extending the approximately 90 IC per robot design win.
- Gold-to-copper conversion and selective price increases lift gross margin toward management's over-55% target.
- Focused Auto keeps growing near its FY2026 30% pace while total automotive holds to SAAR plus 7–10%.
- Liquid cooling displaces GPU/TPU fan-driver sockets faster than fans proliferate into power supplies and networking.
- Data center sequential growth slows to the guided 20–25% and then decelerates further.
- Automotive fails to inflect in Q1 FY2027, leaving a 71% revenue base to weigh on results.
- Gold, fuel, and freight costs outrun pricing and efficiency actions, stalling gross margin near 50%.
- Taiwan or rare-earth supply disruption constrains wafer or magnetic-sensor supply.
Looking Ahead
The next 12 months hinge on whether Allegro's data center mix keeps climbing and whether robotics moves from design wins to revenue. Management expects FY2027 data center growth well above 20%, with Q1 guided to 16–17% of sales. Robotics shipments are scheduled to begin in calendar 2026, and selective price increases start at the end of Q1 FY2027. Isolated gate-driver revenue remains 18–24 months out, so near-term confirmation is more likely from current sensors, pricing, and gross margin.
- July 30, 2026Q1 FY2027 results release — Tests revenue, margin, and the 16–17% data center share guided for Q1.
- End Q1 FY2027Selective price increases begin — First test of whether pricing protects gross margin against gold and fuel costs.
- Calendar 2026Robotics initial shipments — First contribution from two Chinese robotics design wins.
- FY2027Data center growth well above 20% — Confirms the mix shift and current sensor ramp continue.
- FY2027Focused Auto growth test — Shows whether Focus Auto can hold near FY2026's roughly 30% growth.
- Late 2027 to mid-2028Isolated gate-driver revenue timing — Material data center revenue from SiC gate drivers, with 2–3x content uplift.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $725M | $890M | $946M | +22.8% |
| Gross Margin | 44.4% | 46.2% | 47.2% | +185bps |
| EBITDA | $45M | $98M | $1.1B | +119.9% |
| EBITDA Margin | 6.2% | 11.0% | 13.4% | +488bps |
| Net Income | −$73M | −$15M | $14M | +79.6% |
| Free Cash Flow | $22M | $125M | $467M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)47.2%
- EBITDA Margin (TTM)13.4%
- Net Margin (TTM)1.5%
- ROIC4.3%
- FCF Conversion69.5%
- SBC / Revenue2.8%
The Company
Allegro MicroSystems designs sensor ICs and application-specific power ICs that handle sensing, motion control, and power management. Its magnetic sensor ICs span current, position, and speed sensing; power ICs include motor drivers, regulators, safety PMICs, LED drivers, and isolated gate drivers. The company ships approximately 2.1 billion units annually to more than 15,000 customers and describes itself as the world's leading magnetic sensor IC supplier by market share.
Allegro operates as one reportable segment and frames results by end market rather than formal segments. Its primary internal assembly and test site is an owned 440,000-square-foot facility in Manila, Philippines, supported by R&D sites in Muntinlupa City and Manchester, New Hampshire. Wafer fabrication is outsourced to UMC, Polar, Tower, and TSMC.
Business Segments
Competitive Landscape
The 10-K describes Allegro as the world's leading supplier of magnetic sensor ICs by market share, and management points to the 10MHz TMR current sensor and ASIL D passive TMR angle sensor as differentiation. The provided filings do not lay out a formal competitor table; the only names in the source set come from a computed criticality assessment identifying substitute suppliers.
- Analog Devices, Inc. (ADI)Named in the criticality assessment as a substitute supplier for current sensors and fan drivers if Allegro disappeared.
- Texas Instruments (TI)Named in the criticality assessment as a substitute supplier for current sensors and fan drivers if Allegro disappeared.
- InfineonNamed in the criticality assessment as a substitute supplier for current sensors and fan drivers if Allegro disappeared.
Supply Chain
Allegro designs in-house, outsources wafer fabrication to four primary fabs, and performs assembly, test, and finish at its Manila site. Distribution matters: about 90% of industrial sales, including data center, flow through distribution.