Lattice Semiconductor Corporation (LSCC) | The Buildout — AI Infrastructure
The Verdict
Lattice Semiconductor designs low-power field-programmable gate arrays that sit next to CPUs, GPUs, and other processors, handling secure boot, root of trust, power sequencing, platform management, and rack control. It does not sell AI compute engines. After closing the AMI acquisition, the combined company adds platform firmware and manageability software, positioning itself as a control and security layer across AI data-center infrastructure.
| Market Cap | — |
| Revenue (TTM) | $574M |
| Revenue Growth | +17.4% |
| EBITDA Margin (TTM) | 13.0% |
| Net Cash | $100M |
| Earnings Beats | 1 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Compute & Communications grew 83% YoY in Q2 FY2026, and server growth was faster than the segment.
- AMI adds a software revenue model expected to exit 2026 at a run rate above $200 million, with gross margins above 75% and EBITDA margins above 40%.
- Management says new products will exceed 25% of 2026 revenue, and server is expected to be about 38% of total revenue.
- Free cash flow margin reached 40.4% in Q2 FY2026, on operating cash flow of $88.3 million.
- Industrial & Embedded recovered, up 17% QoQ and 36% YoY in Q2 FY2026.
What We’re Watching
- Assembly/test capacity: management targets supply/demand in line by September 2026; any slip would gate revenue.
- Backlog quality: '2027 is pretty much booked' is not backed by a filed backlog figure or disclosed non-cancelable share.
- AMI integration: the $1.65B acquisition closed July 27, 2026, with a $925M term loan; the first combined segment disclosure comes in Q3 FY2026.
- Growth-rate sustainability: the CEO said the company is not promising the 'Rule of 105' into the future.
The thesis is strengthening: record Q2 revenue, a raised Q3 guide, AMI closed, and management pulled the $1 billion run-rate milestone a quarter ahead. The open question is whether the assembly capacity buildout and AMI integration can convert a very visible backlog into revenue without cancellations or margin drag.
Earnings
Lattice reported Q2 FY2026 revenue of $201.1 million, up 18% sequentially and 62% YoY, with non-GAAP gross margin of 71.7% and non-GAAP EPS of $0.53. Non-GAAP EBITDA margin was 43%, and free cash flow reached $81.3 million.
| Metric | Q1 FY2026 | Q4 FY2025 | Q1 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $171M | $146M | $120M | +42.2% |
| Gross margin | 68.8% | 62.4% | 68.0% | +80bps |
| EBITDA | $38M | $13M | $18M | +112.9% |
| EPS | $0.16 | $-0.06 | $0.04 | +332.6% |
The visibility is increasing daily. I mean it's really unprecedented. We've got visibility all the way to the end of 2027. 2027 is pretty much booked.— Fouad Tamer, CEO, August 4, 2026
Management tone: Management shifted from confident to highly confident and strident across the Q1 and Q2 calls, repeatedly pointing to execution: closing AMI in the targeted third-quarter window, beating the high end of Q2 guidance, and pulling the $1 billion run-rate milestone forward. They were direct on assembly constraints and cost inflation, while careful not to promise the 'Rule of 105' into the future.
Management Guidance
For Q3 FY2026, management guided FPGA business revenue to $210–230 million, AMI partial-quarter revenue to $33–37 million, total revenue to $245–265 million, and combined gross margin to 69.5% ±1%. FPGA gross margin was guided to 70% ±1%, non-GAAP operating expense to $83–90 million, tax rate to 4–6%, and non-GAAP EPS to $0.54–0.58. For the full year, management expects to exit 2026 at a ~$1.2 billion revenue run rate, with server about 38% of revenue, AI-related revenue about 25%, and new products exceeding 25% of revenue.
Trajectory
Through the audited data spine, quarterly revenue stepped from $124M to $133M to $146M to $171M across the last four reported quarters, and the latest disclosed Q2 FY2026 revenue of $201.1 million extends that run. Gross margin held stable at 68.8% in Q1 FY2026 while operating margin expanded 1,180bps and EBITDA margin expanded 990bps. The drivers are data-center server demand, an industrial recovery, and new product ramps; the open question is whether the pace holds after the current supply/demand alignment.
The Model
The model projects FY+1 revenue of $850.0 million and EBITDA of $229 million (26.9%), and FY+2 revenue of $1,200 million and EBITDA of $360 million (30.0%). Near-term projections are anchored by the Q3 guided range of $245–265 million and management's exit-2026 run rate of about $1.2 billion; the FY+2 step-up assumes continued AMI growth, new product traction, and sustained server demand.
| Metric | FY2025 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $523M | $850M | $1.2B |
| YoY Growth | — | +62.4% | +41.2% |
| EBITDA | $55M | $229M | $360M |
| EBITDA Margin | 10.5% | 26.9% | 30.0% |
Projections are the median of 5 independent model runs.
For Q3 FY2026, management guided FPGA business revenue to $210–230 million, AMI partial-quarter revenue to $33–37 million, total revenue to $245–265 million, and combined gross margin to 69.5% ±1%. FPGA gross margin was guided to 70% ±1%, non-GAAP operating expense to $83–90 million, tax rate to 4–6%, and non-GAAP EPS to $0.54–0.58. For the full year, management expects to exit 2026 at a ~$1.2 billion revenue run rate, with server about 38% of revenue, AI-related revenue about 25%, and new products exceeding 25% of revenue.
What Could Go Right — and Wrong
- Supply/demand alignment lands by September 2026 and assembly capacity holds through Q4 and 2027, allowing the backlog to convert to revenue.
- AMI's software business exits 2026 above a $200 million run rate, grows about 25% in 2027, and revenue synergies materialize on top.
- Server remains about 38% of revenue while AI-related revenue surpasses 25% as new products exceed 25% of total revenue.
- Industrial & Embedded recovery broadens, with factory automation, robotics, medical, and aerospace and defense adding a second growth leg.
- Free cash flow margin stays near the Q2 40.4% level and leverage falls below 2x EBITDA by end-2027.
- Assembly qualification slips beyond September 2026, gating revenue despite strong demand.
- The '2027 booked' backlog proves softer than management's statements, with double-ordering or cancellations emerging.
- A hyperscaler capex pause lands on the concentrated server/AI exposure — server ~38% of 2026 revenue, AI ~25%.
- AMI integration or the hardware pass-through divestiture slips, delaying the expected earnings accretion starting Q4.
- Cost inflation and the 4–6% non-GAAP tax rate reverse, pressuring margins and earnings.
Looking Ahead
Over the next 12 months, the reporting shifts to a combined FPGA-plus-AMI structure. The first test is Q3 FY2026, with about two months of AMI. By Q4 and full-year 2026, the plan calls for assembly capacity to be in good shape, the AMI hardware pass-through to be exited, and meaningful AMI EPS accretion to begin. Into 2027, attention turns to AMI growth around 25%, backlog conversion, and the $1.2 billion exit run rate.
- Q3 FY2026 reportFirst combined Lattice/AMI quarter — Tests total revenue $245–265M guide and first AMI segment disclosure.
- September 2026Assembly capacity alignment target — Management aims to bring supply/demand in line; slippage would gate revenue.
- Q4 FY2026AMI EPS accretion expected — Management expects meaningful AMI EPS accretion starting Q4; supply should improve.
- End 2026AMI hardware pass-through exit — Low-margin business expected fully exited by end of 2026.
- Full-year 2026 reportRun-rate and mix confirmation — Tests ~$1.2B exit run rate, new products >25%, server ~38%, AI ~25%.
- End 2027Leverage below 2x EBITDA — Plan calls for deleveraging below 2x EBITDA; AMI growth ~25% excluding synergies.
Financials
Annual Summary
| Metric | FY2024 | FY2025 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $509M | $523M | $574M | +2.7% |
| Gross Margin | 66.7% | 66.7% | 66.9% | +0bps |
| EBITDA | $81M | $55M | $1.0B | -32.3% |
| EBITDA Margin | 15.9% | 10.5% | 13.0% | 541bps |
| Net Income | $61M | $3M | $20M | -94.9% |
| Free Cash Flow | $128M | $145M | $1.2B | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)66.9%
- EBITDA Margin (TTM)13.0%
- Net Margin (TTM)3.5%
- ROIC4.0%
- FCF Conversion215.5%
- SBC / Revenue21.5%
The Company
Lattice Semiconductor designs low-power FPGAs and related silicon, system solutions, design services, and technology licenses. Its chips sit alongside CPUs, GPUs, XPUs, and other processors, handling secure boot, root of trust, power sequencing, platform management, I/O aggregation, sensor bridging, and power/cooling management rather than competing as AI compute engines. The 10-K describes the company as 'the low power programmable leader,' and the product portfolio spans small FPGAs such as MachXO and CrossLink and mid-range Avant-E, Avant-G, and Avant-X devices.
Lattice is fabless. It buys wafers from UMC/USJC, Samsung, TSMC, and Seiko Epson, and uses ASE as its primary outsourced assembly and test supplier, with Amkor and KYEC as second sources. Facilities are leased, with R&D sites in Hillsboro, San Jose, Manila, Pune, Penang, and Shanghai; the company owns no manufacturing plants.
Business Segments
Competitive Landscape
Lattice competes as a low-power, companion FPGA supplier rather than directly in high-performance compute FPGAs. The source material's only named FPGA competitive reference is Altera, and management sidestepped Altera supply-advantage comparisons in Q&A. The ASPEED partnership is described as external validation of Lattice's datacenter management role.
- AlteraNamed in Q1 Q&A around potential supply advantage; management sidestepped direct comparison and focused on Lattice's foundry relationships.
Supply Chain
Lattice is fabless, buying wafers from UMC/USJC, Samsung, TSMC, and Seiko Epson, then relying on ASE, Amkor, and KYEC for assembly and test. Distribution is concentrated: Q1 FY2026 revenue was 94% through distributors.
More on LSCC: Earnings recap