Lantronix, Inc. (LTRX) | The Buildout — AI Infrastructure
The Verdict
Lantronix supplies the onboard compute, connectivity and management software that let unmanned systems run AI at the edge. Its modules sit inside defense drones and counter-UAS payloads, where autonomy requires processing power aboard the platform rather than in a data center. A smaller part of the business sells out-of-band management gear used inside AI data-center racks. The company is repositioning around NDAA-compliant unmanned systems and recurring software, moving away from its history as a broad-based IoT hardware provider.
| Market Cap | — |
| Revenue (TTM) | $121M |
| Revenue Growth | −1.5% |
| EBITDA Margin (TTM) | -0.1% |
| Net Cash | $52M |
| Earnings Beats | 2 of 7 |
| P/E (TTM) | — |
| EV/EBITDA (TTM) | — |
What We Like
- Unmanned Systems revenue reached $12.6M in FY2026, above the midpoint of the raised $10M–$14M guide, after the outlook was raised three times.
- Management guides Unmanned Systems to 15%–20% of FY2027 revenue and quantified it in Q&A as 'around the $25 million-plus range for fiscal '27.'
- Year-end cash was more than $60M and the company ended FY2026 debt-free after repaying $8.7M; FY2026 operating cash flow was about $9.9M.
- Software and services moved from 5%–6% to 7%–8% of revenue standalone and roughly 10% pro forma with the $11.7M Nero acquisition.
- Q4 IoT Systems revenue exceeded $15M, up 16% sequentially, supporting management's earlier 'timing, not demand' framing of the federal slowdown.
What We’re Watching
- Memory availability tightened and prices rose as AI data centers consumed supply; Lantronix buys components on a purchase-order basis with no long-term supply arrangements.
- Unmanned Systems module margins run 'slightly below' the corporate average in the low to mid-40s, and that segment is guided to a larger share of FY2027 revenue.
- FY2026's 8% growth is stated excluding Gridspertise, a customer that went from just over $11M of prior-year nine-month revenue to zero, with no recovery timeline given.
- Management declined a specific FY2027 growth guide for the non-drone IoT Systems business, saying only that 'we believe that business should grow.'
The thesis is strengthening on execution: the drone outlook was raised three times and delivered above the midpoint, the federal slowdown thesis was validated by a 16% sequential rebound, and the first acquisition closed at $11.7M. The balance sheet is transformed. The open question is whether the drone mix and memory costs let gross margin hold at or near current levels while the fastest-growing line carries below-average margin.
Earnings
Fiscal Q4 FY2026 revenue was $31.2M, up 8% year over year and within the $29M–$33M guide. Non-GAAP gross margin was 44.1%, up from 43.6% the prior quarter and 40.6% a year earlier. GAAP gross margin was 43.7%. The quarter still printed a GAAP net loss of $269,000, improved from $2.6M a year ago.
| Metric | Q4 FY2026 | Q3 FY2026 | Q4 FY2025 | YoY |
|---|---|---|---|---|
| Revenue | $31M | $30M | $29M | +8.3% |
| Gross margin | 43.7% | 41.4% | 40.0% | +370bps |
| EBITDA | $0M | −$0M | −$2M | −104.8% |
| EPS | $-0.01 | $-0.03 | $-0.07 | −89.3% |
| Unmanned Systems revenue (FY2026) | $12.6M | n/a | Minimal | From minimal a year ago |
Fiscal 2026 was the year our drone opportunity progressed from early validation to a meaningful growth engine for Lantronix.— Saleel Awsare, CEO, 2026-08-26
Management tone: On the Q4 call management converted a percentage mix guide into a dollar figure, confirming FY2027 drone revenue of 'around the $25 million-plus range' when asked, and reaffirmed the 15%–20% revenue mix. The prior call's framing that slower federal ordering was 'timing, not demand' was followed by a 16% sequential IoT Systems rebound. Memory tightening was newly flagged as an industry-wide cost and supply issue, and the Nero acquisition was described as immediately accretive. On gross margin, prepared remarks guided 'at or near current levels' while Q&A added an 'opportunity to grow' — two different statements in the same quarter. On the non-drone IoT growth rate, management declined to give a specific number.
Management Guidance
For Q1 FY2027, management guided revenue of $31M–$33M and non-GAAP EPS of $0.04–$0.06, for the quarter ending 2026-09-30. For the full year it reaffirmed double-digit revenue growth and guided Unmanned Systems to 15%–20% of revenue 'with continued growth beyond these levels in subsequent years,' quantified in Q&A at roughly $25M+. Gross margins were guided to 'at or near current levels,' with a Q&A addendum of 'opportunity to grow.' No forward opex guidance was given.
Trajectory
Reported revenue stepped up sequentially through FY2026: $29.8M, $29.8M, $30.2M and $31.2M across the four quarters, with the fourth up 8% year over year. Full-year revenue was nearly $121M, an 8% increase excluding Gridspertise. Gross margin compressed about 110 basis points over the trailing four quarters, from 44.8% to 43.7% on a GAAP basis, though the Q4 figure improved from 41.4% the prior quarter on favorable mix and supply-chain efficiency. The growth is concentrated in Embedded IoT, up 34% year over year in Q4 and more than 15% for the year, led by Unmanned Systems.
The Model
The model projects FY+1 revenue of $140.5M with EBITDA of $7M, a 4.9% margin, and FY+2 revenue of $160.0M with EBITDA of $12M, a 7.2% margin. Management's guided Unmanned Systems ramp to 15%–20% of FY2027 revenue and its double-digit total growth frame anchor the near term; the FY+2 step depends on the drone funnel converting and the software and recurring-revenue mix building.
| Metric | FY2026 | Next FY (E) | Following FY (E) |
|---|---|---|---|
| Revenue | $121M | $140M | $160M |
| YoY Growth | — | +16.1% | +13.9% |
| EBITDA | −$0M | $7M | $12M |
| EBITDA Margin | -0.1% | 4.9% | 7.2% |
Projections are the median of 5 independent model runs.
For Q1 FY2027, management guided revenue of $31M–$33M and non-GAAP EPS of $0.04–$0.06, for the quarter ending 2026-09-30. For the full year it reaffirmed double-digit revenue growth and guided Unmanned Systems to 15%–20% of revenue 'with continued growth beyond these levels in subsequent years,' quantified in Q&A at roughly $25M+. Gross margins were guided to 'at or near current levels,' with a Q&A addendum of 'opportunity to grow.' No forward opex guidance was given.
What Could Go Right — and Wrong
- The 30+ unmanned-systems engagements and dozen-plus shipped customers convert into named production wins.
- Plymouth, Minnesota reaches U.S.-origin status for TAA/NDAA drone products in the midterm, a prerequisite for some defense programs.
- Memory cost pass-through works as the CFO expects, neutralizing the largest input-cost risk.
- Nero's roughly $5M annual revenue and 125,000-tag installed base drive hardware cross-sell and lift the software mix.
- A second AI-data-center rack design beyond SambaNova turns the SLC 9000 into a sized revenue line.
- Memory costs fail to pass through, and the below-average-margin drone mix pushes gross margin below the 'at or near current levels' guide.
- The drone doubling proves demand-dependent: a program delay such as a U.S. Army SRR pause breaks the assumption carrying most of net FY2027 growth.
- A policy reversal on the FCC DJI restriction or Section 232 tariffs removes the domestic-preference tailwind.
- The non-drone IoT Systems business stays flat or declines, forcing the double-digit total growth target onto the drone line alone.
- Another customer loss on the scale of Gridspertise's roughly $11M resets the revenue base.
Looking Ahead
Over the next twelve months the tests are the drone funnel's conversion rate, the Plymouth ramp toward U.S.-origin status, and whether memory costs pass through. Management has promised more detail on international expansion on the next call, and the FY2027 mix guide has been restated as a base rather than a ceiling. Further M&A in unmanned systems and recurring revenue is also on the table.
- Quarter ending 2026-09-30Q1 FY2027 results — Tests the $31M–$33M revenue and $0.04–$0.06 non-GAAP EPS guides.
- Next earnings callInternational expansion detail — Management has said international expansion will be emphasized more.
- FY2027Unmanned Systems ramp — Tests conversion toward the roughly $25M+ guided drone revenue.
- MidtermPlymouth U.S.-origin ramp — Certification and production of TAA/NDAA drone products.
- FY2027Gross margin and memory — Tests whether mix pressure and memory costs hold margins near current levels.
Financials
Annual Summary
| Metric | FY2025 | FY2026 | TTM | YoY |
|---|---|---|---|---|
| Revenue | $123M | $121M | $121M | -1.5% |
| Gross Margin | 42.0% | 42.7% | 42.7% | +65bps |
| EBITDA | −$5M | −$0M | −$0M | +98.0% |
| EBITDA Margin | -4.0% | -0.1% | -0.1% | +390bps |
| Net Income | −$11M | −$4M | −$4M | +63.2% |
| Free Cash Flow | $7M | $9M | $9M | — |
| Net Cash | — | — | — | — |
Key Ratios (Trailing)
- P/E TTM—
- EV/EBITDA TTM—
- EV/Revenue TTM—
- Price/FCF TTM—
- Gross Margin (TTM)42.7%
- EBITDA Margin (TTM)-0.1%
- Net Margin (TTM)-3.5%
- ROIC-4.4%
- SBC / Revenue5.2%
The Company
Lantronix makes compute and connectivity modules, standalone network systems, and management software for industrial and enterprise IoT. Its most strategically significant product is a Qualcomm Dragonwing–based system-on-module built for industrial drone applications with a focus on defense and security. That module sits inside Red Cat's Teal Drones Black Widow platform for the U.S. Army's short-range reconnaissance program. The company also sells the SLC 9000 out-of-band console manager, deployed inside SambaNova Systems' DataScale AI rack.
Lantronix is fabless. It relies on a multi-country Asian contract-manufacturing base — Hana Microelectronics in Thailand and China; Honortone and In-Tech in China; Tailyn, Info-Tek and Rubytech in Taiwan — and Marvell manages manufacture of its large-scale integration chips in Taiwan. Headquarters is in Irvine, California, with operations in Plymouth, Minnesota; Vancouver, British Columbia; Hyderabad, India; and Taipei. The filing describes the company as operating in a single operating segment. The Plymouth site is being ramped for TAA/NDAA-certified and, over the midterm, U.S.-origin drone products.
Business Segments
Competitive Landscape
The competitive dynamic turns on compliance and geography. Management said customers come to Lantronix to confirm that it is NDAA and TAA certified, and attributed the Red Cat win to camera expertise, sensor fusion and software integration. Management described Section 232 tariffs as a 'structural tailwind' for the drone business, and the FCC's December 2025 restriction on DJI is part of the same policy backdrop. Lantronix buys silicon from Qualcomm and MediaTek, and the wiring map names MediaTek as both a supplier and a competitor.
- MediaTekNamed as a supplier of Genio SoCs and as a competitor in the wiring map.
- DJIFCC's December 2025 restriction on DJI; part of the policy backdrop for domestic drone demand.
Supply Chain
Lantronix is a fabless module maker: it designs edge-compute and connectivity products, buys silicon and components, and has them assembled by contract manufacturers in Thailand, China and Taiwan. No neighbor in the source set named Lantronix by name.
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