Earnings Recap — Q2 FY2027
CY Q3 2026 · Reported August 25, 2026 · Beat 7 of last 7 quarters
Semtech Corporation reported Q2 FY2027 revenue of $342M, a beat of 4.0% against consensus, and EPS of $0.71, a beat of 15.6%.
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Semtech's record data center revenue and 45% sequential growth guidance underscore the accelerating AI infrastructure buildout, particularly the transition to 1.6T optical and copper interconnects. The company's expansion into photonics (gain chips, CW lasers, photodiodes) and capacity investments signal deepening content per transceiver, positioning Semtech as a key enabler of next-generation data center architectures.
Semtech delivered record Q2 FY2027 revenue of $342M, up 17% sequentially and 33% YoY, with data center revenue reaching a record $100M, up 39% sequentially and 91% YoY, driven by 800G strength and the start of 1.6T FiberEdge and CopperEdge ramps. Adjusted EPS of $0.71 grew 73% YoY, and adjusted gross margin expanded 150 bps sequentially to 54.5%, with ex-modules gross margin at 59.7%. The company announced the divestiture of its cellular module business, expected to close in Q4 FY2027, and reported record LoRa revenue of $58M, up 58% YoY. Operating cash flow was $69M and free cash flow was $61M, with net leverage at 1.1x.
Management guided Q3 FY2027 revenue to $410M ±$5M, up 20% sequentially and 54% YoY, with data center revenue expected to grow 45% sequentially (~160% YoY) and LoRa up ~15% sequentially (~65% YoY). Adjusted gross margin is guided to 58.3% ±100 bps (63.9% ex-modules), with adjusted operating margin of 31% and adjusted EPS of $1.05 ±$0.03. Management expects accelerating data center growth into Q4 and continued momentum through FY2028, supported by record backlog and capacity expansion efforts. They plan to provide a multiyear financial framework at the October 15 investor event, highlighting structural gross margin improvement from the cellular module divestiture and operating leverage.
“We are at the center of one of the most significant infrastructure build-outs in history, and our portfolio plays an essential role.”
on AI infrastructure positioning
“We are now designed into every module provider in our target markets. Several on a sole-source basis, a reflection of technology differentiation and the supply availability we bring across both fully retimed and linear architectures.”
on FiberEdge design wins
“We have established a solid foothold in the photonics space and set a path for strong future growth.”
on Photonics expansion
How are you feeling near term about capacity and your ability to support continued upside in the data center business?
Hong Hou said near-term capacity is sufficient to support customer ramps and some drop-in orders, but for FY2028 they are working with manufacturing partners to increase capacity, including adding testers and qualifying additional OSAT partners. They have the financial capability to work with partners to increase capacity allocation.
Is 20% still the right growth bogey for LoRa?
Hong Hou said Q3 growth will be above 20% (15% sequential, 65% YoY), and they expect sustainable growth better than 20% going forward, driven by three pillars: LoRaWAN, LoRa Plus, and Amazon Sidewalk international expansion.
How much of the gross margin expansion is mix, and is it sustainable?
Mark Lin explained that the divestiture of the cellular module business adds over 500 bps structurally, while sequential mix improvements (150 bps in Q2, 380 bps in Q3) come from 1.6T and LoRa growth. Post-divestiture, a good starting point is 64% gross margin, with mix as a powerful driver.