Semtech (SMTC) Q2 2027 earnings summary

Executive summary

• Achieved record Q2 FY27 net sales of $341.9 million, up 33% year-over-year and 17% sequentially, driven by strong demand in data center, LoRa, and industrial markets.

• Adjusted diluted EPS rose 73% year-over-year to $0.71, with GAAP diluted EPS at $1.59, reflecting margin expansion and a $112.4 million non-cash tax benefit.

• Significant progress in portfolio optimization, including the announced divestiture of the cellular module business for $62 million in cash, expected to close within 12 months.

• Record backlog and accelerating bookings provide high visibility into continued growth through FY28.

• Completed photonic acquisitions, expanded clean room space, and onboarded new technical talent to support growth.

Financial highlights

• Q2 FY27 net sales: $341.9M (+33% YoY); adjusted gross margin: 54.5%; GAAP gross margin: 53.8%.

• Adjusted operating income: $84M (24.4% margin); adjusted EBITDA: $91.1M (26.6% margin).

• GAAP net income: $160.1M (EPS: $1.59 diluted); adjusted net income: $69.5M.

• Operating cash flow: $69M (Q2), $105.1M (six months); free cash flow: $61.4M (Q2).

• Cash and equivalents: $204.1M; principal debt: $503M; net leverage ratio: 1.1.

Outlook and guidance

• Q3'27 net sales expected at $410M ± $5M, up 20% sequentially and 54% year-over-year.

• Adjusted gross margin guidance: 58.3% ± 100 bps; excluding cellular module business: 63.9%.

• Adjusted operating margin guidance: 31%; adjusted EBITDA margin: 32.8%.

• Adjusted EPS guidance: $1.05 ± $0.03, up 48% sequentially and 119% year-over-year.

• Data center net sales expected to grow 45% sequentially and 160% year-over-year in Q3'27.