Executive Summary

Q2 FY2025 revenue was $187.4M, up 12% sequentially but down 32% year-over-year; non-GAAP gross margin held at 48.8%, non-GAAP operating margin expanded to 11.7%, and non-GAAP diluted EPS reached $0.08, at the high end of guidance .
China was a standout: shipments/sales rose 54% in the quarter as inventory digestion there largely normalized, while North America/Europe remained choppy; management is accelerating product launches and localizing China production to support EV momentum .
Q3 FY2025 guidance: revenue $170–$180M, non-GAAP gross margin 49–51%, non-GAAP interest expense ~$6M following a voluntary $25M debt prepayment, tax rate ~6%, and non-GAAP EPS $0.04–$0.08; share count ~185M diluted .
Catalyst: normalization of geographic/product mix, one-time quality resolution (~80 bps lift to Q2 gross margin), and accelerating design wins in TMR current sensors and isolated gate drivers (GaN now, SiC sampling soon) support medium-term margin and growth re-acceleration; near-term revenue guide implies typical December seasonality and ongoing inventory rebalancing .

What Went Well and What Went Wrong

What Went Well

“Q2 sales were $187 million… Non-GAAP EPS was $0.08 at the high end of our outlook,” reflecting solid sequential growth across Automotive and Industrial & Other and disciplined cost control .
China recovery: “our shipments or sales in China in the second quarter were up 54%… inventory rebalancing is all behind us in China,” enabling normalization of ordering patterns and supporting Q2 sales .
Strategic wins/new products: large PHEV inverter current-sensor win with a leading Japanese OEM; GaN isolated gate driver win in China; expansion of medical TMR (blood glucose monitoring); and two new XtremeSense TMR current-sensor launches (CT455/CT456) targeting AI datacenter and EV powertrain .

What Went Wrong

Year-over-year compression: revenue −32% YoY to $187.4M; non-GAAP gross margin fell from 58.3% to 48.8%; non-GAAP operating margin dropped from 31.3% to 11.7%; non-GAAP EPS fell from $0.40 to $0.08, reflecting inventory digestion and mix headwinds (notably in NA/EU) .
Near-term guide lower sequentially: Q3 revenue guide $170–$180M implies ~−6% QoQ at midpoint; management cited typical December seasonality plus ongoing inventory rebalancing outside China .
Continued channel normalization in NA/EU: “we expect continued near-term choppiness in order patterns” as OEMs realign portfolios and production plans; industrial recovery remains gradual into calendar 2025 .

Financial Results

Metric	Q2 FY2024	Q1 FY2025	Q2 FY2025
Revenue ($USD Millions)	$275.5	$166.9	$187.4
Non-GAAP Gross Margin (%)	58.3%	48.8%	48.8%
Non-GAAP Operating Margin (%)	31.3%	6.0%	11.7%
Non-GAAP Diluted EPS ($)	$0.40	$0.03	$0.08

Segment Net Sales ($USD Millions)	Q2 FY2024	Q1 FY2025	Q2 FY2025
Automotive	$197.3	$131.2	$141.9
Industrial & Other	$78.2	$35.7	$45.5
Total	$275.5	$166.9	$187.4

KPIs (non-GAAP where applicable)	Q2 FY2024	Q1 FY2025	Q2 FY2025
Distribution Sales ($) / Mix (%)	—	$81M / 49%	$96M / 51%
Geography Mix (% of sales)	—	China 19%; Japan 24%; Rest of Asia 24%; Americas 17%; Europe 16%	China 26%; Rest of Asia 21%; Japan 20%; Americas 18%; Europe 15%
E-mobility Sales ($)	—	$62M	$71M
DSO (days)	—	35	37
Inventory Days	—	174	158
Operating Cash Flow ($)	$49.7M	$34.2M	$15.5M
CapEx ($)	$20.9M	$11.0M	$10.0M
Non-GAAP Free Cash Flow ($)	$28.8M	$23.2M	$5.6M
Cash & Equivalents + Restricted Cash ($)	—	$184.2M	$199.0M
Term Loan Balance ($)	—	~$400M (repriced to SOFR+225 bps)	$400M EoQ; voluntary $25M prepay on Oct 31 (to $375M)
Diluted Weighted Avg Shares (non-GAAP)	195.1M	194.7M	189.7M

Notes:

Q2 FY2025 gross margin included a one-time quality resolution (~80 bps) and heavier China mix; Q3 guidance expects normalization of mix and 49–51% GM despite lower revenue .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($)	Q3 FY2025	N/A	$170–$180M	New
Non-GAAP Gross Margin (%)	Q3 FY2025	N/A	49–51%	New
Non-GAAP Interest Expense ($)	Q3 FY2025	N/A	~$6M (after $25M prepay)	New
Tax Rate (%)	Q3 FY2025	N/A	~6%	New
Non-GAAP Diluted EPS ($)	Q3 FY2025	N/A	$0.04–$0.08	New
Diluted Share Count (mm)	Q3 FY2025	N/A	~185	New

Q2 FY2025 guidance (issued in Q1): Revenue $182–$192M; non-GAAP GM 49–51%; interest expense ~$7M; non-GAAP EPS $0.04–$0.08. Actual Q2 delivered revenue $187.4M, non-GAAP GM 48.8%, and non-GAAP EPS $0.08 (high end), reflecting mix and a one-time quality resolution .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 FY2024 and Q1 FY2025)	Current Period (Q2 FY2025)	Trend
AI/technology initiatives	Continued portfolio expansion; highlighted high-voltage isolated gate drivers and sensing roadmap	Launched two XtremeSense TMR current sensors; strong traction in GaN isolated gate drivers; SiC drivers sampling soon	Accelerating product velocity
Supply chain & channel inventory	Intentional under-shipping to help distributors/tier-1s reduce inventories; target 8–12 weeks channel inventory	China normalized; NA/EU still digesting; channel ~8–12 weeks target varies by region (Japan higher); signs of within-lead-time orders emerging	Improving (China), mixed (NA/EU)
Tariffs/macro	EV growth secular; near-term auto production slightly down; industrial muted amid higher rates	EU tariffs on Chinese OEMs seen as manageable given OEM localization; December seasonality; ongoing inventory rebalancing	Macro manageable; localization offsets
Product performance/mix	Portfolio wins in automotive steering, solar micro-inverters; power vs sensing mix varied with shipments	Magnetic sensing +12% QoQ; power +13% QoQ; distribution 51% of sales; heavier China mix in Q2	Mix normalizing; sensing leadership intact
Regional trends	Balanced geography; China down in Q1 due to under-shipping; Japan/rest of Asia stable	China up 54% QoQ; Japan flat; rest of Asia good; NA/EU choppy due to OEM production cuts	China strength; NA/EU digestion
R&D execution	Crocus integration; pipeline expanding; ESG goals and new launches	Continued investment; accelerating new product introductions; medical TMR traction	Sustained investment, faster launches
Medical/health features	Initial medical TMR wins emerging	Expanded medical business (blood glucose monitoring) using TMR	Building momentum

Management Commentary

“We delivered results consistent with our guidance despite a challenging macro environment. Q2 sales were $187 million… Non-GAAP EPS was $0.08 at the high end of our outlook.” – CEO Vineet Nargolwala .
“Our shipments or sales in China in the second quarter were up 54%… the inventory rebalancing is all behind us in China.” – CEO Vineet Nargolwala .
“We bring a unique value proposition with our isolated gate drivers… 30% to 35% space savings and overall system cost savings… we’re getting some really good traction with our GaN drivers… we’ll be shortly sampling our silicon carbide drivers.” – CEO Vineet Nargolwala .
“Gross margin was 48.8%… operating margin was 11.7%… adjusted EBITDA was 17.2% of sales… Q3 gross margin [is guided] 49% to 51%… we made another $25 million voluntary debt payment.” – CFO Derek D’Antilio .
“We will endeavor to move a sizable portion of our China revenues into China… first parts from our OSAT partner will roll off by the end of this year… over time [localization] positive to gross margins.” – CEO/CFO .

Q&A Highlights

Inventory normalization dynamics: China normalized; NA/EU still digesting; target channel inventory ~8–12 weeks varies by region; signs of within-lead-time ordering indicate potential 2025 acceleration .
Margin bridge and outlook: Q2 GM 48.8% included ~80 bps one-time quality resolution and heavier China mix; Q3 GM 49–51% expected as mix normalizes and utilization improves .
Product pipeline/cross-sell: GaN isolated gate driver wins breaking bundled solutions; SiC drivers sampling soon; portfolio benefits include system cost/space savings .
End-demand run-rate: Management still sees long-term model tied to auto production plus 8–10%; Q4 FY2024 revenue had ~$25M excess shipments; timing back to $225–$250M quarterly run-rate depends on digestion pace .
China supply chain localization: First OSAT production by year-end; expected to be margin accretive over time .

Estimates Context

S&P Global consensus (revenue, EPS, EBITDA, target price, # of estimates) was unavailable at the time of this analysis due to data access limits; therefore, we cannot quantify beat/miss vs Street for Q2 FY2025. Values referenced from S&P Global are not included due to unavailability at this time.
Company guidance was met or exceeded at the high end for non-GAAP EPS ($0.08) and delivered revenue within guided range ($187.4M vs $182–$192M), supported by China strength and a one-time gross margin benefit .

Key Takeaways for Investors

Sequential recovery is underway, led by China; near-term guide factors in December seasonality and continued NA/EU digestion—watch geographic mix normalization and order patterns (signs of within-lead-time orders) for 2025 acceleration .
Margin resilience: despite lower revenue vs prior year, non-GAAP GM held at 48.8% and is guided to 49–51% in Q3 as mix normalizes and utilization improves; one-time quality resolution boosted Q2 by ~80 bps .
Product catalysts: XtremeSense TMR sensors (CT455/CT456) and isolated gate drivers (GaN now, SiC sampling) target high-value EV/data center/industrial applications, supporting ASPs and margin uplift over time .
China localization strategy should aid competitiveness and margins; first OSAT production by year-end with broader wafer qualifications to follow .
Balance sheet actions reduce interest expense (repriced term loan; $25M voluntary prepay) and lower share count post Sanken transaction—EPS leverage improves as revenue re-accelerates .
Segment mix trajectory: Automotive recovering (76% of Q2 sales), e-mobility up to $71M; industrial & other showed strong sequential growth (+27% QoQ), but broad-based recovery remains gradual into CY2025 .
Tactical setup: With Q3 revenue guide below Q2 and GM guided higher, focus near term on margin execution and design-win conversion; medium term, EV secular growth and new product velocity support return toward prior run-rate as digestion abates .

All figures, quotes, and guidance drawn from Allegro MicroSystems’ Q2 FY2025 press release/8-K and earnings call transcript: **[866291_60a2a213f27d49b8872a0717ddc3310a_0]** **[866291_60a2a213f27d49b8872a0717ddc3310a_17]** **[866291_60a2a213f27d49b8872a0717ddc3310a_20]** **[866291_60a2a213f27d49b8872a0717ddc3310a_27]** **[866291_0000950170-24-119242_algm-ex99_1.htm:6]** **[866291_0000950170-24-119242_algm-ex99_1.htm:7]** **[866291_0000950170-24-119242_algm-ex99_1.htm:8]** **[866291_60a2a213f27d49b8872a0717ddc3310a_31]** **[866291_ALGM_3405204_1]** **[866291_ALGM_3405204_3]** **[866291_ALGM_3405204_4]** **[866291_ALGM_3405204_6]** **[866291_ALGM_3405204_7]** **[866291_ALGM_3405204_8]** **[866291_ALGM_3405204_9]** **[866291_ALGM_3405204_10]** **[866291_ALGM_3405204_11]** **[866291_ALGM_3405204_13]** **[866291_ALGM_3405204_14]** **[866291_ALGM_3405204_19]** **[866291_ALGM_3405204_20]** and prior quarter documents **[866291_47880af3bf8447dc9c477688374b723f_0]** **[866291_47880af3bf8447dc9c477688374b723f_8]** **[866291_47880af3bf8447dc9c477688374b723f_19]** **[866291_ALGM_3395709_3]** **[866291_ALGM_3395709_4]** **[866291_0000950170-24-056257_algm-ex99_1.htm:0]** **[866291_0000950170-24-056257_algm-ex99_1.htm:5]** **[866291_f028ffcfbf3648d484f78c5e1c92bd29_0]** **[866291_f028ffcfbf3648d484f78c5e1c92bd29_1]**.

ALLEGRO MICROSYSTEMS, INC. (ALGM)·Q2 2025 Earnings Summary