Executive Summary

Lattice delivered a solid quarter with revenue of $133.35M, non-GAAP gross margin of 69.5%, and non-GAAP EPS of $0.28; Communications & Computing (C&C) revenue reached a record, driving sequential and year/year growth . Versus S&P Global consensus, revenue was essentially in line ($133.35M vs $133.01M*) and non-GAAP EPS matched ($0.28 vs $0.279*). Values retrieved from S&P Global.*
Q4 2025 guidance implies acceleration: revenue $138–$148M (midpoint +22% YoY), non-GAAP GM ~69.5% ±1%, non-GAAP EPS $0.30–$0.34; management corrected a press release typo during the call, clarifying non-GAAP OpEx should be $54.5–$56.5M (not $54–$55M) .
Strategic drivers: strong AI/data center demand with server revenue up >80% YTD and wired comms up 63% YTD; bookings “strongest … in at least six quarters,” supporting 2026 growth confidence .
Headwinds remain in Industrial & Auto (I&A) from channel inventory normalization and a decline in client-compute within C&C, but normalization is on track by year-end; lead times were extended to better align supply and demand .

What Went Well and What Went Wrong

What Went Well

Record C&C revenue and broad-based growth; non-GAAP gross margin expanded q/q and y/y to 69.5% and non-GAAP EPS grew 17% q/q and y/y to $0.28 .
Strong AI/data center momentum driving bookings and design wins; management cited the “strongest booking patterns … in at least six quarters” and accelerating server attach/content .
Product leadership reinforced with industry-first PQC-ready MachXO5-NX TDQ launch (CNSA 2.0 compliant), aligning with rising security requirements across compute/comm/industrial/auto .

What Went Wrong

GAAP operating profile pressured by higher stock-based compensation tied to performance/market-based grants, lifting GAAP OpEx and compressing GAAP operating margin (GAAP GM 67.9%, GAAP OpInc -1.2% of revenue) .
I&A softness persisted amid purposeful under-shipping to normalize channel inventory; I&A revenue fell y/y and remains a headwind until normalization completes .
Client-compute weakness offset strength in servers and wireline comms within C&C, muting the full segment growth picture in 2025 .

Financial Results

Headline Metrics vs prior periods and consensus

Metric	Q3 2024	Q2 2025	Q3 2025	Consensus (Q3 2025)
Revenue ($M)	$127.09	$123.97	$133.35	$133.01*
Non-GAAP Diluted EPS ($)	$0.24	$0.24	$0.28	$0.279*
GAAP Diluted EPS ($)	$0.05	$0.02	$0.02	—
Non-GAAP Gross Margin (%)	69.0%	69.3%	69.5%	—
Adjusted EBITDA Margin (%)	33.5%	34.1%	35.6%	—
Non-GAAP Operating Margin (%)	26.6%	27.5%	29.0%	—

Values retrieved from S&P Global.*

Segment Breakdown ($ and mix)

End Market	Q3 2024 ($M / %)	Q2 2025 ($M / %)	Q3 2025 ($M / %)
Communications & Computing	$61.0 / 48%	$68.7 / 55%	$74.0 / 55%
Industrial & Automotive	$54.2 / 43%	$47.3 / 38%	$50.3 / 38%
Consumer	$11.9 / 9%	$8.0 / 7%	$9.0 / 7%

KPIs and Mix

KPI	Q3 2024	Q2 2025	Q3 2025
DSO (days)	66	63	65
DIO (days)	242	218	193
Distribution / Direct	95% / 5%	84% / 16%	83% / 17%
Geography (Asia / Americas / Europe)	63% / 15% / 22%	67% / 22% / 11%	65% / 19% / 16%
Operating Cash Flow ($M) / Margin	$44.01 / 34.6%	$38.53 / 31.1%	$47.10 / 35.3%
Free Cash Flow ($M) / Margin	$39.36 / 31.0%	$31.30 / 25.2%	$34.03 / 25.5%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	Q4 2025	N/A	$138M–$148M	New
Non-GAAP Gross Margin %	Q4 2025	N/A	69.5% ±1%	New
Non-GAAP OpEx ($M)	Q4 2025	N/A	$54.5–$56.5 (call correction)	New (corrected)
Non-GAAP Tax Rate	Q4 2025	N/A	3%–5%	New
Non-GAAP EPS	Q4 2025	N/A	$0.30–$0.34	New

Reference (for execution vs prior quarter guidance): Q3 2025 guidance issued on Aug 4 was revenue $128–$138M, non-GAAP GM 69.5% ±1%, non-GAAP OpEx $52–$54M, non-GAAP tax 5%–6%, and non-GAAP EPS $0.26–$0.30; actual Q3 revenue/EPS landed at $133.35M and $0.28, respectively .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025, Q2 2025)	Current Period (Q3 2025)	Trend
AI/data center momentum	Highlighted new AI use cases; caution on macro . Q2: normalized channel inventory; continued strength into 2026 .	Strongest bookings in ~6 quarters; server up >80% YTD; expanding attach/content across CPU/accelerators/networking .	Accelerating
Supply chain/inventory	Q1: resilient supply chain; Q2: comms/compute inventory normalized .	I&A under-shipping continues, normalization by year-end; lead times extended to align deliveries .	Improving (I&A); tighter planning (lead times)
Product roadmap	Q1: broad new applications; Q2: expanding small FPGAs (Certus/MachXO5-NX) .	Year of Nexus in 2026; Avant more 2027-weighted; industry-first PQC-ready MachXO5-NX TDQ launched .	Positive execution
Margins/pricing	Q1/Q2: non-GAAP GM ~69%; disciplined pricing to value .	Non-GAAP GM 69.5%; pricing to value; portfolio mix managed to sustain ~69% .	Stable high-60s
Regional trends	Q1: APAC partner/customer events . Q2: Americas mix higher .	China auto strong; aerospace & defense healthy; overall geo mix Asia 65%, Americas 19%, Europe 16% .	Mixed by end market
R&D/investments	Q1: maintained disciplined OpEx while executing . Q2: investing for leadership .	Higher stock-based comp tied to growth targets; investing for 2026 growth .	Investing up (GAAP), flat on non-GAAP y/y

Management Commentary

“We delivered a strong quarter… Communications and Computing achieved record revenue, and we are expecting continued growth into the fourth quarter and beyond.” — CEO .
“We set a new record for communications and computing revenue… gross margin to 69.5% on a non-GAAP basis… Non-GAAP EPS of $0.28… strongest booking patterns we have seen in at least six quarters.” — CFO .
“Our server business has been up 85% year to date… communication business up 63% year to date… we expect [C&C] to drive accelerated growth in 2026.” — CEO .
“We extended lead times in August… customers satisfied with delivery performance… visibility into a very strong book for the next three quarters at least.” — CFO .
“We launched the industry’s first CNSA 2.0-compliant post-quantum cryptography-ready secure control FPGA family (MachXO5‑NX TDQ).” — Company press release .

Q&A Highlights

2026 growth drivers: C&C expected to comprise ~60% of revenue in 2026 with growth outpacing hyperscaler CapEx; I&A modeled conservatively at mid-single to ~15% growth; net result underpins performance-based comp accrual for 2026 growth targets .
Inventory and lead times: I&A under-shipping of ~$15–$20M per quarter should end by year-end; lead times extended to improve planning and allocations amidst rising demand .
Mix shift within C&C: Strength in servers and wired comms offset by a decline in client-compute (three OEMs), muting full-segment growth optics; client headwind fades going forward .
Margins: Management aims to sustain ~69.5% non-GAAP GM with mix managed across segments and designs; not banking on large GM expansion next year .
AI usage: Estimated high-teens % of products in 2025 rising to mid‑20s % in 2026; ~60/40 split between C&C and I&A use cases .

Estimates Context

Q3 2025 actuals vs S&P Global consensus: Revenue $133.35M vs $133.01M*; non-GAAP EPS $0.28 vs $0.279* — essentially in line on both. Values retrieved from S&P Global.*
Q4 2025 outlook vs S&P Global consensus: Guidance midpoint revenue ~$143M vs $143.05M* and midpoint EPS ~$0.32 vs $0.317* — guidance aligns closely with consensus. Values retrieved from S&P Global.*
Implication: With record C&C, strongest bookings in ~6 quarters, and inventory normalization tailwind, 2026 estimates in C&C may drift up while I&A remains modeled conservatively given macro sensitivity .

Key Takeaways for Investors

C&C-led reacceleration is intact: record C&C revenue, strongest bookings in ~6 quarters, and server attach/content expansion provide visibility into 2026 growth .
Near-term setup constructive: Q4 guide implies +22% YoY growth at midpoint with stable ~69.5% non-GAAP GM and EPS $0.30–$0.34; OpEx guide corrected to $54.5–$56.5M .
Structural positioning in AI/security improving: industry-first PQC-ready MachXO5‑NX TDQ aligns with escalating security standards across data center and infrastructure .
Mix and inventory dynamics: I&A normalization should turn from 2025 headwind to 2026 tailwind; client-compute headwinds within C&C abating, leaving servers/wireline as primary drivers .
Margin stewardship credible: non-GAAP GM sustained near 69.5% through mix/pricing discipline; EBITDA margin expanded to 35.6% despite investment ramp .
Cash generation supports capital returns/investment: FCF margin ~25.5% with buybacks continuing ($86M YTD through Q3’25) while funding roadmap investments .
Trading lens: Narrative remains AI-driven demand (servers, wireline), bookings momentum, and new security products—watch Q4 execution vs guide and any 2026 outlook color as potential stock movers .