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SL

SILICON LABORATORIES INC. (SLAB)·Q1 2026 Earnings Summary

Executive Summary

  • Setup into Q1 2026 is favorable: two consecutive quarters of revenue growth (Q2: $192.8M; Q3: $206.0M) and accelerating margin expansion, with Q4 gross margin guided to 62–64% and non-GAAP EPS to $0.40–$0.70, positioning for Q1 2026 consensus of ~$213.2M revenue and ~$0.49 EPS .*
  • Q3 delivered modest beats vs consensus on revenue and non-GAAP EPS; management signaled a non-recurring ~200 bps gross margin credit in Q4 and a normalized gross margin near ~61% thereafter .
  • Demand drivers remain intact: CGM ramp still tracking to ~10% of revenue in 1H 2026, smart meters (India, Japan) and distribution mix (74%) supporting margins; Series 3 rollout complements ongoing Series 2 strength .
  • Near-term catalyst is profitability: Q4 margin step-up (including a one-time credit) and tighter OpEx suggest continued EPS acceleration; watch for confirmation of CGM contribution and asset-tracking wins into 2026 .

What Went Well and What Went Wrong

What Went Well

  • “Sequential and year-over-year growth in sales and profitability” with Q3 revenue $206M and non-GAAP EPS $0.32, driven by distribution mix and industrial strength .
  • Strategic execution: expanded GlobalFoundries partnership to add U.S. capacity for Series 2 and launched AI-augmented Simplicity Platform and SDK to accelerate IoT development .
  • Visibility into durable drivers: “full-year revenue growth of 34%” expected in 2025, CGM ramp path to 10% of revenue in 1H 2026, and asset tracking emerging as a future growth category .

What Went Wrong

  • GAAP profitability remains negative in Q3 (operating loss: $12M; diluted loss per share: $(0.30)), despite improving non-GAAP metrics .
  • One-time gross margin credit (~200 bps) lifts Q4 margin but is non-recurring; normalized GM expected ~60–61% before trending back toward long-term 56–58% range over time .
  • Visibility constraints: turns within lead time limit backlog clarity; tariff/macro uncertainty persists even though end-customer inventories continue to trend lower .

Financial Results

MetricQ2 2025Q3 2025Q4 2025 GuidanceQ1 2026 Consensus*
Revenue ($USD Millions)$192.845 $205.999 $200–$215 $213.163*
GAAP Gross Margin (%)56.1% 57.8% 62–64% 61.0*
Non-GAAP Gross Margin (%)56.3% 58.0% 62–64% N/A
GAAP Operating Loss ($USD Millions)$(22.867) $(12.342) N/AN/A
Non-GAAP Operating Income ($USD Millions)$1.121 $10.523 N/AN/A
GAAP Diluted EPS ($USD)$(0.67) $(0.30) $(0.22) to $0.08 N/A
Non-GAAP Diluted EPS ($USD)$0.11 $0.32 $0.40 to $0.70 $0.49469*
  • Consensus vs actuals (beats/misses): Q2 revenue $192.845M vs $192.631M estimate (+$0.214M); EPS $0.11 vs $0.093 (+$0.017) .* Q3 revenue $205.999M vs $205.299M estimate (+$0.700M); EPS $0.32 vs $0.307 (+$0.013) .* Q4 guidance midpoints broadly align or slightly exceed consensus (GM midpoint ~63% vs 63.0%; non-GAAP EPS midpoint ~$0.55 vs $0.53) .*

Segment revenue breakdown

SegmentQ2 2025 Revenue ($USD Millions)YoYQ3 2025 Revenue ($USD Millions)YoY
Industrial & Commercial$110 +25% $118 +22%
Home & Life$83 +45% $88 +26%

KPIs

KPIQ2 2025Q3 2025
Distribution Mix (%)69% 74%
Channel Inventory (Days)51 61
DSO (Days)~30 ~30
Inventory on Hand (Days)86 85
Cash + Short-Term Investments ($USD Millions)~$416 ~$439

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Next QuarterQ3 2025: $200–$210 Q4 2025: $200–$215 Raised upper end
GAAP Gross Margin (%)Next QuarterQ3: 57–58 Q4: 62–64 Raised (material)
Non-GAAP Gross Margin (%)Next QuarterQ3: 57–58 Q4: 62–64 Raised (material)
GAAP OpEx ($USD Millions)Next QuarterQ3: $130–$133 Q4: $134–$136 Raised (seasonal comp)
Non-GAAP OpEx ($USD Millions)Next QuarterQ3: $107–$110 Q4: $110–$112 Raised modestly
GAAP Diluted EPS ($USD)Next QuarterQ3: $(0.60) to $(0.20) Q4: $(0.22) to $0.08 Improved range
Non-GAAP Diluted EPS ($USD)Next QuarterQ3: $0.20–$0.40 Q4: $0.40–$0.70 Raised
Non-GAAP Tax Rate (%)Ongoing20% policy 20% policy Maintained

Notes: Management flagged a one-time gross margin credit of ~200 bps in Q4; normalized GM ~61% excluding the credit .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q1 2026 context)Trend
AI/technology enablementLaunched agentic AI SDK; Studio 6 to speed IoT development Tools expected to scale customer adoption over time Positive, adoption ramping
Supply chain & distributionDistribution mix up (69%→74%); refilling channel toward 70–75 day target; POS strong Continued push for ~5-day per quarter channel build; end-customer inventories at lowest tracked Improving, supportive of margins
Tariffs/macroWatching tariff impacts; modeled modest impact; intent to pass through; uncertainty persists No broad inventory builds observed due to geopolitics; visibility limited by turns Mixed macro backdrop, manageable company impact
Product performanceCGM, smart meters, ESL driving growth; CGM path to 10% by 1H 2026 Expect CGM to feather into revenue across H1’26 Strong secular ramp
Regional trendsIndia metering underway; Japan refresh expected to begin shipments later in 2025 Grid upgrades tied to AI-driven energy demand support meter demand globally Broadening tailwinds
R&D execution (Series 2/3)Series 2 still ramping; Series 3 first device shipping, PSA Level 4 certification; more devices coming Series 3 feathering into wins; material revenue impact beyond 2026 Strategic platform strength
Asset trackingNew wins incl. high-volume pallet maker; BLE channel sounding applications Emerging as potential fourth growth pillar; early stage Building momentum
Wi‑FiBattery-powered camera (Roku) win; fastest-growth new tech after BLE Design funnel expanding; Series 3 to bring more Wi‑Fi Accelerating from small base

Management Commentary

  • “We expect full-year revenue growth of 34% compared to 2024…with many customers at various stages of qualification and new production ramps leading into 2026 and beyond.”
  • “The rapid rise of artificial intelligence is driving new growth in energy demand…As the global leader in smart metering, we are well-positioned to benefit from this trend.”
  • “Simplicity AI SDK…agentic AI…streamlines steps, accelerates time…lowers the bar…should result in scalability and more efficiency in terms of acquiring customers’ designs.”
  • “Series 2…ultra successful…de facto standard…Series 3…will be even more impactful…software compatible…largest opportunity funnel…on track to record design wins.”
  • “We expanded our partnership with GlobalFoundries…add needed U.S. capacity…for the next decade and beyond.”

Q&A Highlights

  • Gross margin: Q4 guide includes a one-time ~200 bps credit; normalized GM ~61%, expected to hold for “next few quarters” before gradually reverting toward 56–58% long-term range .
  • Distribution/channel: Targeting 70–75 days; moved ~10 days in Q3 (5 days organic + ~5 days strategic stocking), POS strong; plan to add ~5 days per quarter, lumpy .
  • CGM: Still expect path to ~10% of revenue by 1H 2026; multiple customers ramping .
  • Asset tracking: Emerging as a potential growth driver; BLE channel sounding central to use cases .
  • M&A/Capital: Tight filter; more likely to route excess cash flow to buybacks given strong organic growth and improving profitability .
  • Wi‑Fi: 30–40% YoY growth in 2025; Series 3 to enhance Wi‑Fi portfolio; remains smallest tech pillar but growing quickly .

Estimates Context

  • Recent beats: Q2 revenue $192.845M vs $192.631M estimate; EPS $0.11 vs $0.093; Q3 revenue $205.999M vs $205.299M; EPS $0.32 vs $0.307 .*
  • Q4 2025 guidance midpoints broadly align to or modestly exceed consensus (GM ~63% vs 63.0%; EPS midpoint ~$0.55 vs $0.53), implying a potential beat if mix and distribution contributions persist .*
  • Q1 2026 consensus: revenue ~$213.163M, EPS ~$0.4947, gross margin ~61%; trajectory consistent with normalized margin framework post Q4 credit .*

Estimates table (consensus)

MetricQ2 2025Q3 2025Q4 2025Q1 2026
Revenue Consensus Mean ($USD Millions)192.631*205.299*207.627*213.163*
Primary EPS Consensus Mean ($USD)0.093*0.307*0.533*0.495*
Gross Margin Consensus Mean (%)55.96*57.50*63.03*61.00*

Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term trading setup favors profitability: Q4 margin step-up (with a one-time credit) and higher non-GAAP EPS range suggest continued earnings momentum; watch for confirmation of normalized GM near ~61% into Q1 2026 .
  • Distribution mix and industrial strength are lifting margins; further channel refill (toward 70–75 days) is a tailwind to gross margin and POS, albeit lumpy .
  • CGM remains the most visible 2026 growth catalyst with management reaffirming a path to ~10% revenue in 1H 2026; evidence of multiple customers ramping supports durability .
  • Series 3 plus continued Series 2 share gains expand the design win funnel; platform compatibility should accelerate time-to-revenue in future ramps .
  • Asset tracking and Wi‑Fi are emerging contributors; BLE channel sounding and battery-powered Wi‑Fi wins (e.g., Roku camera) broaden the growth footprint .
  • Macro risks (tariffs, geopolitics) are monitored; modeled impact appears modest and likely pass-through; end-customer inventories are at cycle lows—a healthy demand indicator .
  • Action: In the short term, position for margin/EPS upside against consensus into Q4–Q1; in the medium term, lean into CGM/metering/Series 3 narratives and monitor asset-tracking design conversions to revenue.

References:

  • Q3 2025 8‑K and press release: financials, segment metrics, guidance .
  • Q3 2025 earnings call: prepared remarks and Q&A themes .
  • Q2 2025 8‑K and press release: financials, segment metrics, guidance .
  • S&P Global consensus estimates (revenue, EPS, gross margin) for Q2–Q1 [GetEstimates].*