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SEMTECH CORP (SMTC)·Q4 2025 Earnings Summary

Executive Summary

  • Q4 FY2025 delivered sequential and year-over-year improvements: revenue $251.0M (+6% q/q, +30% y/y), adjusted gross margin 53.2%, adjusted operating margin 19.9%, and adjusted EPS $0.40; adjusted EBITDA margin rose to 23.0% .
  • Results beat S&P Global consensus: revenue by ~$1.7M and EPS by ~$0.08; Q3 and Q2 also exceeded consensus, sustaining a beat-and-raise pattern*.
  • Guidance: Q1 FY2026 outlook calls for net sales $250.0M ±$5M, adjusted EPS $0.37 ±$0.03, adjusted gross margin ~53%, reflecting continued margin discipline and lower interest expense post deleveraging .
  • Call catalysts: record data center net sales ($50M), strong LoRa momentum ($37.1M), and explicit acknowledgement of a 3–4 quarter CopperEdge “air pocket” before broader deployments in boards/connectors later in FY’26 .

What Went Well and What Went Wrong

  • What Went Well

    • Data center achieved a record $50M, driven by FiberEdge (400G/800G) and ongoing CopperEdge engagements with 20+ customers; management expects multi-customer, multi-application revenues in latter FY’26 .
    • LoRa surged to $37.1M (+28% q/q, +205% y/y) with smart meter wins across France, Germany, the U.K., and China; Gen2/Gen3 adoption improving integration and time-to-market .
    • Deleveraging reduced net debt 68% y/y to ~$411M, lowering cash interest and supporting margin expansion and cash flow ($33.5M CFO; $30.9M FCF) .

  • What Went Wrong

    • CopperEdge active copper cable ramp won’t materialize as expected for FY’26 due to rack architecture changes; anchor customer demand expected below prior expectations for 3–4 quarters .
    • Adjusted operating expenses increased to $83.7M in Q4 (above prior Q4 guide), reflecting higher R&D to accelerate near-term opportunities .
    • Seasonality headwinds flagged for industrial IoT in Q1 FY’26 despite strong pipelines; high-end consumer TVS sequentially down in Q4 on normal seasonality .

Financial Results

MetricQ4 2024Q2 2025Q3 2025Q4 2025
Revenue ($USD Millions)$192.9 $215.4 $236.8 $251.0
GAAP Diluted EPS ($)($9.98) ($2.61) ($0.10) $0.43
Non-GAAP Adjusted Diluted EPS ($)($0.06) $0.11 $0.26 $0.40
GAAP Gross Margin (%)(0.2)% 49.0% 51.1% 52.0%
Non-GAAP Gross Margin (%)48.9% 50.4% 52.4% 53.2%
GAAP Operating Margin (%)(321.3)% 3.6% 7.5% 8.5%
Non-GAAP Operating Margin (%)9.2% 14.2% 18.3% 19.9%
Adjusted EBITDA ($USD Millions)$24.0 $40.5 $51.1 $57.8
Adjusted EBITDA Margin (%)12.5% 18.8% 21.6% 23.0%

Segment and end-market trends

Segment/End-Market ($USD Millions)Q2 2025Q3 2025Q4 2025
Infrastructure$52.9 $65.8 $69.1
Data Center (subset)$27.2 $43.1 $50.0
High-End Consumer$37.1 $40.0 $35.4
Industrial$125.3 $131.0 $146.6
LoRa (subset of Industrial)$28.7 $29.0 $37.1
IoT Systems Hardware$52.3 $57.9 $69.0

KPIs

KPIQ4 2024Q2 2025Q3 2025Q4 2025
Cash from Operations ($M)$13.9 n/a$29.6 $33.5
Free Cash Flow ($M)$12.2 ($8.4) $29.1 $30.9
Cash & Equivalents ($M)$128.6 $115.9 $136.5 $151.7
Long-term Debt ($M)$1,371.0 $1,192.9 $1,190.3 $505.9

Results vs S&P Global Consensus (Actual vs Estimate)

MetricQ4 2024Q2 2025Q3 2025Q4 2025Q1 2026 (guide/consensus)
Revenue ($M)192.9 vs 190.7*215.4 vs 212.3*236.8 vs 232.1*251.0 vs 249.3*250.0 (guide) vs 250.1*
Primary EPS ($)(0.06) vs (0.045)*0.11 vs 0.095*0.26 vs 0.233*0.40 vs 0.318*0.37 (guide) vs 0.371*

Values marked with an asterisk are retrieved from S&P Global/Capital IQ consensus via GetEstimates. Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Actual/GuidanceChange
Net Sales ($M)Q4 FY2025$250 ± $5 $251.0 Slight beat
Non-GAAP Gross Margin (%)Q4 FY202552.8% ± 50 bps 53.2% Beat (~40 bps)
Adjusted OpEx ($M)Q4 FY2025$82.8 ± $1.0 $83.7 Above guide
Adjusted Operating Margin (%)Q4 FY202519.7% ± 70 bps 19.9% Slight beat
Adjusted Interest Expense ($M)Q4 FY2025$19.0 $11.2 Lower (deleveraging)
Normalized Tax Rate (%)Q4 FY202515% 15% Maintained
Adjusted Diluted EPS ($)Q4 FY2025$0.32 ± $0.03 $0.40 Beat
Adjusted EBITDA ($M)Q4 FY2025$56.9 ± $2.8 $57.8 Beat
Non-GAAP Diluted Shares (M)Q4 FY202580.0 87.1 Higher (equity offering)
Net Sales ($M)Q1 FY2026n/a$250 ± $5 New guide
Adjusted Gross Margin (%)Q1 FY2026n/a53.0% ± 50 bps New guide
Adjusted OpEx ($M)Q1 FY2026n/a$87.0 ± $1.0 New guide
Adjusted EPS ($)Q1 FY2026n/a$0.37 ± $0.03 New guide
Adjusted EBITDA ($M)Q1 FY2026n/a$53.3 ± $3.0 New guide
Adjusted Net Interest ($M)Q1 FY2026n/a$6.3 New guide (lower rate, –200 bps)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 FY2025)Previous Mentions (Q3 FY2025)Current Period (Q4 FY2025)Trend
AI/Data Center (CopperEdge/FiberEdge/LPO)ACC TAM expands beyond single customer; first shipments planned; LPO adoption targeted for latter FY’26 CopperEdge high-single-digit $M; Catalina NVL36 platform; broader board/connector use; LPO/LRO confidence rising Record data center $50M; CopperEdge air pocket for 3–4 quarters; broader use cases expected latter FY’26 Strong growth with near-term CopperEdge pause; diversification underway
Supply Chain/OperationsBuilding wafer bank; inventory normalized; operations excellence emphasized Foundry/assembly partners prioritized demand; on-time delivery highlighted Continued ops leverage, debt reduction enabling R&D; improved cash flow Execution tailwind
Tariffs/GeopoliticsGovernment users rethink sensitive components; TAA facility launched TAA capabilities expanded; regional instances added China competitor added to DoD 1268 list; EU participant exiting cellular IoT; pipeline tailwind Favorable tailwinds in IoT
Product Performance: LoRa$28.7M (+34% q/q); new use cases; Mercedes case study $29.0M (+104% y/y); ecosystem maturation; Gen2/Gen3 $37.1M (+28% q/q, +205% y/y); smart meters in EU/China; Gen4 “LoRa Plus” release Accelerating adoption
High-End Consumer (TVS/PerSe)$37.1M; TVS +4% q/q; PerSe SAR and gesture wins $40.0M; TVS $28.3M; BOM visibility; SAR compliance $35.4M; TVS $24.1M (seasonality); PerSe share gains Seasonality but share gains
R&D ExecutionPortfolio rationalization; disciplined investments Multiyear roadmap alignment; OpEx grows at ~½ revenue R&D to data center/LoRa/IoT; AI for productivity; increased FY’26 R&D Higher targeted spend

Management Commentary

  • “Fiscal year 2025 represented a year of positive inflection… sequential improvement for each quarter reported in net sales, gross margin, operating margin and earnings per share.” — Hong Hou, CEO .
  • “We executed to our previously stated capital allocation priority of reducing debt, with net debt as of the end of fiscal year 2025 decreasing 68% year-over-year.” — Mark Lin, CFO .
  • “Net sales for data center were a record $50 million… CopperEdge demand at our anchor customer [is] lower… for 3 to 4 quarters… we expect engagement to result in revenues from multiple customers and multiple applications by the latter part of FY ’26.” — Hong Hou .
  • “LoRa-enabled solutions recorded Q4 net sales of $37.1 million… smart meter wins in France, Germany, the U.K., and China.” — Hong Hou .
  • “Adjusted gross margin, adjusted operating margin and adjusted EBITDA margin all sequentially improved in each quarter of FY ’25.” — Mark Lin .

Q&A Highlights

  • CopperEdge trajectory: Anchor customer pause for 3–4 quarters; broader board/connector deployments expected to start contributing by late FY’26; CopperEdge revenues continue (not zero) in Q1 FY’26 .
  • Data center mix and visibility: Record $50M; FiberEdge at record levels; growth concentrated in 400G/800G with early 1.6T activity; ACC largely 200G per lane .
  • LoRa sustainability: Shipping in line with demand; momentum across metering, asset tracking, factory automation; inventories monitored; Mercedes deployment complete .
  • Portfolio rationalization: Noncore assets not distressed; valuations benefiting from inflection; divestiture patience and focus on strategic fit and deleveraging .
  • OpEx/gross margin: Near-term R&D prioritized; OpEx guided up; mix (infrastructure) accretive to gross margin; AI tools targeted for SG&A efficiency .
  • Cash flow and interest: Q4 CFO $33.5M; FCF $30.9M; annual cash interest savings ~$40M from debt reduction; credit facility rate cut by 200 bps with leverage-based pricing .

Estimates Context

  • Q4 FY2025: Actual revenue $251.0M vs consensus $249.3M*; adjusted EPS $0.40 vs consensus $0.318* — both beats*.
  • Q3 FY2025: Actual revenue $236.8M vs consensus $232.1M*; adjusted EPS $0.26 vs consensus $0.233* — beats*.
  • Q2 FY2025: Actual revenue $215.4M vs consensus $212.3M*; adjusted EPS $0.11 vs consensus $0.095* — beats*.
  • Q1 FY2026: Company guided revenue ~$250M and EPS ~$0.37; consensus at $250.1M and $0.371* — guide aligned with consensus* .

Values marked with an asterisk are retrieved from S&P Global/Capital IQ consensus via GetEstimates. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Sustained operating leverage: Margins improved every quarter in FY’25; mix and cost actions should support mid-50s non-GAAP gross margin near term .
  • CopperEdge near-term pause but expanding TAM: Expect muted ACC contribution for 3–4 quarters, but broader board/connector adoption and multi-customer deployments targeted for latter FY’26 .
  • LoRa strength and IoT tailwinds: Material LoRa inflection and IoT hardware bookings aided by geopolitical shifts (DoD 1268 and EU exit) and RedCap certification with AT&T/Qualcomm .
  • Deleveraging and interest savings: Net debt down ~68% y/y; lower interest (–200 bps) supports EPS and cash flow compounding in FY’26 .
  • Data center breadth drives durability: Record FiberEdge/400G–800G demand, ACC continuity, and LPO/LRO opportunities provide multiple growth vectors independent of a single platform .
  • R&D prioritization: Incremental FY’26 R&D focused on data center, LoRa, and PerSe; management emphasizes fast course correction and ROI discipline .
  • Trading setup: Near-term narrative may focus on CopperEdge air pocket vs margin/cash flow resilience; estimate revisions likely modestly positive on margins and FCF; watch OFC/LPO milestones and board-level CopperEdge wins for upside catalysts .