Q2 2027 Semtech Corporation Earnings Call Transcript
Key Points
- Record revenue of $342 million, up 33% year-over-year, with EPS of $0.71, up 73% year-over-year, demonstrating strong operating leverage.
- Data center revenue hit a record $100 million, up 91% year-over-year, with strong demand for 1.6 FiberEdge and CopperEdge products, and a projected 45% sequential growth in Q3.
- LoRa revenue reached an all-time high of $58 million, up 58% year-over-year, with continued momentum from LoRaWAN, LoRaPLUS, and Amazon Sidewalk expansion.
- Gross margin expansion is significant, with consolidated adjusted gross margin up 150 basis points sequentially to 54.5%, and expected to rise to 58.3% in Q3, driven by favorable product mix.
- The divestiture of the cellular module business is expected to structurally improve gross margins by over 500 basis points, with the deal expected to close in Q4 and be EPS neutral.
- Strong backlog and customer demand provide high visibility into fiscal 2028, with over 70% of next year's revenue already booked, supporting confidence in continued growth.
- Expansion into photonics, including CW lasers and photodiodes, positions Semtech to increase content per transceiver from high single-digit to high double-digit dollars, driving future growth.
- Capacity constraints are a concern, with the company needing to secure additional manufacturing capacity for fiscal 2028, which may require significant capital investment.
- The high-end consumer end market saw a 5% year-over-year decline, indicating weakness in this segment despite sequential growth.
- The company faces potential pricing pressure in the data center market, although current pricing is favorable, there is a risk of erosion as competition intensifies.
- The divestiture of the cellular module business, while beneficial for margins, may create operational disruptions and requires careful execution to avoid EPS dilution.
- The company's reliance on a few key hyperscaler customers for data center growth poses a concentration risk, and any slowdown in their spending could impact revenue.
- The photonics portfolio is still in early stages, with significant revenue contribution expected only with 3.2T transceivers, which are about 18 months away, creating a gap in near-term growth.
- Operating expenses are expected to increase in Q3, driven by higher R&D spend, which could pressure margins if revenue growth does not meet expectations.
Good day, and thank you for standing by. Welcome to Semtech Corporation's second quarter 2027 earnings conference call. (Operator Instructions) Please be advised that today's conference call is being recorded.
I would now like to hand the conference over to Mitch Haws, Senior Vice President of Investor Relations for Semtech. Please go ahead.
Thank you, and welcome to Semtech's second quarter 2027 financial results conference call. Participants on today's conference call are Hong Hou, President and Chief Executive Officer; and Mark Lin, Executive Vice President and Chief Financial Officer.
Before we begin the prepared remarks, I would like to highlight upcoming investor events, including the Citibank Global TMT Conference on September 8 and the benchmark TMT and JPMorgan Rising Tech Leaders Forum, both on September 10 in New York City. In addition, we hope you'll attend our investor event in San Jose on October 15 and during which we'll provide an in-depth overview of
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