LSCC — Lattice Semiconductor Corporation

Lattice Semiconductor Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: Record $201 million, up 62% year-over-year and 18% sequentially.
• Non-GAAP EPS: $0.53, reflecting over 120% growth year-over-year and 29% quarter-over-quarter.
• Gross Margin: 71.7%, up 170 basis points sequentially and 240 basis points year-over-year.
• Operating Expenses: $67.1 million, up 10% sequentially and 30% year-over-year, primarily due to R&D investments.
• Free Cash Flow: $81.3 million, with a free cash flow margin of 40.4%.
• Backlog: Extended well into 2027, indicating strong demand.

2. Strategic Updates and Business Highlights

• Acquisition of AMI: Successfully closed, expected to double Lattice's addressable market. AMI's revenue run rate projected to exceed $200 million with gross margins above 75% and EBITDA margins above 40%.
• Market Trends: Strong growth in Compute and Communications driven by AI applications, with revenue up 83% year-over-year. Industrial and Embedded segment also recovering, up 36% year-over-year.
• New Product Growth: Expected to exceed 25% of total revenue for the year, contributing to overall growth across all markets.

3. Forward Guidance and Outlook

• Q3 Revenue Guidance: $245 million to $265 million, including two months of AMI revenue, with FPGA business expected to grow to $220 million.
• EPS Guidance: Non-GAAP EPS projected between $0.54 and $0.58, reflecting approximately 100% year-over-year growth.
• Long-term Aspirations: Targeting $3 billion in revenue by 2030, with a strong foundation for sustained growth driven by AI infrastructure demand.

4. Bad News, Challenges, or Points of Concern

• Supply Chain Constraints: Ongoing issues in assembly capacity across the industry, though management is optimistic about resolving these by Q4 2026.
• Transitory Revenue from AMI: Low-margin hardware pass-through business affecting Q3 margins, expected to be exited by the end of 2026.
• Cost Increases: Rising costs from suppliers due to industry-wide pressures, necessitating a mix of cost absorption and price increases for customers.

5. Notable Q&A Insights

• Growth Drivers: Strong attach rates for FPGAs in AI and traditional server markets, with significant demand across various applications.
• AMI Integration: Early days for revenue synergies, with expectations for AMI to grow at 25% year-over-year in 2027, excluding initial low-margin hardware revenue.
• Market Position: Lattice is outperforming competitors, with a growth rate significantly above the industry average, attributed to both share gains and new product introductions.
• Visibility and Backlog: Unprecedented visibility into demand extending through 2027, with a substantial portion of the backlog being non-cancelable.

Overall, Lattice Semiconductor is positioned for robust growth, driven by strong market demand and strategic acquisitions, despite facing some supply chain challenges and transitional issues with the AMI integration.