No Surprises In Lattice Semiconductor's (NASDAQ:LSCC) Q3 Sales Numbers But Stock Drops

Semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.9% year on year to $133.3 million. The company expects next quarter’s revenue to be around $143 million, coming in 0.7% above analysts’ estimates. Its non-GAAP profit of $0.28 per share was in line with analysts’ consensus estimates.

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Ford Tamer, Chief Executive Officer, said, "We delivered a strong quarter, with broad-based growth across our end markets, and grew non-GAAP earnings 17% quarter over quarter. Our Communications and Computing business achieved record revenue, and we are expecting continued growth into the fourth quarter and beyond. We continue to drive operating leverage and expand profitability, with significant revenue and non-GAAP EPS growth of 13% and 29%, respectively, expected in the second half of 2025 compared to the first half of 2025. "

Company Overview

A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Lattice Semiconductor grew its sales at a mediocre 4.3% compounded annual growth rate. This fell short of our benchmark for the semiconductor sector and is a rough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Lattice Semiconductor’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 18.4% annually.

This quarter, Lattice Semiconductor grew its revenue by 4.9% year on year, and its $133.3 million of revenue was in line with Wall Street’s estimates. Additionally, Lattice Semiconductor’s growth inflected positively this quarter, news that will likely give some shareholders hope. Company management is currently guiding for a 21.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 20.8% over the next 12 months, an improvement versus the last two years. This projection is commendable and implies its newer products and services will fuel better top-line performance.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Lattice Semiconductor’s DIO came in at 193, which is 20 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.

Key Takeaways from Lattice Semiconductor’s Q3 Results

We were impressed by Lattice Semiconductor’s strong improvement in inventory levels. Aside from that, this was a very in-line quarter with revenue, EPS, and guidance for next quarter all meeting Wall Street's expectations. With the stock up nearly 50% in the last three months, this wasn't enough, and the stock traded down 9.1% to $66.20 immediately following the results.

Is Lattice Semiconductor an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.