LSCC Q3 Deep Dive: Data Center and AI Demand Drive Guidance, Inventory Normalization in Focus

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.

Is now the time to buy LSCC? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Lattice Semiconductor’s third quarter results were met with a negative market reaction, despite the company meeting Wall Street’s expectations for both revenue and non-GAAP profit. Management attributed the quarter’s performance to accelerating demand in communications and computing, especially from data center and AI infrastructure customers. CEO Ford Tamer highlighted expanding design wins in low-power field-programmable gate arrays (FPGAs) for data center, security, and board management applications, while noting that normalization of channel inventory in industrial and automotive markets remained a drag. Tamer acknowledged, “The momentum highlights our differentiated value proposition... and sets the foundation for rapid growth.”

Looking forward, Lattice Semiconductor’s guidance reflects optimism driven by robust bookings in data center and communications, anticipated inventory normalization, and increasing adoption of its Nexus and Avant FPGA product lines. Management expects significant revenue acceleration in 2026, with Tamer stating, “Our comms and compute business revenue growth continues to accelerate, and it will accelerate further into 2026.” CFO Lorenzo Flores emphasized a strong order book and improved visibility, while also noting that recovery in industrial and automotive is contingent on aligning shipments with real demand as inventories normalize. The company is investing in expanding its product portfolio and deepening partnerships to support these growth opportunities.

Key Insights from Management’s Remarks

Management identified expanding AI infrastructure demand, inventory normalization strategies, and broadening design win momentum as pivotal elements shaping third quarter results and near-term outlook.

• AI and data center momentum: Lattice Semiconductor reported rising demand for its low-power FPGA solutions, particularly as companion chips in AI and data center servers. Management cited increased bookings and customer adoption following strong visibility at industry events like the Open Compute Summit.

• Inventory normalization in industrial and auto: The company continued to strategically undersupply the industrial and automotive segments to reduce channel inventory, aiming for a return to normalized shipment levels by year-end. Management expects this to shift from a headwind in 2025 to a tailwind in 2026.

• Growth in communications and computing: Communications and computing revenue reached record levels, driven by adoption in server and network infrastructure applications. Server revenues were up over 80% year-to-date, and management expects this segment to constitute 60% of total revenue in 2026.

• Expanding product family adoption: The Nexus platform saw new SKUs launched throughout 2025, with further introductions planned for 2026. Management highlighted strong customer interest in both Nexus and Avant families across data center and industrial use cases, supporting a multi-year product ramp.

• Security and post-quantum cryptography (PQC) adoption: Adoption of Lattice’s PQC solutions accelerated, driven by evolving security standards and requirements for CNSA (Commercial National Security Algorithm) compliance. Management described security as a significant driver of new design wins, especially in communications and server markets.

Drivers of Future Performance

Lattice Semiconductor’s outlook is shaped by AI-driven data center demand, inventory normalization, and the expansion of its FPGA product portfolio.

• Data center and AI growth: Management projects continued outperformance in communications and computing, with accelerated adoption of FPGAs in AI-enabled servers and networking equipment. This is expected to drive double-digit revenue growth, supported by design win momentum and expanding attach rates per system.

• Inventory normalization tailwinds: The company expects the headwind from industrial and automotive inventory correction in 2025 to convert into a growth driver in 2026, as shipments better align with end-market demand and channel inventories reach targeted levels.

• Product roadmap execution: Continued rollouts of Nexus and Avant product lines are expected to broaden Lattice’s addressable markets and support higher average selling prices. Management is investing in R&D and partnerships to expand use cases, particularly in security and AI at the edge, which could positively impact both revenue and margins.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the pace of inventory normalization in industrial and automotive and its impact on shipment alignment, (2) continued growth and design win momentum in communications and data center markets, and (3) rollouts of new Nexus and Avant FPGA products. Progress in security applications and the adoption of post-quantum cryptography solutions will also be important indicators for future growth.

Lattice Semiconductor currently trades at $69.20, down from $72.84 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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