Semtech's Q1 Earnings Match Estimates, Revenues Increase Y/Y

Semtech Corporation SMTC reported first-quarter fiscal 2026 earnings, wherein the bottom line was in line with the Zacks Consensus Estimate and the top line surpassed the same. SMTC reported first-quarter non-GAAP earnings of 38 cents per share, which matched the Zacks Consensus Estimate. The bottom line exceeded management’s guidance of 37 cents per share and showed a robust improvement of more than sixfold from the year-ago quarter’s earnings of 6 cents.

The company's impressive bottom-line performance demonstrated benefits of increased revenues, operational efficiency and effective expense management. Semtech has surpassed the Zacks Consensus Estimate for earnings thrice in the trailing four quarters, while matching the same on one occasion, the average surprise being 10.8%.

Semtech’s first-quarter fiscal 2026 revenues of $251.1 million beat the Zacks Consensus Estimate by 0.44% and came above the midpoint of management’s guidance of $245-$250 million. The top line jumped 22% year over year, with solid growth across all of its end markets, particularly in data centers.

The company’s latest quarterly results are likely to give a fresh boost to its shares. Shares of SMTC have plunged 38.5%, underperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 5.4%.

Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote

Semtech’s Q1 Revenues in Terms of End Markets

SMTC’s top-line performance can be attributed to the impressive year-over-year rise in its end markets.

Sales from the infrastructure market were $72.8 million (29% of net sales), exhibiting year-over-year growth of 30%. This was driven by solid demand for data centres and continued investment in CopperEdge.

Sales from the industrial market were $142.8 million (56.9% of net sales), up 24% year over year.

Sales from the high-end consumer market were $35.4 million (14.1% of net sales), up 3% year over year. Strong design-in momentum for SurgeSwitch across multiple device manufacturers, along with broad PerSe proximity sensing deployments and best-in-class low power, sensitivity, and noise rejection, supports top-line growth.

SMTC’s Q1 Revenues in Terms of Product Lines

Signal Integrity (29.3% of net sales) sales were $73.5 million in the reported quarter, up 26.1% year over year. Analog Mixed Signal & Wireless (36.1% of net sales) sales were $90.6 million, up 20.3% year over year.

IoT System and Connectivity (34.6% of net sales) sales were $86.9 million, up 19.9% on a year-over-year basis.

Semtech’s Margins Expand Year Over Year

The non-GAAP gross margin of 53.5% expanded 370 basis points (bps) on a year-over-year basis and 30 bps sequentially.

Adjusted operating expenses of $86.6 million were within SMTC’s guidance range. On a year-over-year basis, adjusted operating expenses increased 11.9%.

Non-GAAP operating income surged 88.9% year-over-year to $47.6 million. The non-GAAP operating margin improved to 19% from 12.2% reported in the year-ago quarter.
Semtech’s Balance Sheet & Cash Flow

As of April 27, 2025, cash and cash equivalents were $156.5 million, up from $151.7 million as of Jan. 26, 2025.

The long-term debt was $542.6 million, up from the previous quarter’s reported figure of $505.9 million.

During the first quarter, Semtech generated operating cash flow and free cash flow of $27.8 million and $26.2 million, respectively.

Semtech Initiates Impressive Q2 Guidance

For the second quarter, Semtech expects net sales of $256 million (+/- $5 million). The Zacks Consensus Estimate for the same is pegged at $255.3 million, indicating a year-over-year rise of 18.5%.

SMTC expects infrastructure end-market net sales to increase sequentially, driven by data center growth, high-end consumer sales to rise slightly due to typical seasonality and industrial sales to remain flat to slightly down, as moderation in LoRa business to offset IoT cellular growth.

The non-GAAP gross margin is expected to be 53% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 18.8%.

Non-GAAP earnings are expected to be 40 cents (+/- 3 cents) per share. The consensus mark for earnings is pegged at 39 cents per share, indicating a year-over-year rise of 254.6%. The figure remained unchanged over the past 60 days. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank & Stocks to Consider

Currently, SMTC carries a Zacks Rank #3 (Hold).

Paylocity Holding PCTY, StoneCo STNE and BlackBerry BB are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

PCTY, STNE and BB sport a Zacks Rank #1 (Strong Buy) each at present.  You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTY shares have declined 1% year to date. The Zacks Consensus Estimate for PCTY’s full-year 2025 earnings is pegged at $6.95 per share, up by 4.51% over the past 30 days, indicating an increase of 0.99% from the year-ago quarter’s reported figure.

STNE shares have surged 68.7% year to date. The Zacks Consensus Estimate for STNE’s full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating a gain of 5.93% from the year-ago quarter’s reported figure.

BB shares have gained 9.2% year to date. The Zacks Consensus Estimate for BB’s full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a gain of 400% from the year-ago quarter’s reported figure.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research