Semtech delivered a major profitability swing during its fiscal second quarter of 2027 as record revenue, a stronger product mix, and operating leverage pushed GAAP operating margin from deeply negative territory to a double-digit profit margin.
Net sales increased 33% year-over-year to a record $341.9 million from $257.6 million and rose 17% sequentially from $291 million.
GAAP operating income swung to positive $55.8 million from a $16.2 million operating loss in the prior-year quarter. GAAP operating margin reached 16.3% compared with negative 6.3%, representing an improvement of approximately 2,260 basis points.
The prior-year comparison included a $42 million goodwill impairment, which contributed materially to the unusually large GAAP margin swing. Even after adjusting for special items, however, the improvement remained significant.
Adjusted operating income increased 72% to $83.6 million from $48.6 million, while adjusted operating margin expanded to 24.4% from 18.8%, an improvement of approximately 560 basis points.
GAAP gross margin improved to 53.8% from 52.1%. Adjusted gross margin reached 54.5% compared with 53.2% in the prior-year period.
Adjusted EBITDA increased to $91.1 million from $56.5 million, while adjusted EBITDA margin expanded to 26.6% from 21.9%. Adjusted diluted EPS reached $0.71 compared with $0.41.
Semtech reported GAAP net income of $160.1 million compared with a $27.1 million loss a year earlier. That figure benefited from a $101.4 million income-tax benefit, making adjusted earnings a more useful indicator of the quarter’s underlying operating performance. Adjusted net income was $69.5 million.
Management said accelerating bookings and record backlog point to additional growth. For the fiscal third quarter, Semtech expects revenue of approximately $410 million, plus or minus $5 million, representing another increase of roughly 20% from the record second-quarter level at the midpoint.
The company also expects an adjusted operating margin of approximately 31% in the third quarter and an adjusted gross margin of approximately 58.3%.
KEY QUOTES:
“Accelerating bookings and record backlog point to a strong inflection in growth with new revenue drivers and visibility expected to extend well into next fiscal year.”
Hong Hou, President and CEO of Semtech
“This was another quarter of disciplined execution, converting record revenue, margin expansion and diluted earnings per share growth into strong operating and free cash flow.”
Mark Lin, Executive Vice President and Chief Financial Officer of Semtech
