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    ALGM
    Earnings call· Mar 2026(Q4 FY26)

    ALLEGRO MICROSYSTEMS Q4 FY26 earnings call ALGM

    May 7, 2026 Source

    Executive summary

    Allegro MicroSystems Q4 FY26 — Record Data Center Sales and Strong Auto Growth Drive Momentum

    Allegro MicroSystems concluded fiscal year 2026 with robust performance, marked by record data center sales and significant growth in focused automotive segments. The company's strategic investments in differentiated sensor and power technologies are translating into content expansion and market share gains, particularly in AI-driven data center architectures and xEV/ADAS applications. Management remains confident in its ability to execute towards long-term financial targets, supported by a multiyear high backlog and strong design win momentum.

    Highlights

    5

    • Q4 sales reached $243 million, marking the fifth consecutive quarter of sales growth.

    • FY26 sales increased by 23% year-over-year to $890 million, with EPS more than doubling to $0.54 per share.

    • FY26 focused auto sales (xEV and ADAS) grew 30% year-over-year.

    • FY26 industrial and other end markets grew 38%, led by data center and robotics/automation.

    • Data center sales increased 41% sequentially in Q4, establishing a new quarterly record at 14% of total sales.

    Concerns

    3

    • Gold cost was an approximately 200 basis point headwind to gross margin in fiscal 2026.

    • Annual price negotiations with customers in the March quarter typically impact revenue drop-through.

    • Recent fuel costs are creating headwinds for freight and operations in the Philippines facility.

    Guidance & targets

    11
    CategoryTargetConfidence
    Q1 FY27 Sales
    $245M to $255M
    high materiality
    High
    Q1 FY27 Non-GAAP Gross Margin
    50% to 51%
    medium materiality
    High
    Q1 FY27 Non-GAAP Operating Expenses
    $80M +/- $2M
    medium materiality
    High
    Q1 FY27 Interest Expense
    $4M
    low materiality
    High
    Q1 FY27 Non-GAAP Tax Rate
    ~9%
    low materiality
    High
    Q1 FY27 Weighted Average Diluted Share Count
    187M shares
    low materiality
    High
    Q1 FY27 Non-GAAP EPS
    $0.19 to $0.23 per share
    high materiality
    High
    Long-term Data Center Growth Rate
    well north of 20%
    high materiality
    High
    FY27 Data Center Growth Rate
    well above 20%
    high materiality
    High
    Long-term Auto Sales Growth
    SAAR + 7% to 10%
    high materiality
    High
    Long-term Gross Margin Target
    over 55%
    high materiality
    Medium

    Segment performance

    11
    SegmentRevenueYoYQoQMargin
    Automotive
    Sales were essentially flat sequentially due to an expected decline in China from Chinese New Year. Total auto sales grew 17% in fiscal 2026 to $629M, representing 71% of total sales.
    		$164M18% vs Q4 FY25flat—
    Focused Auto (xEV and ADAS)
    Increased 30% in FY26, representing 55% of total auto sales. Growth driven by content expansion and share gains in steering, braking, high-voltage traction inverters, and xEV powertrain systems.
    		$349M30%——
    Industrial and Other
    Led Q4 sales growth, with FY26 sales increasing 38% year-over-year to $261M. Driven by data center and robotics/automation.
    		$79M49% vs Q4 FY2523%—
    Data Center (within Industrial)
    Established a new quarterly record at 14% of total sales in Q4. FY26 sales more than quadrupled. Content scales with power per rack due to expanding product portfolio and new high-voltage architectures. Current sensors are emerging as a meaningful new growth pillar.
    Q4 Sales as % of total: 14%Q3 Sales as % of total: 10%Q2 Sales as % of total: 8%FY26 Sales as % of total: 10%Content per rack (today's servers): ~$150Content per rack (next-gen AI): >$425
    		——41%—
    Magnetic Sensor Sales
    Increased sequentially and year-over-year in Q4.
    		$141M21%2%—
    Power Products Sales
    Increased sequentially and year-over-year in Q4.
    		$102M35%12%—
    Rest of Asia
    Led regional growth in FY26 due to strength in data center.
    Q4 Sales as % of total: 30%
    		—44% (FY26)——
    China
    Led regional growth in FY26, driven by growth in Focused Auto.
    Q4 Sales as % of total: 25%
    		—36% (FY26)——
    Japan
    Geographical sales on a ship-to basis.
    Q4 Sales as % of total: 17%
    		————
    Europe
    Geographical sales on a ship-to basis.
    Q4 Sales as % of total: 15%
    		————
    Americas
    Geographical sales on a ship-to basis.
    Q4 Sales as % of total: 13%
    		————

    Operational metrics

    14
    Non-GAAP EPS
    $0.17up 13% sequentially, up 183% YoY
    Q4 FY26

    Nearly tripling year-over-year. FY26 Non-GAAP EPS was $0.54, more than double the prior year.

    Non-GAAP Operating Margin
    15.6%up from 15.4% in Q3, up 660 bps vs 9% in Q4 FY25
    Q4 FY26

    FY26 Operating Margin was 14.1% of sales.

    Adjusted EBITDA
    20.4%
    Q4 FY26

    FY26 Adjusted EBITDA was 19.1% of sales.

    Gross Margin
    50%up from 49.9% in Q3, up from 45.6% in Q4 FY25
    Q4 FY26

    FY26 Gross Margin was 49.4%, an improvement of 140 bps year-over-year. Operating leverage and factory efficiencies helped offset price and commodity cost increases.

    Cash and investments balance
    $175M
    Q4 FY26

    Balance at the end of Q4 FY26.

    Total debt balance
    $285M
    Q4 FY26

    Exiting the year, after $60M in voluntary debt payments.

    Net debt
    $116M
    Q4 FY26

    Exiting the year.

    DSO
    35 daysvs 40 days in Q3
    Q4 FY26

    Days sales outstanding.

    Diluted share count
    187M shares
    Q4 FY26

    Weighted average diluted share count.

    Voluntary debt payments
    $60M
    FY26

    Made during the full fiscal year.

    Gold cost headwind
    200 bps
    FY26

    Impact on gross margin.

    Isolated gate driver content uplift
    2-3x
    future

    Expected content uplift from isolated gate drivers as customers move to higher voltage platforms.

    TMR sensor product releases
    30%
    FY26

    TMR represented approximately 30% of sensor product releases in FY26, offering superior accuracy, bandwidth, and low power consumption.

    Term loan repricing
    SOFR + 175 bpsdown 25 bps
    Q4 FY26

    Term loan repriced, resulting in $650,000 of related expenses in Q4.

    Industry KPIs

    7
    MetricValueDetails
    Backlog order bookmultiyear high
    Ai data center revenue—
    Bookings net order intake—
    Design wins socket pipeline—
    Inventory channel inventory128 daysdays
    Node platform ramp schedule—
    End market segment revenue mix—

    Orderbook & backlog

    1
    Total company backlogmultiyear highQ4 FY26 exit

    Gives confidence in forward-looking momentum.

    Product announcements

    3
    ProductTypeDetails
    10 megahertz TMR current sensormilestone
    ASIL D passive TMR angle sensorlaunch
    First isolated gate driver for silicon carbide transistorslaunch

    Risks & headwinds

    5
    Gold cost headwindFY26

    200 bps on gross margin

    Mitigation: Gold-to-copper conversion program, vendor negotiations, factory efficiencies.

    Fuel costsrecent

    headwind

    Mitigation: Select price increases (surcharges) starting end of Q1 FY27.

    Annual price negotiationsQ4 (March quarter)

    impacts Q4 drop-through

    Mitigation: Offsetting with factory efficiencies and cost reductions; select price increases.

    China auto sales declineQ4 FY26

    expected decline

    Mitigation: Due to Chinese New Year, not a structural issue; focused auto in China continues to grow long-term.

    Material shortagescurrent

    customers concerned, no impact on orders

    Mitigation: Not impacting Allegro's business at this point.

    What to watch in Q1 FY27

    5

    Data Center Revenue Growth

    FY27
    CurrentQ4 FY26 data center sales up 41% sequentially, 14% of total sales
    TargetWell above 20% growth rate in FY27

    Why it matters

    Data center is a key growth pillar, especially with new current sensor and isolated gate driver opportunities, driving overall industrial segment performance.

    As we look ahead in FY '27, we believe our growth rate will come in well above 20%.

    Q&A highlights

    7

    What are the changes in revenue KPIs and end markets over the last 90 days, especially given the multiyear high backlog?

    Management expressed increased confidence in the data center market due to ramping current sensors and strong fan driver demand. In automotive, there are positive signs from backlog and design wins, particularly in high-dollar content applications.

    “It gave me increasing confidence that we have a strong story there, especially as we see the current sensors ramping on top of continued strong demand in fan drivers. So we're feeling good about the industrial market as we look ahead.”

    asked by Gary Mobley · answered by Michael Doogue

    2 min read5 chapters

    Detailed Narrative

    01

    Data Center Expansion and Content Growth

    Allegro's data center business achieved record sales in Q4 FY26, growing 41% sequentially and representing 14% of total sales. The company is benefiting from fan proliferation into power supplies and network switching equipment, which are rarely liquid-cooled, ensuring continued fan driver demand. Content per rack is scaling significantly, from approximately $150 in today's servers to over $425 in next-generation AI configurations, driven by expanding product portfolios and new high-voltage architectures. Current sensors are emerging as a meaningful new growth pillar, with isolated gate drivers expected to contribute materially in 18-24 months.

    02

    Automotive Segment Outperformance

    The focused automotive segment, including xEV and ADAS, demonstrated strong performance, increasing 30% in FY26 and exceeding the SAAR plus 7-10% target. This growth is attributed to content expansion and share gains in applications like steering, braking, high-voltage traction inverters, and VLDC motor drivers. Despite a sequential flattening in Q4 due to Chinese New Year, management expects continued strength in FY27, driven by design wins in high-dollar content applications and a positive outlook for the China automotive market.

    03

    Industrial and Robotics Momentum

    Industrial and other end markets grew 38% in FY26, led by data center and robotics/automation, significantly exceeding the high-teens growth target. Robotics and automation sales doubled year-over-year in FY26, driven by increased adoption of sensors in factory and building automation. The company secured two design wins with leading Chinese robotic companies for current and inductive sensors in robotic joints, with initial shipments expected in calendar 2026 and volumes increasing in 2027.

    04

    Technology Leadership and Innovation

    Allegro maintains its #1 position in magnetic sensing, with its 10 megahertz TMR current sensor named EDN's 2025 Sensor Product of the Year, offering the highest bandwidth solution for next-gen power systems. The company also expanded its sensor portfolio with an ASIL D passive TMR angle sensor for steer-by-wire ADAS systems, which offer a 2-3x content uplift. In power ICs, Allegro released its first isolated gate driver for silicon carbide transistors, expecting a 2-3x dollar content uplift in 800-volt xEV platforms and higher power AI architectures.

    05

    Cost Management and Operational Efficiency

    Despite headwinds from gold costs (200 basis points in FY26) and recent fuel charges, Allegro improved its gross margin by 140 basis points in FY26 through factory efficiencies and vendor negotiations. The company is actively pursuing a gold-to-copper conversion program and plans select price increases starting at the end of Q1 FY27 to offset rising costs. These initiatives, combined with operating leverage, are crucial for progressing towards long-term gross margin targets.

    AI-generated summary of the company’s earnings call. Not investment advice.