Detailed narrative
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.
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.
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.
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.
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.