Can you provide a framework for AMI's gross margin profile and clarify if accretion is structural or synergy-dependent?

AMI's business has a very high gross margin, higher than Lattice's current 70%, and its operating margin is close to or slightly above Lattice's. The accretion is structural and not dependent on cost-cutting synergies, as AMI's P&L structure is complementary and allows funding of debt and interest while showing immediate accretion. “AMI's business is very high gross margin. It's higher than ours, and we'll share some more detail on that later. And then they have a different structure, but at the operating margin level, it's pretty close to ours.”

What are the cross-synergies between Lattice FPGAs and AMI's firmware/infra management software? What is the expected growth rate for AMI?

AMI provides low-level firmware and infrastructure management software that is highly complementary to Lattice's low-power FPGAs, enabling faster time-to-market for customers' systems. This combination will allow for new solutions in areas like rack boot and retrofitting older systems. AMI's growth rate is expected to be in the high teens, accelerating next year, and the combined entity aims for faster revenue and EPS growth by 2028. “The history of AMI has 40 years of developing these test cases and very deep knowledge of the whole industry from server to switch to [indiscernible] they're the first one to be brought up when a CPU gets brought up.”

With channel inventory now under 2 months, is there potential for refill, and how does this impact future quarters?

Channel inventory is no longer a business imperative to bring down; the focus is on maintaining the right balance globally. The company is happy to have managed through the inventory correction, which now provides greater, more direct visibility into end-customer demand, leading to more efficient builds. The last time inventory was under 2 months, the company experienced 10 good quarters. “The last time the company was under 2, we had 10 good quarters ahead than 1x. And so we may be entering a very strong period here.”

LSCC

Lattice Semiconductor (LSCC) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· May 4, 2026

Source: earnings call transcript

Executive summary

Lattice Semiconductor Q1 FY26 — Strong Growth and Strategic AMI Acquisition

Lattice Semiconductor delivered a strong Q1 FY26, exceeding expectations with significant revenue and EPS growth driven by market tailwinds in AI servers and industrial automation. The company announced the strategic acquisition of AMI, aiming to create a comprehensive secure management and control platform and accelerate growth. Management is confident in a multi-year growth cycle, with bookings extending into 2027 and channel inventory normalizing, positioning Lattice for sustained above-market growth.

Highlights

Q1 revenue was $170.9 million, representing 42% year-over-year growth.
Non-GAAP EPS grew more than 80% year-over-year to $0.41, a 30% increase quarter-over-quarter.
Compute and Communications end market achieved record revenue, up 86% year-over-year and 15% sequentially.
Industrial and Embedded end market grew more than 20% sequentially, reflecting improving market conditions.
Channel inventory reduced from 3 months last quarter to close to 2 months of inventory on hand.
Acquisition of AMI is expected to be immediately accretive to gross margin, free cash flow, and EPS on a non-GAAP basis.

Concerns

Q1 GAAP net cash flow from operating activities was $50.3 million, down from $57.6 million in Q4, impacted by annual bonus payout and revenue linearity.
Cost pressure is expected to continue and increase relatively in the second half of this year versus the first half.

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$175 million to $195 million high materiality	Q2 · FY26	High
Non-GAAP Gross Margin	70% plus or minus 1% medium materiality	Q2 · FY26	High
Non-GAAP Operating Expense	$64 million and $67 million medium materiality	Q2 · FY26	High
Non-GAAP Income Tax Rate	4% and 6% low materiality	Q2 · FY26	High
Non-GAAP EPS	$0.42 per share and $0.46 per share high materiality	Q2 · FY26	High
AMI Acquisition Closing	Q3 2026 high materiality	Q3 · FY26	High
Annual Revenue Run Rate	exceed $1 billion high materiality	end of 2026 · FY26	High
AMI Acquisition Accretion	immediately accretive high materiality	post-close	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Compute and Communications Driven by continued momentum in data center AI applications. Record revenue	62% of total revenue	86%	15%	—
Industrial and Embedded Primarily driven by increased demand in factory automation, robotics, and medical applications. Consumer business is now included within this segment.	38% of total revenue	10%	21%	—

Orderbook & backlog

Backlog strong Q1 FY26

extends well into 2027

Bookings accelerated Q1 FY26

Deals & partnerships

AMI (American Megatrends International) Acquisition of a leader in firmware, orchestration, and system-level manageability to create the industry's most comprehensive secure management and control platform. $1.65 billion ($1 billion cash, $650 million equity)

The acquisition combines Lattice's low-power programmable hardware with AMI's industry-leading solutions (BIOS, BMC, platform security). AMI firmware will remain processor and silicon agnostic. THL Partners (AMI's owner) has a 12-month lockup on the equity issued, with 25% per quarter.

Risks & headwinds

Supply chain straining due to rapid growth current

definitely is straining us

Mitigation:Working hard with suppliers, expanding back-end supply chain, adding more partners, securing supply.

Increased cost pressure H2 FY26

cost pressure will continue and increase relatively in the second half of this year versus the first half

Mitigation:Working with customers to offset cost increases.

Cash flow impact from bonus payout and revenue linearity Q1 FY26

Q1 GAAP net cash flow from operating activities was $50.3 million compared to $57.6 million in Q4. Free cash flow was $39.7 million, down from $44 million in Q4.

Mitigation:Expect a strong recovery of cash flow as we continue to grow.

What to watch in Q2 FY26

Channel inventory levels

Q2 FY26

Current close to 2 months

Target under 2 months

Why it matters

Further reduction in channel inventory indicates strong end-market demand and improved visibility, signaling a potential multi-year growth period.

As importantly, along with increased consumption, channel inventory reduced from 3 months last quarter to close to 2 months of inventory on hand, and we expect this trend to continue to under 2 months in Q2.

Find out whether LSCC delivers this. Inve re-checks your case every morning.

Q&A highlights

How will AMI double Lattice's SAM, particularly in Compute and Communications? What is the expected mix of revenue from servers and AI in 2026 for the core business?

AMI is expected to double Lattice's SAM from $6 billion to $12 billion over 3-4 years, primarily in the Compute and Communications subsegment. Server revenue is projected to be about 38% of total revenue in 2026, and AI-related revenue is expected to be about 25% of total revenue in 2026.

“we expect it to be about 25% of revenue in 2026. And AMI plus that is going to be uniquely positioned to be able to provide solutions to customers in this Compute and Comms market.”

asked by Ruben Roy · answered by Fouad Tamer

2 min read 6 chapters

Detailed narrative

Q1 Performance and Operating Leverage

Lattice Semiconductor reported a strong Q1 FY26, with revenue reaching $170.9 million, a 42% year-over-year increase and 17% quarter-over-quarter. Non-GAAP EPS grew over 80% year-over-year to $0.41, demonstrating significant operating leverage. Non-GAAP gross margin was 70%, up 60 basis points QoQ and 100 basis points YoY, reflecting product value.

Non-GAAP operating margin expanded 370 basis points to 34.4%, and EBITDA margin increased 310 basis points to 39.6%.

Strategic AMI Acquisition

The company announced the definitive agreement to acquire AMI for $1.65 billion ($1 billion cash, $650 million equity), expected to close in Q3 2026. This acquisition is a pivotal milestone, combining Lattice's low-power programmable hardware with AMI's leadership in firmware, orchestration, and system-level manageability.

The combined entity aims to create the industry's most comprehensive secure management and control platform, expanding Lattice's served available market (SAM) from $6 billion to $12 billion over the next 3-4 years.

Market Tailwinds and Multi-Year Growth Cycle

Lattice is experiencing accelerated bookings and a strong backlog extending into 2027, driven by robust trends in AI servers, networking, industrial automation, and emerging physical AI applications. The company sees itself in the early innings of a multi-year growth cycle, with high confidence in sustained above-market growth.

Server revenue is expected to be about 38% of total revenue in FY26, and AI-related revenue is projected to reach 25% of total revenue in 2026.

Channel Inventory Normalization

Channel inventory reduced from 3 months in the prior quarter to close to 2 months in Q1 FY26, with expectations to go under 2 months in Q2. This improvement, coupled with increased customer visibility, allows for more efficient build processes and is seen as a positive indicator for future demand, particularly in the Industrial and Embedded segment which grew 21% sequentially.

Evolving to System-Level Solutions

Lattice is evolving into a system-level solutions company, with customers valuing complete solutions spanning connectivity, security, management, and control, beyond just low-power hardware. This approach increases attach rates and drives higher value per design, particularly in complex AI-driven and advanced computing architectures. The AMI acquisition further strengthens this strategy by integrating firmware and manageability infrastructure.

Supply Chain Management and Lead Times

Despite the rapid growth straining the supply chain, Lattice has been able to secure necessary supply, working closely with fab partners (UMC, Samsung, TSMC) and expanding back-end supply chain. The company is actively bringing lead times down, with the supply of legacy node wafers being less challenged. Cost pressures are expected to continue and potentially increase in the second half of the year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.