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    LSCC
    Earnings call· Jun 2026(Q2 FY26)

    LATTICE SEMICONDUCTOR Q2 FY26 earnings call LSCC

    Aug 4, 2026 Source

    Executive summary

    Lattice Semiconductor Q2 FY26 — Record Revenue and Strong AMI Integration

    Lattice Semiconductor delivered record Q2 FY26 results, driven by strong execution and a healthy market environment, particularly in data center AI applications. The successful acquisition of AMI is expected to significantly expand the addressable market and accelerate growth, pushing the company to a $1 billion annualized revenue run rate a quarter ahead of schedule. Despite industry-wide supply constraints and rising costs, Lattice maintains a strong outlook, with robust bookings extending into 2027 and a focus on sustained earnings and cash flow growth.

    Highlights

    5

    • Record Q2 revenue of $201 million, up 62% YoY and 18% QoQ.

    • Non-GAAP EPS of $0.53, growing over 120% YoY and 29% QoQ.

    • Q2 non-GAAP gross margin expanded to 71.7%, up 170 bps QoQ and 240 bps YoY.

    • Q2 free cash flow of $81.3 million, with a 40.4% FCF margin, up from $39.7 million and 23.2% in Q1.

    • Successful close of AMI acquisition, expected to double addressable market and contribute to a $1 billion annualized revenue run rate in Q3.

    Concerns

    3

    • Assembly side supply constraints across the industry, expected to be resolved by September for Q4 and 2027.

    • Increasing costs from supply chain and expedite fees, requiring some cost pass-through to customers.

    • Transitory issues in AMI business related to low-margin hardware pass-through, impacting Q3 gross margin.

    Guidance & targets

    14
    CategoryTargetConfidence
    FPGA Revenue
    $210 million to $230 million
    high materiality
    High
    AMI Revenue (partial quarter)
    $33 million and $37 million
    medium materiality
    High
    Total Revenue
    $245 million to $265 million
    high materiality
    High
    Non-GAAP EPS
    $0.54 and $0.58 per share
    high materiality
    High
    Combined Non-GAAP Gross Margin
    69.5%, plus or minus 1%
    medium materiality
    High
    Non-GAAP Operating Expense
    $83 million and $90 million
    medium materiality
    High
    Non-GAAP Income Tax Rate
    4% and 6%
    low materiality
    High
    AMI Revenue Run Rate
    more than $200 million
    high materiality
    High
    AMI Gross Margin
    above 75%
    high materiality
    High
    AMI EBITDA Margin
    above 40%
    high materiality
    High
    AMI Revenue Growth
    about 25% year-on-year
    medium materiality
    High
    Leverage Ratio
    below 2x EBITDA
    high materiality
    High
    Long-term Revenue Goal
    $3 billion
    high materiality
    Medium
    New Products Contribution to Revenue
    exceed the 25%
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Compute and Communications
    Driven by continued momentum in data center AI applications, increasing CapEx, AI content per server, FPGA attach rates, security requirements, and disaggregated architectures. Server business growing faster than the segment.
    		record level83%18%—
    Industrial and Embedded
    Momentum building across industrial automation, aerospace and defense, medical, robotics, and emerging physical AI applications. Channel inventory at healthy levels. Expected to remain an important contributor to growth through 2026 and beyond. Not impacted by automotive end market weakness.
    		—36%17%—
    AMI (expected exit 2026 run rate)
    Highly attractive business with strong profitability and durable recurring revenue. Approximately 60% of revenue from boot firmware, 40% from infrastructure manageability solutions. Model includes firmware licensing, royalties, and platform enablement services. Expected to grow 25% YoY in 2027.
    		>$200 million——gross margins above 75%, EBITDA margins above 40%

    Operational metrics

    11
    Non-GAAP EPS
    $0.53up >120% YoY, up 29% QoQ
    Q2 FY26

    Exceeded guidance.

    Non-GAAP Gross Margin
    71.7%up 170 bps QoQ, up 240 bps YoY
    Q2 FY26

    Above expectation.

    Non-GAAP Operating Expense
    $67.1 millionup ~10% QoQ, up 30% YoY
    Q2 FY26

    Sequential increase primarily driven by R&D investment, performance-based bonuses, and commissions.

    Non-GAAP Operating Margin
    38.3%expanded 390 bps QoQ
    Q2 FY26

    Demonstrates operating leverage.

    EBITDA Margin
    43%increased 340 bps QoQ
    Q2 FY26

    Reflects strong operating performance.

    Free Cash Flow Margin
    40.4%up from 23.2% in Q1 FY26
    Q2 FY26

    Reflects strong cash generation.

    New Products Contribution to Revenue
    >25%exceeding high end of prior range
    FY26

    New products are expected to exceed the 25% of total revenue for FY26.

    AI-related Revenue Share
    25%on track to meet and exceed
    FY26

    AI-related revenue would approach 25% of company revenue in '26. This refers to AI with GPU/CPU/XPUs inside, while traditional infrastructure is also growing rapidly.

    Rule of 105 Performance
    105%62% growth + >40% EBITDA margin
    Q2 FY26

    Combines 62% revenue growth and over 40% EBITDA margin, exceeding the 'Rule of 60' benchmark.

    AMI Revenue Mix
    60% boot firmware / 40% infrastructure manageability
    Q2 FY26

    The AMI business is well balanced with approximately 60% of revenue generated from its boot firmware franchise and 40% from its infrastructure manageability solutions.

    AMI Hardware Pass-Through Revenue
    —
    Q3 FY26

    Low-margin hardware pass-through business that is not core to AMI's strategic value. AMI began proactively divesting this business before the acquisition. While we expect this noncore business to be fully exited by the end of 2026, Q3 and Q4 will include this revenue.

    Industry KPIs

    6
    MetricValueDetails
    Backlog order bookall the way to the end of 2027
    Ai data center revenueon track to meet and exceed 25%%
    Bookings net order intakeaccelerated bookings
    Design wins socket pipelinehealthy
    Inventory channel inventoryhealthy levels
    End market segment revenue mixCompute and Communications: record level; Industrial and Embedded: recovery

    Orderbook & backlog

    1
    Backlogextending well into 2027Q2 FY26

    accelerated

    2027 is pretty much booked. Putting capacity agreements in place with suppliers and customers to ensure commitments.

    Deals & partnerships

    1
    AMIBrings together Lattice's low-power programmable FPGAs with AMI's industry-leading firmware and infrastructure manageability portfolio. Positions combined entity to create the industry's most complete, secure management and control platform for AI data center infrastructure.$1 billion in cash and 5.2 million shares of stock

    Funded with $925 million from a $1.15 billion credit facility ($950M term loan, $200M revolver) and $75 million cash from balance sheet.

    Risks & headwinds

    3
    Assembly side supply constraintsright now

    across the industry

    Mitigation: Putting capacity agreements in place, qualifying new capacity, expected to be resolved by September for Q4 and definitely for 2027.

    Increasing supply chain and expedite costs

    costs are increasing across the industry

    Mitigation: Absorb some costs, pass some to customers.

    Transitory low-margin hardware pass-through business from AMIQ3 and Q4 FY26, fully exited by end of 2026

    not a meaningful amount of revenue

    Mitigation: AMI proactively divesting this business. Expected to structurally expand AMI's margin profile.

    What to watch in Q3 FY26

    5

    AMI EPS accretion

    starting in Q4
    Currentnot yet accretive
    Targetmeaningful accretion to EPS

    Why it matters

    Confirms the financial benefits of the AMI acquisition and its contribution to overall profitability.

    As AMI is integrated with Lattice, we expect to see meaningful accretion to EPS starting in Q4.

    Q&A highlights

    8

    Are FPGA attach rates, content per server, and ASPs continuing to increase in the Comms and Compute segment, especially with AI data centers?

    Fouad Tamer confirmed continued growth in attach rates, CapEx, and new applications. He highlighted increasing ASPs due to complex security requirements and the utility of Lattice FPGAs in low latency, determinism, parallel processing, and wide I/O for applications like power and cooling in data centers. The server TAM forecast for 2026 is up to 20 million units, driving demand for both AI-attached and supporting cloud infrastructure.

    “The latest Digitimes report shows the server TAM is now up to 20 million units forecast for 2026. which is a really strong growth, much stronger than prior year.”

    asked by Quinn Bolton · answered by Fouad Tamer

    2 min read6 chapters

    Detailed Narrative

    01

    Record Q2 Performance and Market Strength

    Lattice achieved record Q2 revenue of $201 million, marking 62% YoY and 18% QoQ growth, with non-GAAP EPS of $0.53, up over 120% YoY. This performance was driven by a healthy market, particularly in Compute and Communications, and strong execution. The company highlighted its "Rule of 105" performance, combining 62% revenue growth and over 40% EBITDA margin, significantly exceeding the "Rule of 60" benchmark.

    02

    Compute and Communications Momentum

    This segment reached a record revenue level, growing 18% sequentially and 83% year-over-year, fueled by data center AI applications. Demand is driven by increasing CapEx, AI content per server, FPGA attach rates, security requirements, and disaggregated architectures. The server TAM forecast for 2026 is now 20 million units, indicating strong growth in both AI-attached and traditional cloud infrastructure.

    03

    Industrial and Embedded Recovery

    The I&E segment saw revenue up 17% sequentially and 36% year-over-year, with momentum building across industrial automation, aerospace and defense, medical, robotics, and physical AI applications. Channel inventory is at healthy levels, and new design wins are ramping, positioning the segment for continued growth through 2026 and beyond. The company noted it is not impacted by automotive end market weakness🌐.

    04

    AMI Acquisition and Strategic Impact

    The successful close of the AMI acquisition is expected to double Lattice's addressable market, creating a complete secure management and control platform for AI data center infrastructure. AMI is a highly profitable business with strong recurring revenue characteristics, projected to operate at a revenue run rate of over $200 million by exit 2026 with gross margins above 75% and EBITDA margins above 40%. The integration is expected to be meaningfully accretive to EPS starting in Q4.

    05

    Supply Chain and Cost Management

    While front-end fab and back-end testing are in good shape, the assembly side faces industry-wide constraints. Lattice is implementing capacity agreements and qualifying new capacity to align supply and demand by September, aiming for good shape in Q4 and 2027. The company acknowledges increasing supply chain and expedite costs, planning to absorb some while passing others to customers.

    06

    Strong Forward Visibility and Bookings

    Lattice reports unprecedented🌐 visibility, with backlog extending well into 2027, and 2027 "pretty much booked." The company is putting capacity agreements in place with suppliers and seeking similar commitments from customers to ensure supply. New products are also exceeding expectations, projected to contribute over 25% of total revenue for FY26.

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