With AMI's high margins, what is the longer-term gross and operating margin target for the combined company, perhaps a year or two out?

Lorenzo Flores indicated that the current model (70% gross margin, approaching 40% operating margin) is likely to persist in the near term due to continued R&D investments. He suggested that with accelerated revenue growth, the company might reach 40% operating margin sooner than previously expected, leading to significant EPS acceleration. “So 70-ish percent on the gross margin and a little bit sooner to 40% on the operating margin level than we had seen in the past is probably where we're taking it.”

How much revenue does AMI's low-margin hardware business represent, is it part of the $200 million run rate, and is it causing the Q3 margin step-down?

Lorenzo Flores clarified that the hardware business is a "transitory issue" and not a meaningful amount of revenue from Lattice's overall perspective. It is being divested and will be fully exited by the end of 2026, with no impact on overall financials or AMI-specific financials by Q4. The $200 million annual run rate for AMI excludes this hardware business. It does cause a Q3 step-down. “The $200 million a year run rate for AMI would exclude that in the end.”

Are there any supply constraints, how are they being managed, and could they gate growth next year?

Fouad Tamer stated that while front-end fab and back-end testing are fine, the assembly side faces industry-wide constraints. Lattice is putting capacity agreements in place and qualifying new capacity, expecting to align supply and demand by September, and be in good shape for Q4 and 2027. “In the middle, on the assembly side, there are constraints across the industry right now. And so us and the rest of the industry are experiencing these constraints.”

LSCC

Lattice Semiconductor (LSCC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Information Technology· Aug 4, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
FPGA Revenue	$210 million to $230 million high materiality	Q3 · FY26	High
AMI Revenue (partial quarter)	$33 million and $37 million medium materiality	Q3 · FY26	High
Total Revenue	$245 million to $265 million high materiality	Q3 · FY26	High
Non-GAAP EPS	$0.54 and $0.58 per share high materiality	Q3 · FY26	High
Combined Non-GAAP Gross Margin	69.5%, plus or minus 1% medium materiality	Q3 · FY26	High
Non-GAAP Operating Expense	$83 million and $90 million medium materiality	Q3 · FY26	High
Non-GAAP Income Tax Rate	4% and 6% low materiality	Q3 · FY26	High
AMI Revenue Run Rate	more than $200 million high materiality	Exit 2026 · FY26	High
AMI Gross Margin	above 75% high materiality	Exit 2026 · FY26	High
AMI EBITDA Margin	above 40% high materiality	Exit 2026 · FY26	High
AMI Revenue Growth	about 25% year-on-year medium materiality	FY27	High
Leverage Ratio	below 2x EBITDA high materiality	End of 2027 · FY27	High
Long-term Revenue Goal	$3 billion high materiality	2030 · FY30	Medium
New Products Contribution to Revenue	exceed the 25% medium materiality	FY26	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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 level	83%	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%

Orderbook & backlog

Backlog extending well into 2027 Q2 FY26

accelerated

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

Deals & partnerships

AMI Brings 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

Assembly side supply constraints right 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 AMI Q3 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

AMI EPS accretion

starting in Q4

Current not yet accretive

Target meaningful 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.

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

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

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