SEMTECH Q4 FY26 earnings call SMTC

Semtech achieved record net sales of $1.05 billion for fiscal year 2026, marking a 15% annual growth, driven by strong performance in its data center and LoRa portfolios. Adjusted diluted EPS for the year was $1.71, a significant 94% increase over the prior year, reflecting disciplined execution and a differentiated product portfolio. The company also generated robust operating cash flow of $61.5 million and free cash flow of $59.1 million in Q4, exceeding full FY25 amounts.

Semtech acquired HieFo Corporation, a manufacturer of high-efficiency indium phosphide-based optoelectronic devices, including Gain Chips and CW Laser Chips. This acquisition is strategically important as data center architectures evolve to 1.6T and 3.2T, increasing the complexity of optical interconnects. By integrating HieFo's technology with Semtech's TIA laser drivers, the company aims to co-develop and co-optimize performance, increasing content opportunity from high single-digit dollars in an 800-gig module to about $80 in a 3.2T module.

Data center net sales reached a record $63 million in Q4, up 26% YoY, and $223 million for FY26, growing 58% YoY. Semtech expects data center revenue growth to exceed 50% YoY in FY27. The company's analog solutions address the critical need for power efficiency in AI infrastructure, enabling hyperscalers to scale next-generation architectures at 800G, 1.6T, and 3.2T. Strong demand for 800G TIA solutions continues, with 1.6T volume ramps expected to build throughout the year.

Semtech is expanding its LPO IC portfolio with 1.6T LPO drivers and TIAs expected this year, and is actively developing NPO (near-package optics) MSA for low-power, high-density solutions, anticipating increased content. Active copper cable (ACC) is gaining significant traction, with Semtech co-authoring the ACC-MSA to establish common specifications and accelerate adoption. The company will demonstrate 1.6T ACCs and next-generation 448G CopperEdge chips at OFC, highlighting its position in hyperscale interconnects.

LoRa-enabled net sales were $39.6 million in Q4, up 7% YoY, and $156 million for FY26, growing 34% YoY. The long-term growth rate for LoRa is projected at approximately 20%, with quarterly sales ranging from $35 million to $45 million. Key growth drivers include Edge AI integration, multiprotocol connectivity (LoRa Plus with Z-Wave, Zigbee, Thread/Matter), global network expansion, and mass market consumer adoption through Amazon Sidewalk, with Ring planning product launches in March.

The IoT Systems and Connectivity business recorded Q4 net sales of $89.9 million. Semtech launched the AirLink RX400 and EX400, the industry's first rugged 5G RedCap routers, designed for mission-critical industrial deployments. These routers offer 5G performance with significantly reduced power consumption (less than 1 watt idle power), making solar and battery-backed deployments practical for remote utility, oil and gas, and transportation customers.