What Happened?
Shares of semiconductor company Semtech (NASDAQ: SMTC) jumped 16.7% in the morning session after the company reported strong second-quarter 2025 earnings.
Revenue grew 19.6% year on year to $257.6 million, narrowly beating analyst estimates. Adjusted earnings per share of $0.41 were in line with expectations and marked a significant improvement from $0.11 in the same quarter last year. The company's profitability also showed strength, with adjusted EBITDA of $56.5 million handily beating consensus by nearly 14%. Furthermore, free cash flow was a positive $41.5 million, a notable turnaround from a negative figure in the prior year.
Looking ahead, management issued a strong third-quarter EBITDA forecast of $60 million, which also topped Wall Street's projections, signaling confidence in the business's trajectory.
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What Is The Market Telling Us
Semtech’s shares are extremely volatile and have had 54 moves greater than 5% over the last year. But moves this big are rare even for Semtech and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 6 days ago when the stock dropped 3.1% as the major indices continued to pull back, with technology stocks accounting for most of the market's largest decliners.
A key reason for this trend is that much of the recent market gains were concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.
Despite the downturn, some analysts viewed this as an opportunity to own some of the "Core AI winners." Dan Ives of Wedbush Securities commented, "In our view, the tech bull cycle will be well intact for at least another 2-3 years, given the trillions being spent on AI infrastructure/software/chips/power/apps looking ahead. This remains our tech playbook and investor roadmap."
Additionally, mixed earnings reports from retailers, such as Target, have added to the market's weakness. Investors are closely monitoring these reports for insights into the broader economic health and the potential impact of new tariffs on inflation.
Semtech is down 5.3% since the beginning of the year, and at $58.80 per share, it is trading 23.8% below its 52-week high of $77.15 from January 2025. Investors who bought $1,000 worth of Semtech’s shares 5 years ago would now be looking at an investment worth $934.87.
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