Semtech’s second quarter results were met with a significant positive response from the market, reflecting strong execution and momentum across its core business segments. Management attributed the quarter’s performance to robust growth in data center sales—particularly the FiberEdge and CopperEdge product lines—and continued market share gains in high-end consumer and industrial markets. CEO Hong Hou highlighted progress on prioritizing balance sheet health, noting, “We have reduced debt by $879 million…resulting in a substantial net leverage ratio improvement.” The company also credited improved product mix and operational discipline for the sequential gains in both adjusted profit and cash flow.
Is now the time to buy SMTC? Find out in our full research report (it’s free).
Semtech (SMTC) Q2 CY2025 Highlights:
- Revenue: $257.6 million vs analyst estimates of $256.1 million (19.6% year-on-year growth, 0.6% beat)
- Adjusted EPS: $0.41 vs analyst estimates of $0.40 (in line)
- Adjusted EBITDA: $56.5 million vs analyst estimates of $49.62 million (21.9% margin, 13.9% beat)
- Revenue Guidance for Q3 CY2025 is $266 million at the midpoint, roughly in line with what analysts were expecting
- Adjusted EPS guidance for Q3 CY2025 is $0.44 at the midpoint, roughly in line with what analysts were expecting
- EBITDA guidance for Q3 CY2025 is $60 million at the midpoint, above analyst estimates of $50.39 million
- Operating Margin: -6.3%, down from 3.6% in the same quarter last year
- Inventory Days Outstanding: 138, up from 132 in the previous quarter
- Market Capitalization: $5.04 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Semtech’s Q2 Earnings Call
-
Harsh Kumar (Piper Sandler) asked about the timing and customer adoption of LPO products. CEO Hong Hou explained that deployments would begin in the fourth quarter, with design wins across both U.S. and China CSPs, but noted volume ramps would be gradual.
-
Joe Moore (Morgan Stanley) pressed for more detail on CopperEdge adoption in hyperscale data centers. Hou responded that customer awareness is increasing, with strong traction among cable suppliers, and broader ramps expected as new switches become available.
-
Nathaniel Quinn Bolton (Needham & Company) sought clarification on the ACC cable ramp and the impact of switch platform timing. Hou clarified that 100-gig per lane ACCs would ramp first, with 1.6T volume tied to new ASIC and switch introductions.
-
Christopher Rolland (Susquehanna International Group) questioned the implications of improved leverage for acquisitions or divestitures. Hou stated that while small tuck-in acquisitions are possible, the main focus remains on portfolio optimization and core asset investment.
-
Tore Svanberg (Stifel) asked about sales linearity and booking momentum. Hou indicated that strong bookings are evident across data center, LoRa, and PerSe segments, with positive momentum expected to continue.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be watching (1) the pace of LPO and ACC product ramps and corresponding hyperscaler adoption in data centers, (2) sustained growth and design wins in LoRa and PerSe platforms across new consumer and industrial applications, and (3) Semtech’s execution on portfolio optimization and further debt reduction. Successful commercialization of new connectivity technologies and continued improvement in gross margin mix will also be key signposts for progress.
Semtech currently trades at $57.90, up from $50.96 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
The Best Stocks for High-Quality Investors
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
