LSCC Q2 Deep Dive: Data Center Demand and Inventory Normalization Drive Outlook

August 12, 2025 at 22:57 PM EDT

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Semiconductor designer Lattice Semiconductor (NASDAQ: LSCC) met Wall Street’s revenue expectations in Q2 CY2025, but sales were flat year on year at $124 million. The company expects next quarter’s revenue to be around $133 million, close to analysts’ estimates. Its non-GAAP profit of $0.24 per share was in line with analysts’ consensus estimates.

Is now the time to buy LSCC? Find out in our full research report (it’s free).

Lattice Semiconductor (LSCC) Q2 CY2025 Highlights:

Revenue: $124 million vs analyst estimates of $123.6 million (flat year on year, in line)
Adjusted EPS: $0.24 vs analyst estimates of $0.24 (in line)
Adjusted EBITDA: $42.23 million vs analyst estimates of $40.24 million (34.1% margin, 4.9% beat)
Revenue Guidance for Q3 CY2025 is $133 million at the midpoint, roughly in line with what analysts were expecting
Adjusted EPS guidance for Q3 CY2025 is $0.28 at the midpoint, above analyst estimates of $0.27
Operating Margin: 3.8%, down from 18.2% in the same quarter last year
Inventory Days Outstanding: 218, down from 225 in the previous quarter
Market Capitalization: $8.67 billion

StockStory’s Take

Lattice Semiconductor delivered second quarter results that met Wall Street expectations, with the market reacting positively to the company’s steady execution amid a flat revenue environment. Management attributed this performance to robust demand in its Communications and Compute segment, particularly within server applications where CEO Ford Tamer noted, “Server segment growing year-on-year 85%... fueling the strength in the Comms and Compute.” The company also highlighted ongoing progress in reducing channel inventories in its Industrial and Automotive segment, which management believes positions the firm for a return to growth in those markets.

Looking ahead, Lattice Semiconductor’s guidance reflects optimism fueled by continued design win momentum and a rebound in end-market demand. Management is prioritizing growth in companion chip opportunities, especially in AI-related data center applications, while also forecasting a recovery in Industrial and Automotive as inventory normalizes. CFO Lorenzo Flores emphasized, “We are seeing expansion of all our profitability metrics,” while CEO Tamer cited record backlog and robust bookings for the remainder of the year. The company remains focused on advancing its product roadmap and supporting customer innovation, with expectations for both revenue and margin improvement in upcoming quarters.

Key Insights from Management’s Remarks

Management emphasized that new product momentum and a strong recovery in Communications and Compute offset softness in Industrial and Automotive, while ongoing inventory normalization and design wins are expected to drive future growth.

Communications and Compute Growth: The segment saw its highest sequential growth in five years, driven by expanding server applications, strong demand from data center infrastructure, and increasing attach rates with AI accelerators. Management highlighted that server-related revenue grew 85% year-over-year, underlining the importance of this vertical.
New Product Traction: Lattice continued to exceed its new product revenue targets, with management indicating a 70% year-over-year growth in new product sales. The company’s focus on small to midrange FPGA (Field Programmable Gate Array) devices—configurable chips used in a variety of electronics—has been central to recent design wins and customer engagements, particularly in AI and industrial applications.
Inventory Normalization Progress: Channel inventory for Communications and Compute has already normalized, while Industrial and Automotive inventory is on track to reach normal levels by year-end. Management stated that current shipments are still below true demand in these markets, setting the stage for a rebound as inventory corrections conclude.
Margin Expansion Efforts: Despite a lower GAAP operating margin, non-GAAP gross margin expanded both quarter-over-quarter and year-over-year, reflecting a favorable mix of higher-margin new products and operational discipline. Flores pointed to cost controls and disciplined investment as factors supporting profitability.
Design Win Acceleration: The company achieved record design wins across all segments, including hyperscale data centers, industrial robotics, and edge AI. Management expects these wins to translate into higher revenue and further market share gains as they ramp into production.

Drivers of Future Performance

Lattice’s outlook is supported by improving demand in data center and industrial markets, ongoing inventory normalization, and continued design win execution.

Data Center and AI Expansion: Management expects sustained growth in the Communications and Compute segment, led by increased hyperscale data center spending and greater adoption of Lattice’s FPGAs as companion chips in AI server architectures. CEO Ford Tamer noted, “Our attach rate continues to grow into server,” and emphasized the company’s processor-agnostic approach as a differentiator.
Industrial and Automotive Recovery: The company anticipates a rebound in Industrial and Automotive revenue as inventory levels normalize. Flores indicated that current shipments remain below true demand, but record backlog and strong design win momentum are expected to drive growth in 2026, particularly in robotics, smart factory, and automation applications.
Margin Stability and Tariff Risks: While non-GAAP gross margins are expected to remain robust, management acknowledged potential headwinds from tariffs and macroeconomic uncertainties. However, supply chain diversification and flexibility are expected to help mitigate direct cost impacts, with ongoing focus on operational efficiency and disciplined investment supporting profitability.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will closely track (1) the pace at which inventory in Industrial and Automotive returns to normal and how quickly this translates to revenue growth; (2) the ongoing strength in data center demand, especially for AI-driven applications that leverage Lattice’s FPGAs; and (3) the ramp of new product design wins in both established and emerging markets. Execution on margin stability and management of tariff-related risks will also be critical for sustained progress.

Lattice Semiconductor currently trades at $63.50, up from $48.75 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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