Lattice Semiconductor Corp. 10-Q Summary
Business Context and Reporting Period
This filing is a Quarterly Report on Form 10-Q for Lattice Semiconductor Corporation (LSCC) for the quarter ended July 4, 2026. Lattice is a leader in low-power programmable logic semiconductor products, serving Compute, Communications, Industrial, and Embedded markets. The company operates as a single reportable segment.
Key Financial Metrics
| Metric | Q2 2026 (3 Months) | Q2 2025 (3 Months) | YTD 2026 (6 Months) | YTD 2025 (6 Months) |
|---|---|---|---|---|
| Revenue | $201.1 million | $124.0 million | $372.0 million | $244.1 million |
| Gross Margin | $141.3 million (70.3%) | $84.8 million (68.4%) | $259.0 million (69.6%) | $166.5 million (68.2%) |
| Operating Income | $22.4 million (11.1%) | $4.7 million (3.8%) | $48.4 million (13.0%) | $11.7 million (4.8%) |
| Net Income | $19.4 million | $2.9 million | $41.2 million | $7.9 million |
| Diluted EPS | $0.14 | $0.02 | $0.29 | $0.06 |
| Cash & Equivalents | $173.3 million (as of July 4, 2026) | |||
| Operating Cash Flow (YTD) | $138.6 million | $70.4 million (YTD 2025) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 62% year-over-year for the quarter and 52% year-over-year for the six-month period. Growth was driven by a 83% increase in the Compute and Communications segment (data center/AI servers) and a 36% increase in Industrial and Embedded.
- Margin Expansion: Gross margin improved by 190 basis points quarter-over-quarter to 70.3%, attributed to favorable product mix and volume, partially offset by higher stock-based compensation.
- Expense Increases: Operating expenses rose significantly due to higher R&D and SG&A costs, primarily driven by increased stock-based compensation (market and performance-based awards) and higher cash compensation. Acquisition-related expenses of $4.4 million were incurred in the current period, compared to none in the prior year.
- Debt Restructuring: The company entered a new credit agreement in June 2026. A subsequent write-off of $4.9 million in unamortized debt costs related to a bridge facility and the previous credit agreement impacted "Other income (expense), net."
Guidance, Outlook, and Risks
- AMI Acquisition: On July 27, 2026 (subsequent to the reporting period), Lattice completed the acquisition of AMI for approximately $1 billion in cash and stock. To fund this, the company borrowed $925 million under a delayed draw term loan facility. Integration risks and the ability to realize synergies are highlighted as key uncertainties.
- AI Outlook: Management expects AI-related revenue to grow over the next few years, citing a diverse pipeline of design wins in data centers, AI-enabled PCs, and robotics.
- Stock Repurchases: Under the 2026 Repurchase Program, the company repurchased $15.0 million of stock in the first six months of 2026. $235.0 million remains authorized.
- Risk Factors: Key risks include geopolitical tensions (specifically Taiwan/China relations), trade restrictions/tariffs, supply chain concentration (foundries), and the successful integration of the AMI acquisition. The company also faces risks related to its new debt covenants and leverage ratios.
Investor Verification Checklist
- Debt Covenants: Verify compliance with the new 2026 Credit Agreement's leverage and interest coverage ratios following the $925 million term loan drawdown for the AMI acquisition.
- Integration Progress: Monitor the integration timeline and cost synergies of the AMI acquisition, as well as any potential goodwill impairment risks.
- Stock-Based Compensation: Review the sustainability of operating margins given the significant increase in stock-based compensation expense ($44.4 million in Q2 2026 vs. $24.1 million in Q2 2025).
- Geographic Concentration: Assess exposure to Greater China, which accounted for 67% of Q2 2026 revenue, in the context of ongoing trade and geopolitical risks.
- Inventory Levels: Track inventory days on hand (153 days as of July 4, 2026) to ensure it aligns with demand forecasts and does not lead to future write-downs.