Semtech Corporation SMTC reported better-than-expected fourth-quarter fiscal 2026 results. It posted non-GAAP earnings of 44 cents per share, which beat the Zacks Consensus Estimate by a penny. The bottom line exceeded the midpoint of management’s guidance of 43 cents (+/- 3 cents) and reflected a robust year-over-year improvement of approximately 10%.
Semtech beat on earnings in three of the trailing four quarters and met once, the average surprise being 3.5%.
SMTC’s fourth-quarter fiscal 2026 revenues of $274.4 million topped the Zacks Consensus Estimate by 0.5% and came above the midpoint of management’s guidance of $273 million (+/- $5 million). The top line jumped 9% year over year, with solid growth across all of its end markets, particularly in data centers.
Semtech Corporation Price, Consensus and EPS Surprise
Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote
Semtech’s Q4 Revenues in Terms of End Markets
The company’s top-line performance can be attributed to the impressive year-over-year rise in its end markets.
Sales from the infrastructure market totaled $86.3 million (31.5% of net sales), exhibiting year-over-year growth of 25%. This was driven by solid demand for data centers and continued investment in CopperEdge.
Sales from the industrial market amounted to $151 million (55.1% of net sales), up 3% year over year.
Sales from the high-end consumer market totaled $36.6 million (13.4% of net sales), up 3% year over year. Strong 5G momentum as IoT transitions from 4G accelerates, driven by growth in bookings and design wins, along with expanding router and gateway partnerships, supports top-line growth.
SMTC’s Q4 Revenues in Terms of Product Lines
Signal Integrity (33.1% of net sales) sales totaled $90.7 million, up 25.1% year over year. Analog Mixed Signal & Wireless (34.1% of net sales) sales amounted to $93.7 million, which rose 9.7% year over year.
IoT System and Connectivity (32.8% of net sales) sales totaled $89.9 million, down 3.4% on a year-over-year basis.
Semtech’s Margins in Details
The non-GAAP gross margin of 51.6% contracted 160 basis points (bps) on a year-over-year basis and contracted 140 bps sequentially.
Adjusted operating expenses of $91.5 million increased 9.3% year over year and 5.8% sequentially. As a percentage of revenues, operating expenses increased to 33.3% from 32.4% in the previous quarter and remained flat compared with the year-ago quarter.
Non-GAAP operating income increased 0.4% year over year to $50 million. The non-GAAP operating margin declined to 18.2% from 19.8% reported in the year-ago quarter. On a quarter-over-quarter basis, non-GAAP operating income increased 0.4%, while margin contracted 40 basis points.
Semtech’s Balance Sheet & Cash Flow
As of Jan. 25, 2026, cash and cash equivalents totaled $195.2 million, up from $164.7 million as of Oct. 26, 2025.
The long-term debt amounted to $491.2 million, up from the previous quarter’s reported figure of $490.5 million.
During the fourth quarter, Semtech generated operating cash flow and free cash flow of $61.5 million and $59.1 million, respectively. In fiscal 2026, it generated operating and free cash flows of $181.2 million and $171.4 million, respectively.
Semtech Initiates Q1 FY27 Guidance
For the first quarter of fiscal 2027, Semtech expects net sales to be $283 million (+/- $5 million). The Zacks Consensus Estimate is pegged at $271.3 million, indicating a year-over-year rise of 8.1%.
Semtech expects infrastructure end-market net sales to increase sequentially, driven by data center growth of approximately 12%. High-end consumer sales are expected to increase 9% sequentially and 13% year over year. Industrial end-market sales are anticipated to remain flat sequentially.
The non-GAAP gross margin is expected to be 52.8% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 18.6% (+/- 70 bps).
Non-GAAP earnings are expected to be 45 cents (+/- 3 cents) per share. The consensus mark for earnings is pegged at 42 cents per share, indicating a year-over-year rise of 10.5%.
SMTC’s Zacks Rank and Stocks to Consider
Currently, Semtech carries a Zacks Rank #3 (Hold).
Cirrus Logic CRUS, FormFactor FORM and Lam Research LRCX are some better-ranked stocks that investors can consider from the broader Zacks Computer and Technology sector. Cirrus Logic, FormFactor and Lam Research sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Cirrus Logic’s fiscal 2026 earnings has been revised upward by 4.5% to $8.89 per share over the past 30 days and suggests a year-over-year increase of 17.9%. Cirrus Logic shares have jumped 12.6% in the past six months.
The Zacks Consensus Estimate for FormFactor’s 2026 earnings has moved upward by 3 cents to $1.80 per share in the past 30 days, indicating a 38.5% year-over-year increase. FormFactor shares have soared 64.3% in the past six months.
The Zacks Consensus Estimate for Lam Research’s fiscal 2026 earnings has been revised down by 2 cents to $5.24 per share over the past 30 days, suggesting a year-over-year increase of 26.6%. Lam Research shares have surged 33.2% in the past six months.
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Semtech Corporation (SMTC): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).