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Semtech Shares Jump on Strong Q4 Earnings Beat, Revenues Up Y/Y

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Semtech Corporation (SMTC - Free Report) shares jumped 21.06% to close at $39.60 on Friday following impressive fourth-quarter fiscal 2025 earnings results.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

SMTC reported fourth-quarter fiscal 2025 non-GAAP earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate by 25%. The bottom line also exceeded management’s guidance of 32 cents per share and showed a robust improvement from the year-ago quarter’s earnings of 6 cents per share.

The company's impressive bottom-line performance demonstrated its operational efficiency and effective expense management.

Semtech’s fourth-quarter fiscal 2025 revenues of $251 million beat the Zacks Consensus Estimate by 1.25%. It was roughly in line with the management’s guidance of $250 million (+/- $5 million).

The top line jumped 30.1% year over year, with solid growth across all of its end markets, particularly in data centers.

However, SMTC’s first-quarter fiscal 2026 guidance reflects lower CopperEdge demand. On a year-to-date basis, shares of SMTC have plunged 36%, underperforming the Zacks Semiconductor - Analog and Mixed industry’s decline of 6%.

Semtech Corporation Price, Consensus and EPS Surprise

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

SMTC’s top-line performance can be attributed to the impressive year-over-year rise in its end markets.

Sales from the infrastructure market were $69.1 million (27.5% of net sales), exhibiting year-over-year growth of 75%. This was driven by solid demand for data centres, expansion in the FiberEdge portfolio and continued investment in CopperEdge.

Sales from the industrial market were $146.6 million (58.4% of net sales), up 21% year over year growth.

Sales from the high-end consumer market were $35.4 million (14.1% of net sales), up 10% year over year. Strong market demand, reflective of steady contributions from design wins and market share expansion of Consumer TVS, along with a continued performance of PerSe proximity sensing products, lead to top-line growth.

SMTC’s Q4 Revenues in Terms of Product Lines

Signal Integrity (28.9% of net sales) sales were $72.5 million in the reported quarter, up 69.4% year over year. Analog Mixed Signal & Wireless (35% of net sales) sales were $85.4 million, up 34% year over year.

IoT System and Connectivity (37.09% of net sales) sales were $93.1 million, up 3.8% on a year-over-year basis.

Semtech’s Margins Expand Year Over Year

The non-GAAP gross margin of 53.2% expanded 430 basis points (bps) on a year-over-year basis and 80 bps sequentially.

Adjusted operating expenses of $83.7 million were within SMTC’s guidance range despite a sequential increase in research & development expenses.

The non-GAAP operating margin was 19.9% compared with 9.2% reported in the year-ago quarter.

Semtech’s Balance Sheet & Cash Flow

As of Jan. 26, 2025, cash and cash equivalents were $151.7 million, up from $136.5 million as of Oct. 27, 2024.

The long-term debt was $505.9 million, down from the previous quarter’s reported figure of $1.19 billion.

Operating and free cash flow for the reported quarter was $33.5 million and $30.9 million, respectively.

Semtech Offers Q1 Guidance

For first-quarter fiscal 2026, Semtech expects net sales of $250 million (+/- $5 million), indicating 21% year-over-year growth. The Zacks Consensus Estimate for the same is pegged at $248.80 million, indicating a year-over-year rise of 20.71%.

SMTC expects infrastructure end-market net sales to increase sequentially at mid-point of revenue guidance, including the negative impact of CopperEdge related sales. High-end consumer end-market sales are expected to increase while industrial is anticipated to decline.

The non-GAAP gross margin is expected to be 53% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 18.2%, suggesting a 600 bps year-over-year improvement.

Non-GAAP earnings are expected to be 37 cents (+/- 3 cents) per share. The consensus mark for earnings is pegged at 32 cents per share, suggesting an improvement from the year-ago quarter’s earnings of 6 cents. The figure remained unchanged over the past 30 days.

Zacks Rank & Stocks to Consider

Currently, SMTC carries a Zacks Rank #3 (Hold).

ACI Worldwide (ACIW - Free Report) , Dropbox (DBX - Free Report) and InterDigital (IDCC - Free Report) are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

ACIW, DBX and IDCC sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

ACIW shares have risen 2% year to date. The Zacks Consensus Estimate for ACIW’s full-year 2025 earnings is pegged at $2.73 cents, up by 4.6% over the past 30 days, indicating an increase of 3.41% from the year-ago quarter’s reported figure.

DBX shares have lost 14.7% year to date. The Zacks Consensus Estimate for DBX’s full-year 2025 earnings is pegged at $2.54 per share, down by 3.05% over the past 30 days, indicating a gain of 2.01% from the year-ago quarter’s reported figure.

IDCC shares have gained 12% year to date. The Zacks Consensus Estimate for IDCC’s full-year 2025 earnings is pegged at $10.45 per share, up by 10.1% over the past 30 days, indicating a loss of 30.19% from the year-ago quarter’s reported figure.

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