Lattice Semiconductor (LSCC -0.53%), a leading maker of low-power field programmable gate arrays (FPGAs), released its second quarter earnings on August 4, 2025. GAAP revenue was $124.0 million for Q2 FY2025, coming in 0.3% above analyst expectations. Non-GAAP earnings per share were $0.24, matching the Street’s consensus. The quarter marked a period of stable operations, as GAAP revenue was basically flat compared to the same period last year. Gross margins (non-GAAP) improved in Q1 FY2025 and GAAP operating cash flow grew to $38.5 million in Q2 FY2025 from $31.9 million in Q1 FY2025, while management highlighted record design activity. The overall quarter showed resilience in critical product offerings and end markets, even as some segments remained soft.
| Metric | Q2 2025 | Q2 2025 Estimate | Q2 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.24 | $0.24 | $0.23 | 4.3% |
| Revenue | $124.0 million | N/A | N/A | N/A |
| Gross Margin % (Non-GAAP) | 69.3% | 69.0% | 0.3 pp | |
| Adjusted EBITDA Margin | 34.1% | 32.3% | 1.8 pp | |
| Free Cash Flow Margin | 25.2% | 11.9% | 13.3 pp |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.
Business Overview and Strategic Context
Lattice Semiconductor develops and sells FPGAs—integrated circuits that customers can program to perform custom logic functions after manufacturing. These chips are used in a range of industries, from servers and artificial intelligence (AI) hardware to factory automation and automotive applications. It specializes in low-power, small form factor FPGAs, and its key product families include Nexus and Avant platforms. These are designed for use in systems where energy efficiency and miniaturization are essential, such as edge AI devices, smart sensors, and compact industrial equipment.
The company’s recent focus has been on growing its presence in communications, computing (including data centers), industrial, and automotive segments. It works closely with major customers to win new design slots—a process where a device manufacturer commits to use Lattice’s chips in future hardware. Other top priorities include R&D investment, maintaining a fabless manufacturing model by using outside foundries, and building a strong global distribution network. Success depends on design win momentum, efficient product launches, and strong ties with foundries and distributors.
Key Developments During the Quarter
During the period, revenue (GAAP) held steady at last year’s level. A small beat versus analyst estimates (non-GAAP EPS and GAAP revenue) reflected consistent demand in core markets. Segment performance was mixed: communications and computing revenue rose to $68.7 million (55% of total) (GAAP), up from $54.6 million in Q2 FY2024, marking a shift toward server and AI applications. Industrial and automotive revenue slipped to $47.3 million (38%) (GAAP), down from $58.2 million in Q2 FY2024 (GAAP). Consumer revenue continued to decline, reaching $8.0 million (7%) (GAAP) compared to $11.3 million in Q2 2024.
The company reported that 84% of sales came through distribution partners, up from 79% in Q1 FY2025. Geographically, 67% of revenue was from Asia, with the Americas at 22% of revenue and Europe (including Africa) accounted for 11% of revenue. Design win activity hit a record level, with notable new contracts in cloud datacenter, AI edge, and industrial automation. During the quarter, Lattice expanded its Certus™-NX and MachXO5™-NX FPGA product lines, focusing on AI and industrial applications. A new partnership with Mitsubishi Electric targets next-generation factory automation—a key area of industrial technology.
The gross margin percentage (non-GAAP) rose slightly versus last year, reaching 69.3%. Adjusted EBITDA margin, a measure of core operating profitability before interest, tax, depreciation, and some expenses, climbed to 34.1% in Q2 2025 from 32.3% in Q2 2024. Operating expenses remained under close control on a non-GAAP basis, falling to $51.8 million, a 4.1% year-over-year decrease. However, on a GAAP basis, total operating expenses increased 28.7% in Q2 2025. Management attributed this rise to higher stock-based compensation and “transformation” costs linked to company-wide changes. The gap between GAAP and non-GAAP profitability remained significant, mainly due to these non-cash and one-off expenses.
Free cash flow margin (non-GAAP) improved notably to 25.2% in Q2 2025 compared to 11.9% in Q2 2024. Operating cash flow (GAAP) rose, and the company continued aggressive share repurchases—buying back $71 million in stock during the first half of FY2025, equal to all of its operating cash flow for the period. Cash and cash equivalents (GAAP) were $107.2 million, a drop from $136.291 million (GAAP, as of year-end FY2024). Management highlighted “normalized channel inventory” and expressed confidence about record design wins supporting growth into 2026.
Looking Ahead: Guidance and Investor Focus
For the third quarter, management guided revenue to be between $128 million and $138 million, with a midpoint suggests approximately 7% sequential growth. Non-GAAP gross margin is forecast at 69.5% (plus or minus 1%). Non-GAAP operating expenses are set to rise slightly to $52–$54 million. Management expects non-GAAP net income per share of $0.26–$0.30, which if achieved, would mark a step up from the quarter just reported. The company did not provide full-year revenue targets, but previous comments mentioned expectations of low single-digit growth, assuming no major shifts in macroeconomic or tariff conditions.
Looking forward, trends in communications and computing demand, further design win activity in edge AI and datacenter hardware, and progress in inventory normalization are key areas to watch. The company continues to highlight its leadership in low-power FPGAs and product launches in the Nexus and Avant lines. Management also notes the risks linked to higher operating expenses, the difference between GAAP and non-GAAP results, and ongoing industry supply chain adjustment. Broader tariff and trade policy shifts, especially those related to Asia, remain a watch point for sales and costs.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
