Semtech(SMTC 5.11%) reported fiscal Q2 2026 earnings on Aug. 25, 2025, posting record net sales of $257.6 million, up 20% year over year, and adjusted EPS of $0.41. Management highlighted a dramatic reduction in net leverage from 8.8x to 1.6x, robust growth in data center and LoRa product lines (non-GAAP), and outlined strategic investments positioning the company for continued multi-year expansion. Key insights focus on operational milestones impacting long-term investment value, the strength of data center demand, and product roadmap execution. The fiscal Q2 2026 period ended on July 27, 2025.
Semtech posts record revenues and accelerates deleveraging
During fiscal Q2 2026, adjusted EBITDA rose 39% year over year to $56.5 million, and operating cash flow surged to $44.4 million versus negative $5 million in the prior year period. Management reduced debt by $879 million from the time the current CEO started and sequentially lowered adjusted net interest expense from $5.0 million to $4.1 million, freeing up capital for R&D and growth initiatives.
"At the end of fiscal Q2 2026, we have reduced debt by $879 million from the time I started as CEO, resulting in a year-over-year quarterly interest expense reduction of 80% and a substantial net leverage ratio improvement to 1.6 times at the close of Q2 2026 compared to 8.8 times a year ago. This strong improvement to our financial foundation allowed us to focus on growth drivers for our business."
-- Hong Hou, President and CEO
Semtech's decisive deleveraging has sharply improved financial flexibility, enabling the company to pursue higher-value investments while mitigating risk from prior balance sheet constraints.
Data center gains drive outsized growth and future visibility for Semtech
Data center net sales reached $52.2 million (non-GAAP), up 92% year over year, fueled by record CyberEdge product revenues and broad hyperscaler engagement. FiberEdge and CopperEdge platforms are gaining momentum and achieving new product design wins, and Semtech is supplying both incumbent and emerging high-speed optical connectivity solutions, with volume ramps of 1.6 terabit (T) components expected in 2026.
"Net sales for data center reached a record of $52.2 million, up 1% sequentially and up 92% year over year, benefiting from our broad portfolio. CyberEdge products achieved record net sales, offsetting the copper edge air pocket from the initial rack deployment at our end customer. Based on Q2 performance, we expect continued strong opportunities for fiber edge demand for the remainder of calendar year 2025 and beyond from our optical module customers serving North America cloud service providers or CSPs. This conviction is supported by our direct ecosystem engagement, which correlates with the increases in the data center CapEx forecast from multiple hyperscalers, seven operators, and enterprises."
-- Hong Hou, President and CEO
Semtech’s demand visibility in data center optics, strengthened by direct exposure to hyperscaler CapEx spend and new 800-gigabit/1.6T solutions, underpins its multi-year high-growth outlook in a structurally expanding segment.
LoRa platform expansion delivers new end-markets and higher recurring revenue base
LoRa-enabled solutions recorded $36.9 million in net sales, up 29% year over year, marking a shift from prior guidance to sustained $30 million-$40 million quarterly run-rates (as stated by management, not specified as GAAP or non-GAAP). Adoption is broadening to new applications including dual-band for drone, asset tracking, and environmental monitoring, and a record number of LoRa nodes were shipped.
"We are very pleased to see that the LoRa continues to have very strong demand. We did mention that. As a matter of fact, the end node number of end node was shipped last quarter, it's a historic record. So going forward, we think right now gives us confidence and conviction. We expect the LoRa revenue on a quarterly basis to be between $30 million to $40 million. You know? So certainly, it's gonna be an increase from our original belief from 30 to 35."
-- Hong Hou, President and CEO
Semtech’s LoRa franchise is showing clear evidence of market share gains and platform stickiness, providing diversification across industrial, consumer, and low-altitude economy use cases.
Looking ahead
For fiscal Q3 2026, management guides for net sales of $266 million plus or minus $5 million (up 12% year over year at the midpoint), adjusted gross margin (non-GAAP) of 53% plus or minus 50 basis points, and adjusted EPS of $0.44 plus or minus $0.03. Data center and infrastructure revenues (non-GAAP) are expected to increase sequentially, while LoRa will remain flat to slightly up sequentially, and the high-end consumer segment will follow typical seasonality. The company is engaged with three hyperscalers for 800-gigabit Linear Pluggable Optics (LPO) solutions, with revenues expected to begin ramping in fiscal Q4 2026, and a disciplined investment approach with adjusted OpEx guidance of $88.8 million plus or minus $1 million.
