Semtech Corporation reported strong financial performance in its Q2 2027 earnings period, highlighted by record data center revenue reaching $100 million, representing a 91% year-over-year increase. The growth was fueled by infrastructure buildouts for 800G and 1.6T architectures, with the company securing design-in status across every module provider in its target markets, often on exclusive bases.
The company announced a strategic portfolio optimization through the sale of its cellular module business, a move designed to concentrate resources on higher-margin segments including data center and LoRa technologies. Concurrent with this divestiture, Semtech expanded its photonics portfolio via strategic acquisitions and personnel additions, aiming to grow content per transceiver from the high single-digit to high double-digit dollar range. The company achieved structural gross margin improvement, anticipating approximately 64% gross margins post-divestiture.
Semtech’s industrial market segment also delivered record results, leveraging what management termed a “three pillars” strategy encompassing LoRaWAN, LoRa Plus, and Amazon Sidewalk’s international expansion. Earnings per share growth outpaced revenue growth at more than double the rate, reflecting the company’s shift toward a higher-margin business model.
Looking ahead, management projected 45% sequential revenue growth in data center for Q3, equivalent to approximately 160% year-over-year growth. The company is actively addressing capacity constraints by acquiring manufacturing equipment and expanding clean room facilities to meet significant backlog demand. High-power CW lasers for transceivers are expected to begin contributing revenue in the first half of fiscal 2028 targeting 1.6T and 3.2T applications.
Capital expenditures are expected to grow to support photonics capacity expansion but remain generally below 5% of net sales. The company noted memory-constrained pressure affecting the high-end consumer market, though its TVS business maintained resilience. Management expressed expectations for year-over-year growth to remain significantly above 20% driven by LoRa Plus expansion and Amazon Sidewalk’s international deployment.
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