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Semtech (SMTC) is trading lower after reporting its Q1 (Apr) results last night. The company beat EPS expectations, while revenue increased 15.9% yr/yr to a record $291 mln, also above expectations. SMTC also issued strong Q2 guidance, supported by accelerating data center momentum, expecting adjusted EPS of $0.59-0.63 and revenue of $323-333 mln, both nicely above expectations. At the midpoint, the revenue outlook implies roughly 27% yr/yr growth, marking a sharp acceleration.

• Results were fueled by the Infrastructure end market, which increased 14% sequentially and 36% yr/yr to $98.8 mln, driven by record data center revenue of $71.6 mln, up 39% yr/yr. SMTC is benefitting from strong demand across its broad portfolio, increased customer engagement, better portfolio alignment, and supply assurance.
• SMTC said demand for its 800 gig FiberEdge portfolio and TIA solutions remains exceptionally strong across a wide range of transceiver programs. SMTC expects 800 gig to continue driving growth through the year, further augmented by 1.6T shipments launching in Q2.
• SMTC's FiberEdge linear TIA and driver solutions are deployed by several leading hyperscalers in the U.S. and China, contributing to sequential LPO growth that SMTC expects to accelerate over time. SMTC also generated significant 1.6T design wins with major optical module makers, supporting strong bookings/backlog and the expected back-half ramp.
• Industrial revenue increased 8% yr/yr to $153.9 mln, fueled by another strong quarter for LoRa. LoRa-enabled revenue increased 12% sequentially and 14% yr/yr to $44.5 mln. SMTC expects momentum to continue, targeting more than 15% sequential LoRa growth.
• Adjusted gross margin was 53.0%, down from 53.5% last year but 20 bps above guidance, while semiconductor products gross margin was 60.7%, 30 bps above guidance. SMTC is guiding for sequential improvement in Q2, with adjusted gross margin of 53.5-54.5% and semiconductor products gross margin of 61.6-62.6%.
• The expected acceleration is being fueled by the data center business, which is projected to grow 35% sequentially and 85% yr/yr in Q2. The outlook is supported by accelerating shipments of 800 gig and 1.6T components, along with early CopperEdge traction, including 1.6T IC shipments to cable partners for deployment at a U.S. hyperscaler.

Briefing.com Analyst Insight

This was a strong start to the year for SMTC. While the Q1 report was strong, beating expectations with record revenue and accelerating data center growth, the guidance was particularly impressive. The expected step-up in Q2, along with management's commentary around the data center ramp, reinforces that SMTC is emerging as a key optical and interconnect beneficiary of AI infrastructure spending. While 800 gig FiberEdge remains the anchor, growth is being further strengthened by 1.6T shipments launching in Q2, CopperEdge traction with a U.S. hyperscaler, and longer-term opportunities around NPO/XPO architectures and HieFo's InP photonics portfolio. Margins are also expected to improve sequentially, with new 1.6T ramps expected to be accretive to semiconductor product margins. Overall, the strong outlook suggests SMTC is moving onto a stronger growth trajectory, supported by accelerating data center demand, improving mix, and broader design-win momentum. The negative reaction appears to be a sell-the-news response after the stock more than doubled since the start of April, rather than disappointment with the report itself.