Semtech (NASDAQ:SMTC) reported fourth-quarter results that slightly exceeded analyst expectations and issued a first-quarter outlook ahead of forecasts, supported by ongoing demand for high-speed connectivity products used in data centers.
Despite the stronger-than-expected results, the stock moved lower in premarket trading on Tuesday. Shares, which had gained 4.9% in Monday’s session, fell about 3.4% before the market opened.
For the quarter ended Jan. 25, the semiconductor company posted adjusted earnings of $0.44 per share, just above the analyst consensus of $0.43 per share. Revenue reached a record $274.4 million, topping the estimated $273.1 million.
Sales rose 9% compared with the same period a year earlier and increased 3% sequentially. On a GAAP basis, Semtech reported a net loss of $0.32 per share. Adjusted gross margin came in at 51.6%, while adjusted operating margin was 18.2%.
The company generated operating cash flow of $61.5 million during the quarter, with free cash flow totaling $59.1 million.
The results come amid strong demand for networking technologies used in data centers.
Semtech said increasing investment by hyperscale data center operators is driving demand for high-speed optical and copper interconnect products used in next-generation network infrastructure.
The company added that it is well positioned to benefit from the shift toward faster data center connectivity technologies, including 800G, 1.6T and 3.2T interconnect solutions.
Looking ahead to the fiscal first quarter of 2027, Semtech expects adjusted earnings in a range of $0.42 to $0.48 per share, compared with analyst expectations of $0.43 per share.
Revenue for the quarter is projected to be between $278 million and $288 million, exceeding the consensus estimate of $272.6 million.
“We believe today’s results were another notch in the right direction as SMTC continues to position itself towards favorable LT secular trends, while simultaneously continuing its balance sheet improvement and potential divestiture of the Sierra product lines,” Stifel analyst Tore Svanberg commented.
Separately, Morgan Stanley analyst Joseph Moore said Semtech delivered a “solid quarter with strong data center execution and guidance pointing to continued momentum.”
“Optical remains the core driver, with 800G strength and ACC ramping this year. The opportunity is still early, but expectations are rising and execution will be key to capturing the upside,” he added.
Semtech develops semiconductor and connectivity technologies used in data center networks, Internet of Things devices and cellular infrastructure.
The company said continued spending on research and development, along with expanded production capacity, will support long-term growth as demand for faster data center technologies continues to increase.