EPS of $-0.04 decreased by 1.4% from previous year
Gross margin of 45.7%
Net income of -6.86M
""We have a strong foundation and a clear strategic focus. We continue to be a market leader in magnetic sensing and possess deep expertise in targeted power ICs."" - Vineet Nargolwala
Allegro MicroSystems Inc (ALGM) Q3 2025 Financial Results: Navigating Through Transition and Growth Opportunities
Executive Summary
In Q3 2025, Allegro MicroSystems Inc (ALGM) reported revenue of $177.87 million, reflecting a decline of 30% year-over-year and a 5% sequential decrease. The company grappled with inventory adjustments amid a volatile automotive market, emphasized by management's commentary highlighting a strategic pivot towards e-mobility and automotive innovations. Despite facing a net loss of $6.86 million for the quarter, Allegro reported a non-GAAP EPS of $0.07, indicating a focus on operational resilience and product innovation. With a robust Gross Margin of 45.65%, the company is positioned to benefit from strategic market shifts in xEVs and ADAS applications. Management's outlook remains cautiously optimistic, projecting a stabilization in automotive production and potential revenue growth in the subsequent quarter based on healthy order trends and localization advancements.
Key Performance Indicators
Revenue
177.87M
QoQ: -5.08% | YoY:-26.07%
Gross Profit
81.22M
45.66% margin
QoQ: -5.19% | YoY:-34.12%
Operating Income
-41.00K
QoQ: -101.01% | YoY:-100.11%
Net Income
-6.86M
QoQ: 79.63% | YoY:3.58%
EPS
-0.04
QoQ: 79.28% | YoY:-1.36%
Revenue Trend
Margin Analysis
Key Insights
**Revenue**: $177.87 million, a 30% decrease YoY and 5% down QoQ.
**Cost of Revenue**: $96.66 million, leading to a Gross Profit of $81.22 million and a Gross Margin of 45.66%.
**Operating Income**: Loss of $41,000, reflecting operational challenges.
**Net Income**: $6.86 million loss, with an EPS of -$0.0373.
**Cash Flow**: Negative operating cash flow of $8.18 million, but cash at the end of the period stands strong at $149 million.
### Key Ratios
Financial Highlights
### Financial Metrics Overview
- Revenue: $177.87 million, a 30% decrease YoY and 5% down QoQ.
- Cost of Revenue: $96.66 million, leading to a Gross Profit of $81.22 million and a Gross Margin of 45.66%.
- Operating Income: Loss of $41,000, reflecting operational challenges.
- Net Income: $6.86 million loss, with an EPS of -$0.0373.
- Cash Flow: Negative operating cash flow of $8.18 million, but cash at the end of the period stands strong at $149 million.
### Key Ratios
- Current Ratio: 4.91
- Debt/Equity Ratio: 0.426
- Inventory Days: 182 days
- Days of Sales Outstanding: 43 days
- Net Profit Margin: -3.86%
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
177.87M
-26.07%
-5.08%
Gross Profit
81.22M
-34.12%
-5.19%
Operating Income
-41.00K
-100.11%
-101.01%
Net Income
-6.86M
3.58%
79.63%
EPS
-0.04
-1.36%
79.28%
Key Financial Ratios
currentRatio
4.91
grossProfitMargin
45.7%
operatingProfitMargin
-0.02%
netProfitMargin
-3.86%
returnOnAssets
-0.48%
returnOnEquity
-0.73%
debtEquityRatio
0.43
operatingCashFlowPerShare
$-0.04
freeCashFlowPerShare
$-0.12
priceToBookRatio
4.39
priceEarningsRatio
-149.48
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Management Insights
- Market Conditions: Vineet Nargolwala stated, "Bookings at the highest they've been in the past eight quarters and up 50% year-over-year," indicating positive momentum in customer orders.
- Product Innovation: Allegro has "doubled the number of new product introductions over the past two years," which management perceives as crucial in positioning the company favorably in the e-mobility sector.
- Future Outlook: Derek D’Antilio mentions, "We expect fourth quarter sales to be in the range of $180 million to $190 million," suggesting a projected recovery in sales as inventory levels normalize.
"We have a strong foundation and a clear strategic focus. We continue to be a market leader in magnetic sensing and possess deep expertise in targeted power ICs."
— Vineet Nargolwala
"We believe Allegro is poised for significant value creation. We've been serving the auto and industrial markets for over three decades and we see multiple catalysts for long-term growth in these markets."
— Vineet Nargolwala
Forward Guidance
Management forecasts a cautious yet optimistic outlook for Q4 2025, projecting revenue of $180 to $190 million and a gross margin between 46% and 48%. This guidance considers factors such as pricing agreements and anticipated production adjustments. Continued double-digit growth expectations in xEVs and autonomous driving systems are pivotal areas to monitor. Allegro plans to capitalize on reduced inventory and improved demand as market conditions stabilize.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ALGM Focus
45.66%
-0.02%
-0.73%
-149.48%
SYNA
43.40%
-9.86%
-1.57%
-28.20%
MCHP
54.70%
3.01%
-0.89%
-143.75%
QRVO
42.70%
5.79%
1.22%
40.81%
MPWR
55.40%
26.50%
6.14%
78.02%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the combination of structural growth in xEVs and the successful execution of cost-cutting measures, Allegro MicroSystems Inc stands to benefit from a recovery in demand over the upcoming quarters. The company’s commitment to innovation, coupled with a strong balance sheet, positions it favorably against competitors. However, investors should continue closely monitoring market conditions and inventory management as the automotive sector adapts to shifting consumer preferences.
Key Investment Factors
Growth Potential
Allegro's focus on innovative product development, particularly in e-mobility and automotive applications, signals significant growth opportunities in high-demand markets.
Profitability Risk
Ongoing risks include geopolitical tensions affecting supply chains, particularly in Asia, sustained negative net income, and an overall volatile demand environment in the automotive sector.
Financial Position
Despite Q3 losses, Allegro's cash position remains strong at $149 million, providing stability for future investments and operations.
SWOT Analysis
Strengths
Strong cash position with $149 million availability.
Well-established brand and market leader in magnetic sensing solutions.
Diverse product innovation pipeline, particularly in automotive applications.
Weaknesses
Significant YoY decline in revenue and net losses persisting.
High inventory levels affecting operational efficiency.
Opportunities
Growth potential in the electric vehicle (EV) and advanced driver-assistance systems (ADAS) markets.
Strategic localization efforts in manufacturing providing competitive advantages.
Threats
Market volatility affecting semiconductor demand and pricing pressures.
Geopolitical tensions impacting supply chains and operational costs.