EPS of $-0.08 decreased by 117.4% from previous year
Gross margin of 41.4%
Net income of -14.80M
""Innovation with purpose is central to everything we do at Allegro, and through innovation, we will strengthen our competitive advantages and drive double-digit sales growth." - Mike Duke, CEO" - Mike Duke
Allegro MicroSystems Inc. (ALGM) Q4 2025 Financial Results: Navigating Challenges and Growth Opportunities
Executive Summary
Allegro MicroSystems, a leader in the semiconductor industry, reported a volatile Q4 2025, closing the quarter with revenues of $192.8 million, representing a sequential growth of 8.41% but a decline of 19.85% compared to the prior year. Despite the uptick in automotive sales, which rose 8% sequentially, net income turned negative at -$14.8 million, illustrating continued pressure on profitability caused by cost management challenges and inventory adjustments. CEO Mike Duke acknowledged the strategic shift in priorities focused on accelerating new product development and optimizing cost efficiencies to return to profitability and drive future growth. The management is cautiously optimistic, expecting improvements in Q1 2026 based on initial indicators of rising customer demand and inventory normalization.
Key Performance Indicators
Revenue
192.82M
QoQ: 8.41% | YoY:-19.85%
Gross Profit
79.88M
41.43% margin
QoQ: -1.65% | YoY:-35.20%
Operating Income
-13.20M
QoQ: -32 090.24% | YoY:-134.10%
Net Income
-14.80M
QoQ: -115.74% | YoY:-108.01%
EPS
-0.08
QoQ: -114.48% | YoY:-117.39%
Revenue Trend
Margin Analysis
Key Insights
**Revenue:** $192.8 million (QoQ: +8.41%, YoY: -19.85%)
**Gross Profit:** $79.9 million
**Net Income:** -$14.8 million
**EPS:** -$0.08
**Gross Margin:** 41.4% (down from prior periods)
Financial Highlights
### Financial Highlights:
- Revenue: $192.8 million (QoQ: +8.41%, YoY: -19.85%)
- Gross Profit: $79.9 million
- Net Income: -$14.8 million
- EPS: -$0.08
- Gross Margin: 41.4% (down from prior periods)
- Operating Margin: -6.8%
- Cash Flow from Operations: $20.4 million
- Current Ratio: 4.3, indicating a strong liquidity position
- Cash at End of Period: $131.1 million
Management commentary indicates a focus on driving innovation, with a noted increase in design wins in key growth areas such as e-mobility and robotics, which the management expects to fuel future revenue growth.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
192.82M
-19.85%
8.41%
Gross Profit
79.88M
-35.20%
-1.65%
Operating Income
-13.20M
-134.10%
-32 090.24%
Net Income
-14.80M
-108.01%
-115.74%
EPS
-0.08
-117.39%
-114.48%
Key Financial Ratios
currentRatio
4.3
grossProfitMargin
41.4%
operatingProfitMargin
-6.84%
netProfitMargin
-7.68%
returnOnAssets
-1.04%
returnOnEquity
-1.59%
debtEquityRatio
0.37
operatingCashFlowPerShare
$0.11
freeCashFlowPerShare
$0.08
priceToBookRatio
4.92
priceEarningsRatio
-77.34
Net Income vs. Revenue
Expense Breakdown
Management Commentary
### Key Insights from Management:
#### Strategic Focus:
- CEO Mike Duke stated, "Relentless innovation that drives leadership in new and existing markets and applications will be a top priority."
- Focus on expanding the Total Addressable Market (TAM) to $12 billion, emphasizing growth in e-mobility and robotics.
#### Market Conditions:
- "Our customer inventories have continued to decline... Backlog has resumed growth, and we are actually starting to see select component or raw material shortages," noted CFO Derek D'Angelio, indicating positive market recovery.
#### Future Guidance:
- Expected Q1 2026 revenue range: $192 million to $202 million, with a potential year-over-year increase of 18%, showcasing optimism for a return to growth.
"Innovation with purpose is central to everything we do at Allegro, and through innovation, we will strengthen our competitive advantages and drive double-digit sales growth." - Mike Duke, CEO
â Mike Duke
"We expect to begin to see this normalize in Q1 and into Q2." - Derek D'Angelio, CFO regarding gross margin improvements.
â Derek D'Angelio
Forward Guidance
Management anticipates continued revenue growth in Q1 2026, estimating sales to reach between $192 million and $202 million, primarily driven by improving market conditions, particularly in the automotive sector. Gross margins are projected to improve to between 46% and 48%, reflecting expected operational efficiencies. Potential risks stem from ongoing tariff impacts and volatile raw material supply, which management continues to monitor closely.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ALGM Focus
41.43%
-6.84%
-1.59%
-77.34%
SYNA
44.30%
-5.54%
14.20%
4.22%
MCHP
51.60%
-10.30%
0.00%
-41.48%
QRVO
45.30%
3.25%
0.93%
53.90%
MPWR
55.40%
26.30%
46.10%
4.93%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Despite the current challenges, Allegro's investment outlook remains cautiously optimistic based on strategic initiatives in innovation and market recovery signs. The projected positive shift in revenue and margins exemplifies the potential to rebound into growth territory. Investors should closely monitor market demand trends, particularly in the automotive sector and the successful implementation of cost efficiency strategies. However, the inherent risks associated with market volatility and geopolitical factors should not be overlooked.
Key Investment Factors
Growth Potential
Allegro is positioned to capitalize on a $12 billion market opportunity in areas such as e-mobility and industrial automation, with management targeting double-digit sales growth going forward.
Profitability Risk
Persistent challenges in the automotive market due to inventory fluctuations and price pressures, alongside external factors like tariffs, pose significant risks to financial performance.
Financial Position
With a strong current ratio of 4.3 and a cash reserve of $131.1 million, Allegro demonstrates robust short-term financial health, but its high debt levels need ongoing management.
SWOT Analysis
Strengths
Strong liquidity position with a current ratio of 4.3
Market leadership in magnetic sensors and motor driver ICs
Successful innovation strategy with an increase in product releases
Weaknesses
Declining revenue and net income trends
High exposure to tariff impacts and pricing pressures
Dependence on cyclical automotive market
Opportunities
Expansion in e-mobility and industrial automation sectors
Potential for significant growth in data center-related products
Advancements in proprietary TMR technology for new applications
Threats
Fluctuating demand in automotive and industrial markets
Intensified competition from local semiconductor players, particularly in China
Raw material shortages that could impact production capabilities