Executive Summary
Semtech’s QQ4 2025 results reflect a diversified, multi-segment technology portfolio leaning into a favorable data center CapEx cycle, a stronger LoRa IoT adoption, and ongoing margin expansion driven by disciplined cost management and portfolio optimization. Reported net sales of $251 million in Q4 2025 marked a sequential increase of 6% and a year-over-year rise of roughly 30%, underscored by a gross margin of about 52% and an adjusted gross margin near 53% as management highlighted a sustained trajectory of margin expansion throughout FY2025. The company delivered solid operating leverage with an adjusted operating margin of 19.9% and adjusted EBITDA margin of 23.0%, supported by disciplined R&D investment and ongoing balance-sheet improvement. Semtech ended FY2025 with net debt of approximately $411 million (down ~68% from FY2024), delivering meaningful annual cash savings of about $40 million from debt reduction and freeing up capital for core growth engines. Management signaled continued, but quarter-by-quarter, progress on portfolio optimization and higher-R&D spend to accelerate opportunities in data center optics (400/800G), FiberEdge/LPO/LRO, LoRa IoT, and select IoT sensing applications, while acknowledging CopperEdge remains a near-term headwind due to rack-design timing. Looking ahead, the Q1 FY2026 guide suggests a revenue target of $250 million +/- $5 million with an adjusted gross margin of approximately 53% and an adjusted EBITDA margin near 21.3%, implying a continued margin-driven growth trajectory despite near-term CopperEdge volatility. Investors should monitor: (1) CopperEdge ramp timing and content in next-generation rack designs, (2) continued data center demand and mix between FiberEdge, CopperEdge, and LPO/LRO, (3) LoRa IoT adoption across smart metering, industrial automation, and edge devices, (4) potential portfolio optimization outcomes and any strategic divestitures, and (5) the effect of leverage, interest savings, and tax normalization on free cash flow and earnings quality.
Key Performance Indicators
QoQ: 19.42% | YoY:714.97%
QoQ: 615.42% | YoY:106.09%
QoQ: 580.00% | YoY:104.81%
Key Insights
Revenue: $251.0M in Q4 2025; QoQ +6.0%, YoY +~30.1% (from $193.0M in prior-year Q4)
Gross Profit: $130.5M; Gross Margin: 51.99% (adjusted gross margin guidance ~53.0% for Q1)
Operating Income: $21.2M; Operating Margin: 8.46% (adjusted margin 19.9% in FY2025)
Net Income: $39.1M; Net Margin: 15.58%
EPS (GAAP): $0.48; EPS Diluted: $0.43
Adjusted Metrics (FY2025): Adjusted Gross Margin +200 bps YoY; Adjusted Operating Margin +570 bps YoY; Adjusted EBITDA Margin +610 bps YoY; Adjusted Diluted EP...
Financial Highlights
Revenue: $251.0M in Q4 2025; QoQ +6.0%, YoY +~30.1% (from $193.0M in prior-year Q4)
Gross Profit: $130.5M; Gross Margin: 51.99% (adjusted gross margin guidance ~53.0% for Q1)
Operating Income: $21.2M; Operating Margin: 8.46% (adjusted margin 19.9% in FY2025)
Net Income: $39.1M; Net Margin: 15.58%
EPS (GAAP): $0.48; EPS Diluted: $0.43
Adjusted Metrics (FY2025): Adjusted Gross Margin +200 bps YoY; Adjusted Operating Margin +570 bps YoY; Adjusted EBITDA Margin +610 bps YoY; Adjusted Diluted EPS +529% YoY
Cash Flow: Operating cash flow $33.5M; Free cash flow $30.5M; CapEx $3.0M; Free Cash Flow Margin notable given strong cash generation
Balance Sheet: Cash and cash equivalents $151.7M; Net debt $411M (end FY2025), down ~68% from FY2024; Debt paydown/timing contributed to ~2 months of interest savings; End-FY liquidity supports near-term R&D and M&A options
Guidance (Q1 FY2026): Net sales $250M ± $5M; Adjusted gross margin ~53% (±50 bps); Adjusted OpEx ~$87M (±$1M); Adjusted operating margin ~18.2% (mid-point); Adjusted EBITDA ~ $53.3M (±$3M); Adjusted EBITDA margin ~21.3% (mid-point); Adjusted net interest ~$6.3M; Tax rate ~15%; Adjusted EPS ~$0.37 (±$0.03)
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
251.00M |
30.09% |
5.99% |
| Gross Profit |
130.50M |
43.26% |
7.88% |
| Operating Income |
21.24M |
714.97% |
19.42% |
| Net Income |
39.10M |
106.09% |
615.42% |
| EPS |
0.48 |
104.81% |
580.00% |
Key Financial Ratios
operatingProfitMargin
8.46%
operatingCashFlowPerShare
$0.41
freeCashFlowPerShare
$0.38
Management Commentary
Key themes from CEO/CFO remarks and Q&A:
- Margin expansion and leverage reduction: Management highlighted FY2025 as a year of meaningful margin improvement, with FY2025 adjusted gross margin up 200 bps, adjusted operating margin up 570 bps, and adjusted EBITDA margin up 610 bps. Mark Lin emphasized debt reduction delivering $40M annual cash savings and stronger financial solidity as a precursor to growth investments. Quote: “FY 2025 adjusted gross margin improved 200 basis points. Adjusted operating margin improved 570 basis points. Adjusted EBITDA margin improved 610 basis points, and adjusted diluted earnings per share increased 529%.” (Hong Hou) and “net debt was $411 million, a reduction of $868 million or 68% from the $1.3 billion as of the end of FY 2024.” (Mark Lin).
- Data center recovery and mix shift: The company underscored record quarterly data center net sales of $50M in Q4, up 16% sequentially and 183% YoY, with FiberEdge at record levels and 400G/800G workflows driving demand; CopperEdge headwinds were acknowledged due to rack-architecture changes, with ramp expected later in FY2026. “Data center was a record $50 million, up 16% sequentially and up 183% YoY.” (Mark Lin/Hong Hou) and “FiberEdge portfolio… 400G and 800G retimed optics… strong market acceptance.” (Hong Hou)
- LoRa IoT momentum: LoRa net sales were $37.1M in Q4, up 28% sequentially and 205% YoY, with China 1260h list announcements providing tailwinds; the team cited ongoing customer engagement with >20 potential customers and a multi-use-case growth trajectory beyond traditional meters. “LoRa-enabled solutions recorded Q4 net sales of $37.1 million, up 28% sequentially and up 205% YoY.” (Mark Lin/Hong Hou) and “We are optimistic about year-over-year growth from FY2026 to FY2025-2026.” (Hong Hou)
- IoT and 5G RedCap milestones: IoT systems achieved 5G RedCaps certification with AT&T and Qualcomm; AirVantage Smart Sensing recognized with IoT Breakthrough award, highlighting defensible positions in turnkey LoRaWAN sensor networks and connected services. This supports a longer runway for IoT revenue with recurring streams.
- Portfolio optimization and potential divestitures: Management reiterated a balance-sheet-first approach to rationalizing non-core assets, citing market tailwinds from regulatory changes and strategic buyers seeking synergies; the process is described as value-creating rather than distress-driven. “This is not a distressed asset. We welcome buyers to see the synergy…” (Hong Hou/Mark Lin).
- Outlook and discipline in R&D: There was an explicit commitment to increased R&D investment in FY2026, prioritized to opportunities with higher near-term revenue potential, balanced by ongoing efficiency programs and AI-enabled productivity improvements. “We plan to use AI, you know, right now... increase our R&D spending in this new fiscal year but in a very disciplined fashion.” (CFO/CEO).
"FY 2025 adjusted gross margin improved 200 basis points. Adjusted operating margin improved 570 basis points. Adjusted EBITDA margin improved 610 basis points, and adjusted diluted earnings per share increased 529%."
— Hong Hou
"Net debt was $411 million, a reduction of $868 million or 68% from the $1.3 billion as of the end of FY 2024."
— Mark Lin
Forward Guidance
Outlook assessment based on management guidance and industry dynamics:
- Near-term revenue trajectory remains positive, with Q1 FY2026 guided at $250M ± $5M, reflecting continued data center expansion and resilient top-line growth across end markets. The data center ramp is expected to be supported by FiberEdge and LPO/LRO opportunities, while CopperEdge remains a near-term headwind due to rack design transitions.
- Margin trajectory remains constructive: Adjusted gross margin guided around 53% (±50 bps) and adjusted operating margin around 18.2% (mid-point), signaling ongoing operating leverage and disciplined spend.
- Cash flow and leverage: The company emphasizes cash flow generation and leverage reduction as enablers for strategic investments, with expected ongoing interest savings from debt paydown and improved balance-sheet flexibility. Monitoring risks include copper-edge adoption timing, CSP CapEx cycles, and potential M&A/divestiture actions that could re-shape the mix.
- Key factors for investors to monitor: (1) CopperEdge rack-architecture implementation timing and content across data-center customers; (2) FiberEdge/LPO/LRO growth and ASP/mix; (3) LoRa IoT adoption breadth and China/U.S. export dynamics; (4) potential portfolio refinement outcomes; (5) progression of AI-driven efficiency initiatives and their impact on Opex. Overall, the guidance implies a continued, albeit uneven, glide path toward higher profitability as the mix shifts toward higher-margin optical/data-center solutions and disciplined R&D investments.