Semtech (SMTC) Up 5.8% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Semtech (SMTC). Shares have added about 5.8% in that time frame, outperforming the S&P 500.But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Semtech due for a pullback? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Semtech Corporation before we dive into how investors and analysts have reacted as of late.Semtech's Q3 Earnings Beat Estimates, Revenues Increase Y/YSemtech Corporation reported better-than-expected third-quarter fiscal 2026 results. It posted non-GAAP earnings of 48 cents per share, which beat the Zacks Consensus Estimate by 4 cents. The bottom line exceeded management’s guidance of 44 cents (+/- 3 cents) and reflected a robust year-over-year improvement of approximately 85%.The company's impressive bottom-line performance demonstrated the benefits of increased revenues, operational efficiency and effective expense management.SMTC’s third-quarter fiscal 2026 revenues of $267 million topped the Zacks Consensus Estimate by 0.13% and came above the midpoint of management’s guidance of $266 million (+/- $5 million). The top line jumped 13% year over year, with solid growth across all of its end markets, particularly in data centers.Semtech’s Q3 Revenues in Terms of End MarketsThe company’s top-line outperformance can be attributed to the impressive year-over-year rise in its end markets.Sales from the infrastructure market totaled $77.9 million (29% of net sales), exhibiting year-over-year growth of 18%. This was driven by solid demand for data centers and continued investment in CopperEdge.Sales from the industrial market amounted to $147.2 million (55% of net sales), up 12% year over year.Sales from the high-end consumer market totaled $41.9 million (16% of net sales), up 5% year over year. Strong 5G momentum as IoT transitions from 4G accelerate, driven by growth in bookings and design wins, along with expanding router and gateway partnerships, supports top-line growth.SMTC’s Q3 Revenues in Terms of Product LinesSignal Integrity (31% of net sales) sales totaled $81.6 million, up 14.1% year over year. Analog Mixed Signal & Wireless (36% of net sales) sales amounted to $92 million, which rose 17.1% year over year.IoT System and Connectivity (37% of net sales) sales totaled $88.3 million, up 7% on a year-over-year basis.Semtech’s Margins Expand Year Over YearThe non-GAAP gross margin of 53% expanded 60 basis points (bps) on a year-over-year basis but contracted 20 bps sequentially.Adjusted operating expenses of $86.5 million increased 7.3% year over year but declined 2.1% sequentially. As a percentage of revenues, operating expenses dropped to 32.4% from 34.3% in the previous quarter and 34% in the year-ago quarter.Non-GAAP operating income surged 26.5% year over year to $54.9 million. The non-GAAP operating margin improved to 20.6% from 18.3% reported in the year-ago quarter. On a quarter-over-quarter basis, non-GAAP operating income increased 13%, while margin improved 180 basis points.Semtech’s Balance Sheet & Cash FlowAs of Oct. 26, 2025, cash and cash equivalents totaled $164.7 million, down from $168.6 million as of July 26, 2025.The long-term debt amounted to $490.5 million, down from the previous quarter’s reported figure of $518.9 million.During the third quarter, Semtech generated operating cash flow and free cash flow of $47.5 million and $44.6 million, respectively. In the first three quarters of fiscal 2026, it generated operating and free cash flows of $119.7 million and $112.3 million, respectively.Semtech Initiates Impressive Q3 GuidanceFor the fourth quarter, Semtech expects net sales to be $273 million (+/- $5 million). Semtech expects infrastructure end-market net sales to increase sequentially, driven by data center growth of approximately 10%, partially offset by a 3% decline in high-end consumer sales. Industrial end-market sales are anticipated to remain flat sequentially.The non-GAAP gross margin is expected to be 51.2% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 17.8% (+/- 80 bps). Non-GAAP earnings are expected to be 43 cents (+/- 3 cents) per share.How Have Estimates Been Moving Since Then?It turns out, fresh estimates flatlined during the past month.VGM ScoresAt this time, Semtech has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock has a score of F on the value side, putting it in the lowest quintile for value investors.Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.Outlook Semtech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Zacks Naming Top 10 Stocks for 2026Want to be tipped off early to our 10 top picks for the entirety of 2026? 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