Why Is Semtech (SMTC) Up 4.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Semtech (SMTC). Shares have added about 4.4% 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 the latest 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 Q2 Earnings Beat Estimates, Revenues Increase Y/YSemtech reported better-than-expected results for second-quarter fiscal 2026. It posted non-GAAP earnings of 41 cents per share, which beat the Zacks Consensus Estimate by a penny. The bottom line exceeded management’s guidance of 40 cents and reflected a robust improvement, rising more than threefold from the year-ago quarter’s earnings of 11 cents.The company's impressive bottom-line performance demonstrated the benefits of increased revenues, operational efficiency and effective expense management. Semtech beat on earnings in three of the trailing four quarters and met once, the average surprise being 8.9%.SMTC’s second-quarter fiscal 2026 revenues of $ 257.6 million beat the Zacks Consensus Estimate by 0.6% and came above the midpoint of management’s guidance of $256 million. The top line jumped 20% year over year, with solid growth across all of its end markets, particularly in data centers.Semtech’s Q2 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 $73.4 million (28.5% of net sales), exhibiting year-over-year growth of 38.8%. This was driven by solid demand for data centres and continued investment in CopperEdge.Sales from the industrial market amounted to $143 million (55.5% of net sales), up 14.1% year over year.Sales from the high-end consumer market totaled $41.2 million (16% of net sales), up 11.1% year over year. Strong 5G momentum as IoT transitions from 4G accelerates, driven by growth in bookings and design wins, along with expanding router and gateway partnerships, supports top-line growth.SMTC’s Q2 Revenues in Terms of Product LinesSignal Integrity (29.8% of net sales) sales totaled $76.8 million, up 29.3% year over year. Analog Mixed Signal & Wireless (35.7% of net sales) sales amounted to $92 million, up 16% year over year.IoT System and Connectivity (34.5% of net sales) sales totaled $88.8 million, up 16% on a year-over-year basis.Semtech’s Margins Expand Year Over YearThe non-GAAP gross margin of 53.2% expanded 280 basis points (bps) on a year-over-year basis but contracted 30 bps sequentially.Adjusted operating expenses of $88.4 million were within Semtech’s guided range. On a year-over-year basis, adjusted operating expenses increased 13.5%.Non-GAAP operating income surged 59.3% year over year to $48.6 million. The non-GAAP operating margin improved to 18.8% from 14.2% reported in the year-ago quarter.Semtech’s Balance Sheet & Cash FlowAs of July 26, 2025, cash and cash equivalents totaled $168.6 million, up from $156.5 million as of April 27, 2025.The long-term debt amounted to $518.9 million, down from the previous quarter’s reported figure of $542.6 million.During the second quarter, Semtech generated operating cash flow and free cash flow of $44.4 million and $41.5 million, respectively. In the first half of fiscal 2026, it generated operating and free cash flows of $72.2 million and $67.7 million, respectively.Semtech Initiates Impressive Q3 GuidanceFor the third quarter, Semtech expects net sales to be $266 million (+/- $5 million). Semtech expects infrastructure end-market net sales to increase sequentially, driven by data center growth, high-end consumer sales to rise slightly due to typical seasonality and industrial sales to remain slightly up, as moderation in the LoRa business offsets IoT cellular growth.The non-GAAP gross margin is expected to be 53% (+/- 50 bps). The non-GAAP operating margin is anticipated to be 19.6% (+/- 80 bps). Non-GAAP earnings are expected to be 44 cents (+/- 3 cents) per share.How Have Estimates Been Moving Since Then?Since the earnings release, investors have witnessed a upward trend in estimates review.The consensus estimate has shifted -13.45% due to these changes.VGM ScoresAt this time, Semtech has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock has a score of D on the value side, putting it in the bottom 40% 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.OutlookEstimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Semtech has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Quantum Computing Stocks Set To SoarArtificial intelligence has already reshaped the investment landscape, and its convergence with quantum computing could lead to the most significant wealth-building opportunities of our time.Today, you have a chance to position your portfolio at the forefront of this technological revolution. In our urgent special report, Beyond AI: The Quantum Leap in Computing Power, you'll discover the little-known stocks we believe will win the quantum computing race and deliver massive gains to early investors.Access the Report Free Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Semtech Corporation (SMTC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks