Semtech Shares Dip Despite Record Q2 Revenue and Earnings Beat
Strong 92% growth in data center sales and significant debt reduction were not enough to lift the stock in after-hours trading.
Semtech Corporation (NASDAQ: SMTC) reported record financial results for the second quarter of fiscal year 2026, surpassing analyst expectations for both revenue and earnings. However, the strong performance was met with a muted response from investors, as the company’s stock slipped in after-hours trading.
The semiconductor provider posted net sales of $257.6 million, a 20% increase year-over-year, narrowly beating the consensus estimate of $256.1 million. Adjusted earnings per share came in at $0.41, just ahead of the anticipated $0.40. Despite the positive results, Semtech's shares fell 0.74% in post-market activity.
A key driver of the quarter's success was a surge in its Infrastructure segment, where data center sales grew an impressive 92% from the prior year to a record $52.2 million. The company also demonstrated significant progress in shoring up its finances, reducing its debt by $879 million since June 2024.
"Our second quarter results reflect strong year-over-year financial performance, driven by deep customer engagement, operational discipline, and a culture of excellence," said Hong Hou, president and CEO of Semtech. CFO Mark Lin added that the sales growth and improving profitability led to increased cash flows and an accelerated pace of debt reduction.
The company’s other segments also posted year-over-year growth, with the Industrial market up 14% and the High-End Consumer division rising 11%.
Despite the strong quarterly performance, the company’s outlook for the third quarter appeared to temper investor enthusiasm. Semtech projected Q3 revenue between $261 million and $271 million, with adjusted earnings per share forecast between $0.41 and $0.47. These figures are largely in line with analyst expectations, suggesting investors may have been anticipating a more substantial upward revision following the Q2 beat.
Management remains focused on its strategic priorities, including strengthening the balance sheet, rationalizing its product portfolio, and investing in core assets like its FiberEdge products for data centers and its LoRa-enabled solutions for the industrial market.