Q4 2026 Semtech Corp Earnings Call

March 16, 2026

Speaker #2: Following our prepared remarks, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mitch Haws, Senior Vice President of Investor Relations for Semtech.

Speaker #2: Please go ahead. Thank you, and welcome to SEMTECH's 4th Quarter and Fiscal Year 2026 Financial Results Conference Call. Participants on today's conference call are Hong Hou, our President and Chief Executive Officer, and Mark Lin, our Executive Vice President and Chief Financial Officer.

Mitchell Haws: Thank you, and welcome to Semtech's Q4 and fiscal year 2026 financial results conference call. Participants on today's conference call are Hong Hou, our President and Chief Executive Officer, and Mark Lin, our Executive Vice President and Chief Financial Officer. Before we begin, I would like to highlight upcoming investor events, including the Optical Fiber Communications Conference starting tomorrow, and the Roth Technology Conference on 23 March. Today, after market close, we released our unaudited results for the Q4 and fiscal year 2026, which are posted along with the earnings call presentation to our investor relations website at investors.semtech.com. Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements.

Speaker #2: Before we begin, I would like to highlight upcoming investor events, including the Optical Fiber Communications Conference starting tomorrow and the Roth Technology Conference on March 23rd.

Speaker #2: Today, after market close, we released our Renata results for the fourth quarter and fiscal year 2026, which are posted along with the earnings call presentation to our investor relations website at investors.semtech.com.

Speaker #2: Today's call will include various remarks about future expectations, plans, and prospects, which comprise forward-looking statements. Please refer to today's press release and see Slide 2 of the earnings presentation, as well as the risk factors section of our most recent annual report on Form 10-K.

Mitchell Haws: Please refer to today's press release and see slide 2 of the earnings presentation, as well as the Risk Factors section of our most recent annual report on Form 10-K for a number of risk factors that could cause our actual results and events to differ materially from those anticipated or projected on today's call. You should consider these risk factors in conjunction with our forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call. We'll also be referring to results for our Q4 of fiscal year 2026, unless otherwise noted. Please see today's press release and slide 3 of the earnings presentation for information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures. With that, I will turn the call over to Hong Ho.

Speaker #2: There are a number of risk factors that could cause or actually result in events to differ materially from those anticipated or projected on today's call.

Speaker #2: You should consider these risk factors in conjunction with our forward-looking statements. We will refer primarily to non-GAAP financial measures during today's call. We'll also be referring to results for our fourth quarter of fiscal year 2026, unless otherwise noted.

Speaker #2: Please see today's press release and Slide 3 of the earnings presentation for information regarding notes on our non-GAAP financial presentation. The press release and earnings presentation also include reconciliations of our GAAP and non-GAAP financial measures.

Speaker #2: With that, I will turn the call over to Hong.

Speaker #3: Thank you, Mitch. Good afternoon to all of you joining today. Semtech closed the fiscal year 2026 with significant momentum, achieving a record $1.05 billion in net sales—a milestone that reflects the progress we have made and the trajectory we believe lies ahead.

Hong Hou: Thank you, Mitch. Good afternoon to all of you joining today. Semtech closed the fiscal year 2026 with a significant momentum, achieving a record $1.05 billion in net sales. A milestone that reflects the progress we have made and the trajectory we believe lies ahead. We drove strong sequential and year-over-year revenue and earnings growth, advanced our data center roadmap to capture compelling design win opportunities, and continue to optimize our product portfolio, all while executing on the R&D and expense initiatives we believe position Semtech for an exciting next chapter. Looking at the Q4, net sales were $274.4 million, up 3% sequentially and up 9% year-over-year. For the year, revenues were at $1.05 billion, representing annual growth of 15%, driven by continued strength in our data center and the LoRa portfolios.

Speaker #3: We drove strong sequential and year-over-year revenue and earnings growth, advanced our data center roadmap to capture compelling design win opportunities, and continued to optimize our product portfolio.

Speaker #3: All well executed on the R&D and expensive initiatives we believe position Semtech for an exciting next chapter. Looking at the Q4, net sales were $274.4 million, up 3% sequentially and up 9% year-over-year.

Speaker #3: For the year, revenues were $1.05 billion, representing annual growth of 15%, driven by continued strength in our data center and our lower portfolios.

Hong Hou: Adjusted diluted earnings per share were $0.44, up 10% year-over-year. For fiscal year 2026, adjusted diluted earnings per share were $1.71, growth of 94% over the prior year. In addition to delivering strong revenue and earnings growth, portfolio optimization remains a key focus of execution. As announced earlier this month, we acquired HieFo Corporation, which represents an important strategic building block for Semtech. HieFo is a California-based manufacturer of high-efficiency Indium Phosphide-based optoelectronic devices, including gain chips and the CW laser chips that are critical components in the optical transceivers powering today's data centers. Put simply, HieFo makes the light-emitting building blocks that sit at the heart of high-speed optical interconnects. The strategic rationale is straightforward. As data center architectures evolve to 1.6T and the 3.2T, the complexity of optical interconnects increases dramatically.

Speaker #3: Adjusted diluted earnings per share were $0.44, up 10% year-over-year. For fiscal year 2026, adjusted diluted earnings per share were $1.71, growth of 94% over the prior year.

Speaker #3: In addition to delivering strong revenue and earnings growth, portfolio optimization remains a key focus of execution. As announced earlier this month, we acquired HIFO Corporation, which represents an important strategic building block for Semtech.

Speaker #3: HIFO is a California-based manufacturer of high-efficiency indium phosphate-based optoelectronic devices, including gain chips and a CW laser chip, that are critical components in optical transceivers. These are in today's data centers. Put simply, HIFO makes the light-emitting building blocks that sit at the heart of high-speed optical interconnects.

Speaker #3: The strategic rationale is straightforward. As data center architectures evolve to 1.6T and 3.2T, the complexity of optical interconnects increases dramatically. By bringing HIFO's proven indium phosphide laser technology together with Semtech's industry-leading TIAs and laser drivers, we can co-develop and co-optimize performance across the laser modulator and driver interface, and increase Semtech's content opportunity from high single-digit dollars in an $800G module to about $80 in a 3.2T module.

Hong Hou: By bringing HieFo's proven indium phosphide laser technology, together with Semtech's industry-leading TIAs and laser drivers, we can co-develop and co-optimize performance across the laser modulator and driver interface, and increase Semtech's content opportunity from high single-digit dollars in an 800 gig module to about $80 in a 3.2T module. We believe this combination will result in a more integrated, more efficient chipset, one that reduces system power consumption and gives the hyperscaler a differentiated solution for high bandwidth optical transceiver modules. We have developed a comprehensive investment plan for the Alhambra, California, facility to expand domestic capacity and accelerate product development. Integration of HieFo into Semtech's operation is underway, with the transaction expected to be accretive to non-GAAP diluted earnings per share within the first year.

Speaker #3: We believe this combination will result in a more integrated, more efficient chipset—one that reduces system power consumption and gives the hyperscaler a differentiated solution for high-bandwidth optical transceiver modules.

Speaker #3: We have developed a comprehensive investment plan for the Alhambra, California facility to expand domestic capacity and accelerate product development. Integration of HIFO into Semtech's operation is underway, with the transaction expected to be accretive to non-GAAP diluted earnings per share within the first year.

Speaker #3: We are genuinely excited about the people and technology joining Semtech, and we see significant untapped potential for high-efficiency lasers in different interconnect applications. Finally, we continue to make progress on the divestiture of the cellular module business, and we are increasingly encouraged by the level of interest and engagement.

Hong Hou: We are genuinely excited about the people and technology joining Semtech, and we see significant untapped potential for high-efficiency lasers in different interconnect applications. Finally, we continue to make progress on the divestiture of the cellular module business, and we are increasingly encouraged by the level of interest and engagement. We remain confident this business represents a compelling opportunity for the right buyer, and we remain focused on bringing this process to a successful conclusion. Now let me move to a discussion of our end markets. For Q4, infrastructure net sales were $86.3 million, up 11% sequentially and up 25% year-over-year, strongly supported by our data center business. For fiscal 2026, infrastructure net sales were $310 million, growth of 27% over the prior year.

Speaker #3: We remain confident this business represents a compelling opportunity for the right acquirer, and we remain focused on bringing this process to a successful conclusion.

Speaker #3: Now let me move to a discussion of our end markets. For Q4, Infrastructure net sales were $86.3 million, up 11% sequentially and up 25% year-over-year.

Speaker #3: Strongly supported by our data center business. For fiscal 2026, infrastructure net sales were $310 million, growth of 27% over the prior year. For Q4, net sales of data center were a record $63 million, up 12% sequentially and up 26% year-over-year.

Hong Hou: For Q4, net sales of data center were a record $63 million, up 12% sequentially and up 26% year-over-year, benefiting from strong demand for our broad portfolio, including our market-leading FiberEdge ICs, whose net sales set another record. In Q4, we also started shipping into LPO transceivers, with revenues in line with the outlook we provided on the last quarter's earnings call. For 2026, our data center revenues were a record $223 million, representing an annual growth of 58%. Our optical and copper product lines are firmly established with hyperscalers as a differentiated and high-performance offering. Power efficiency has become one of the defining constraints of the modern AI infrastructure.

Speaker #3: Benefiting from strong demand for our broad portfolio, including our market-leading fiber edge ICs, whose net sales set another record. In Q4, we also started shipping into LPO transceivers, with revenues in line with the outlook we provided on the last quarter's earnings call.

Speaker #3: For year 2026, our data center revenues were a record $223 million, representing annual growth of 58%. Our optical and copper product lines are firmly established with hyperscalers as a differentiated and high-performance offering.

Speaker #3: Power efficiency has become one of the defining constraints of the modern AI infrastructure. As hyperscalers measure data center capacity in megawatts, the ability to move data faster while consuming less power at the networking layer is no longer just a differentiator; it's an enabler.

Hong Hou: As hyperscalers measure data center capacity in megawatts, the ability to move data faster while consuming less power at the networking layer is no longer just a differentiator, it's an enabler. Our analog solutions address this directly, enabling operators to scale next-generation architectures at 800 gig, 1.6 T, and eventually 3.2 T. Demand for 800 gig TIA solutions remains strong and broad-based, with an increasing momentum throughout 2026. At 1.6 T, we are engaged across a wide range of transceiver programs and expect volume ramps to build as hyperscalers roll out their new XPU and switch platforms using reduced power 1.6 T transceivers throughout the year. On LPO, design wins with several leading US hyperscalers validated our TIA and driver solutions in 800 gig transceivers.

Speaker #3: Our analog solutions address this directly, enabling operators to scale next-generation architectures at 800 gig, 1.6T, and eventually 3.2T. Demand for 800 gig TIA solutions remains strong in the broad-based market.

Speaker #3: With increasing momentum throughout 2026, at 1.6T, we are engaged across a wide range of transceiver programs and expect volume runs to build as hyperscalers roll out their new XPU and switch platforms using reduced power 1.6T transceivers throughout the year.

Speaker #3: On LPO, design wins with several leading US hyperscalers validated our TIA and driver solutions in 800-gig transceivers. We are very excited to be a member of the new XPO MSA, to define specifications and enable high-bandwidth, high-density, and low-power switches by combining with a low-loss copper interconnect—such as flyover wires or our linear redriven PCB traces. Some hyperscalers are becoming increasingly bullish on 1.6T LPO instead of using LROs for the first layer of the scale-up fabrics.

Hong Hou: We are very excited to be a member of the new XPO MSA to define specifications and enable high bandwidth, high density, and low power switches. By combining with a low loss copper interconnect, such as FlyOver wires or linear redriven PCB traces, some hyperscalers are becoming increasingly bullish on 1.6T LPO instead of using LROs for the first layer of the scale-up fabrics. We continue to expand our LPO IC portfolio with 1.6T LPO drivers and TIAs expected to come to market this year. In supporting further proliferation of low power linear optics, Semtech, along with other industry leaders, are developing NPO or Near-Packaged Optics MSA for low power, high density, and high bandwidth solutions. Successful deployment of 800G LPO transceivers gives hyperscaler confidence in NPO as the next evolution of the optical solutions.

Speaker #3: We continue to expand our LPO IC portfolio, with 1.6T LPO drivers and TIAs expected to come to market this year. In supporting further proliferation of low-power linear optics, Semtech, along with other industry leaders, is developing MPO, our near-package optics MSA, for low-power, high-density, and high-bandwidth solutions.

Speaker #3: Successful deployment of 800-gig LPO transceivers gives hyperscalers confidence in MPO as the next evolution of optical solutions. We are excited by the increased content available to Semtech in MPO deployments.

Hong Hou: We are excited by the increased content available to Semtech in NPO deployments. Active copper cable, or ACC, continues to gain significant traction. Customers evaluating ACCs against incumbent solutions are seeing compelling performance advantage in the form of a robust link margin and transformative power savings versus DSP-based solutions. Alongside our cable solutions, customers are increasingly evaluating our CopperEdge linear equalizers for onboard integration to enhance signal integrity across high-speed links. An opportunity we are confident will convert into design wins over the coming quarters. One of these use cases is active backplane using CopperEdge ICs, which our cable partners will demonstrate at OFC. Finally, we co-authored the ACC MSA, helping establish ACC technology as a leading solution for low power and high performance copper links. Members of the MSA span IC, XPU, and cable suppliers, all in partnership with major hyperscalers.

Speaker #3: Active copper cable, or ACC, continues to gain significant traction. Customers evaluating ACCs against incumbent solutions are seeing compelling performance advantages in the form of robust link margin and transformative power savings versus DSP-based solutions.

Speaker #3: Alongside our cable solutions, customers are increasingly evaluating our copper edge linear equalizers for onboard integration, to enhance signal integrity across high-speed links—an opportunity we are confident will convert into design wins over the coming quarters.

Speaker #3: One of these use cases is active backbone using copper edge ICs, which our cable partners will demonstrate at OFC. Finally, we co-authored the ACC MSA, helping establish ACC technology as a leading solution for low-power and high-performance copper links.

Speaker #3: Members of the MSA span IC, XPU, and cable suppliers, all in partnership with major hyperscalers. We believe the ACC MSA accelerates the adoption curve for the entire industry.

Hong Hou: We believe the ACC MSA accelerates the adoption curve for the entire industry. By establishing common specifications, we reduce fragmentation, lower deployment risk for hyperscalers, and make it easier for the ecosystem to develop around ACC as a standard, not just a proprietary solution. That is good for customers. It's good for Semtech. We look forward to seeing many of you at OFC starting tomorrow. This year, we are showing live demos across several of our key product areas. They tell a clear story about where Semtech is positioned in the data center interconnect market. Starting with copper, we are demonstrating 1.6T ACCs running live traffic to Nvidia's 224G SerDes. We are also showing next generation 448G per channel CopperEdge chips.

Speaker #3: By establishing common specifications, we reduce fragmentation, lower deployment risk for hyperscalers, and make it easier for the ecosystem to develop around ACC as a standard.

Speaker #3: Not just a preparatory solution—that is good for customers; it's good for Semtech. We look forward to seeing many of you at OFC starting tomorrow.

Speaker #3: This year, we are showing live demos across several of our key product areas. They tell a clear story about where Semtech is positioned in the data center interconnect market.

Speaker #3: Starting with copper, we are demonstrating 1.6T ACCs running live traffic to NVIDIA's 224-gig series, while also showing next-generation 448-gig-per-channel copper edge chips.

Speaker #3: As AI clusters scale, the demand for low-power and low-latency copper interconnects continues to grow. And we think we are very well positioned to lead the market.

Hong Hou: As AI clusters scale, the demand for low power and low latency copper interconnect continues to grow, and we think we are very well-positioned to lead the market. On the optical side, we'll be demonstrating Nvidia's 1.6T DR8 transceivers powered by Semtech's TIAs and laser drivers running live in Nvidia Switch platform. We'll also be demonstrating 100T Ethernet switch running live traffic over both single-mode and the multi-mode fibers supporting FRO, LRO, and LPO configurations across the Broadcom Tomahawk 6 platform, all built on Semtech silicon. We are thrilled to demonstrate the breadth of our optical portfolio across a multi-vendor ecosystem. We'll also be demonstrating our next-generation 448 gig per channel modulator drivers and TIAs, addressing increasing bandwidth demand to support future generation AI workloads.

Speaker #3: On the optical side, we'll be demonstrating NVIDIA's 1.6T DRA transceivers powered by Semtech TIAs and laser drivers, running live on the NVIDIA switch platform. We'll also be demonstrating a 100T Ethernet switch running live traffic over both single-mode and multi-mode fibers, supporting FRO, LRO, and LPO configurations across the Broadcom Tomahawk 6 platform.

Speaker #3: Our build on Semtech silicon. We are thrilled to demonstrate the breadth of our optical portfolio across a multi-vendor ecosystem. We'll also be demonstrating our next-generation 448 gig per channel modulator drivers and TIAs, addressing increasing bandwidth demand to support future-generation AI workloads.

Speaker #3: We'll also showcase our indium phosphide CW laser and gain chip technology for tunable laser applications, featuring outstanding power efficiency, over-temperature performance, and a far-field beam profile.

Hong Hou: We're also showcasing our Indium Phosphide CW laser and gain chip technology for tunable laser applications. With outstanding power efficiency, over-temperature performance, and the far-field beam profile, products from our HieFo acquisition. Across copper and optical, and both near-term and next-generation, OFC gives us a tremendous opportunity to show Semtech's position across the full hyperscale interconnect stack. We believe we are positioned for multi-year growth opportunities, supported by our expanded portfolio. We expect to start shipping CopperEdge for the 1.6 ACC hyperscaler deployment this quarter, with demand accelerating throughout the year. We also expect FiberEdge design wins for 1.6 transceivers with a significant ramp in the second half of the year.

Speaker #3: Products from our HIFO acquisition, across copper and optical, and both near-term and next-generation, OFC gives us a tremendous opportunity to show Semtech's position across the full hyperscale interconnect stack.

Speaker #3: We believe we are positioned for multi-year growth opportunities, supported by our expanded portfolio. We expect to start shipping Copper Edge for the 1.6T ACC hyperscaler deployment this quarter.

Speaker #3: With demand accelerating throughout the year, we also expect fiber-edge design wins for 1.6T transceivers, with a significant ramp in the second half of the year.

Hong Hou: Additional revenue growth drivers in the near future are expected from additional design wins for ACC and other hyperscalers, linear equalizers on board across multiple customers, gain chips and CW lasers in transceivers, and our market-leading 400 gig FiberEdge and CopperEdge products for 3.2T interconnect solutions. Given the breadth of our data center portfolio and design interaction across an expanding set of customers, we expect data center year-over-year revenue growth this fiscal year to exceed 50%. Now, moving to our high-end consumer end market. Net sales for Q4 were $36.6 million, down 13% sequentially and up 3% year-over-year. Net sales for fiscal year 2026 were $155.1 million, up 5% year-over-year, driven by both our TVS and PerSe product portfolios.

Speaker #3: Additional revenue growth drivers in the near future are expected from additional design wins for ACC and other hyperscalers, linear equalizers, onboard across multiple customers, gain chips, and CW lasers in transceivers, and our market-leading 400G fiber edge and copper edge products for 3.2T interconnect solutions.

Speaker #3: Given the breadth of our data center portfolio and design interaction across the expanding set of customers, we expect data center year-over-year revenue growth this fiscal year to exceed 50%.

Speaker #3: Now, moving to our high-end consumer end market. Net sales for Q4 were $36.6 million, down 13% sequentially and up 3% year-over-year. Net sales for fiscal year 2026 were $155.1 million, up 5% year-over-year, driven by both our TVS and PSA product portfolios.

Hong Hou: Our consumer TVS revenue continues to ramp well ahead of handset volume growth, and we expect another year of revenue and design win momentum. We expect consumer TVS revenues to increase next quarter, a function of improved seasonality and share gains at the leading handset manufacturers. In addition, PerSe continues to broaden its design win footprint, with adoption expanding across smart glasses and smartphone platforms in supporting both current and upcoming product launches. The integration of the force sensing portfolio is progressing well, with the initial product shipments already underway. Customer engagement and design win activities continue to build, and we are increasingly optimistic about the cross-selling opportunities this combination unlocks across our combined customer base. Moving to our industrial end market. Q4 industrial net sales were $151 million, up 3% sequentially and year-over-year.

Speaker #3: Our consumer TVS revenue continues to ramp well ahead of Semtech volume growth, and we expect another year of revenue and design win momentum. We expect consumer TVS revenues to increase next quarter, a function of improved seasonality and share gains at leading Semtech manufacturers.

Speaker #3: In addition, PSA continues to broaden its design win footprint. With adoption expanding across smart glasses and smartphone platforms, and in supporting both current and upcoming product launches, the integration of the force sensing portfolio is progressing well.

Speaker #3: With the initial product shipments already underway, customer engagement and design win activities continue to build, and we are increasingly optimistic about the cross-selling opportunities this combination unlocks across our combined customer base.

Speaker #3: Moving to our industrial end market. Q4 industrial net sales were $151 million, up 3% sequentially and year-over-year. With another solid quarter for LoRa, for the full year, industrial revenue was $584 million, 13% growth over the prior year.

Hong Hou: With another solid quarter for LoRa, for the full year, industrial revenue was at $584 million, 13% growth over the prior year. LoRa-enabled net sales were $39.6 million, in line with the Q3 and up 7% year over year, supported by continued expansion across several application verticals such as smart utilities, smart building, smart city, and asset management. For the full year, LoRa revenues were $156 million, representing full year growth of 34%. We had a strong presence at the CES this year, showcasing new LoRa application use cases. Four themes highlighted in our presence. Edge AI integration, multi-protocol connectivity, global network expansion, and the convergence of industrial and consumer IoT, together reflecting a technology that is broadening its reach across a growing range of markets. Edge AI emerged as another defining trend.

Speaker #3: LoRa-enabled net sales were $39.6 million, in line with Q3 and up 7% year-over-year, supported by continued expansion across several application verticals such as smart utilities, smart building, smart city, and asset management.

Speaker #3: For the full year, LoRa revenues were $156 million, representing full-year growth of 34%. We had a strong presence at CES this year, showcasing new LoRa application use cases, with four themes highlighted in our presence.

Speaker #3: Edge AI integration, multiple protocol connectivity, global network expansion, and a convergence of industrial and consumer IoT. Together, reflecting a technology that is broadening its reach across a growing range of markets.

Speaker #3: Edge AI emerged as another defining trend. As sensors increasingly process data locally—for latency, privacy, and bandwidth reasons—our collaboration with an ecosystem partner demonstrated how LoRaWAN and Edge AI work together to enable predictive maintenance in industrial environments.

Hong Hou: As sensors increasingly process data locally for latency, privacy, and bandwidth reasons, our collaboration with an ecosystem partner demonstrated how LoRaWAN and Edge AI work together to enable predictive maintenance in industrial environments. Demand for a solution that combines LoRa with multiple protocol flexibility is accelerating. In order to facilitate LoRa Plus adoption, we recently signed an agreement with a technology partner to support software development to activate and support others' protocols. We are rolling out a Z-Wave first with a Zigbee and a Thread and Matter to follow. We expect beta units will be available to deployment partners in Q2 of this year as a multiple protocol smart home and security solutions.

Speaker #3: Demand for our solution that combines LoRa with multiple protocol flexibility is accelerating. In order to facilitate LoRa+ adoption, we recently signed an agreement with a technology partner to support software development to activate and support others' protocols.

Speaker #3: We are rolling out a Z-Wave first with a Zigbee and a Thread and Matter to follow. We expect beta units will be available to deployment partners in Q2 of this year, as a multiple protocol smart home and security solutions.

Speaker #3: The market's move towards a single-skill solution is exactly what LoRa+ is designed to address: reducing complexity for customers, while expanding our addressable markets. Customers who purchase our LoRa+ transceivers now get royalty-free access to an SDK and development tools—silicon and software together from a single source.

Hong Hou: The market's move towards a single SKU solutions is exactly what LoRa Plus is designed to address, reducing complexity for customers while expanding our addressable markets. Customers who purchase our LoRa Plus transceivers now get royalty-free access to an SDK and development tools, silicon and software together from a single source. Additionally, Amazon and Ring announced a new line of LoRa-powered sensors spanning security, safety, and home control applications, all operating on Amazon Sidewalk. Ring plans to launch this product in the US in March, followed by extension across Canada, Mexico, Europe, Australia, and Japan. This demonstrates LoRa's readiness for mass-market consumer adoption at Amazon's scale, a significant evolution from its industrial and commercial roots. The ecosystem continues to scale, now spanning over 125 million LoRaWAN connected devices across 70 countries, well beyond early adoption and into mainstream deployment.

Speaker #3: Additionally, Amazon and Ring announced a new line of LoRa-powered sensors, spanning security, safety, and home control applications—all operating on Amazon Sidewalk. Ring plans to launch this product in the US in March, followed by expansion across Canada and Mexico, Europe, Australia, and Japan.

Speaker #3: This demonstrates LoRa's readiness for mass market consumer adoption, at Amazon scale. A significant evolution from its industrial and commercial roots. The ecosystem continues to scale, now spanning over 125 million LoRaWAN-connected devices across 70 countries—well beyond early adoption and into mainstream deployment.

Speaker #3: With LoRa technology, we now have established three pillars of low-power connectivity platforms: LoRaWAN, LoRa+ with multiple protocols, and Amazon Sidewalk. With these growth vectors, we believe LoRa's long-term growth rate to be approximately 20%, and quarterly sales to range from $35 to $45 million.

Hong Hou: With LoRa technology, we now have established three pillars of low-power connectivity platforms. LoRaWAN, LoRa Plus with multiple protocols, and Amazon Sidewalk. With these growth vectors, we believe LoRa's long-term growth rate to be approximately 20%, and quarterly sales to range from $35 to 45 million. Our IoT Systems and Connectivity business recorded Q4 net sales of $89.9 million, up 2% sequentially and down 3% year over year. For fiscal 2026, revenues were $354 million, up 9% compared to last year. We continue to bring products to market that address gaps in how industrial customers connect remote infrastructure. In Q4, we launched the AirLink RX400 and the AirLink EX400, the industry's first rugged 5G RedCap routers purposely built for mission-critical industrial deployments.

Speaker #3: Our IoT systems and connectivity business recorded Q4 net sales of $89.9 million, up 2% sequentially and down 3% year-over-year. For fiscal 2026, revenues were $354 million, up 9% compared to last year.

Speaker #3: We continue to bring products to market that address gaps in how industrial customers connect remote infrastructure. In Q4, we launched the AirLink RX400 and EX400, the industry's first rugged 5G RedCap routers, purposely built for mission-critical industrial deployments.

Speaker #3: These routers deliver 5G performance with less than 1 watt of idle power, roughly one-tenth of the draw of standard 5G equipment, making solar- and battery-backed deployment practical for the first time.

Hong Hou: These routers deliver 5G performance with less than one watt of idle power, roughly one-tenth of the draw of standard 5G equipment, making solar and battery-backed deployment practical for the first time. This allows our utility, oil and gas, and transportation customers to operate in remote locations where grid power is not always available. Customer engagement at the DistribuTECH in February reinforced our conviction that this product is well-timed to address a real market need. Looking back on fiscal 2026, I'm proud of what the team had accomplished. We delivered strong revenue and earnings growth through disciplined execution, a differentiated portfolio, and a relentless focus on the customers and the markets where Semtech can win. This was not just a strong year financially, it was a year in which we fundamentally strengthened Semtech's foundation.

Speaker #3: This allows our utility, oil and gas, and transportation customers to operate in remote locations where grid power is not always available. Customer engagement at the Distributed Pack in February reinforced our conviction that this product is well-timed to address a real market need.

Speaker #3: Looking back on fiscal 2026, I'm proud of what the team had accomplished. We delivered strong revenue and earnings growth through disciplined execution, a differentiated portfolio, and a relentless focus on the customers and the markets where Semtech can win.

Speaker #3: This was not just a strong year financially; it was a year in which we fundamentally strengthened SEMTECH's foundation. Looking at where we stand today, I'm more confident than ever in our positioning.

Hong Hou: Looking at where we stand today, I'm more confident than ever in our positioning. The AI data center build-out is one of the most significant infrastructure investments in a generation, and we believe Semtech is well-positioned with a broad purpose-built portfolio of solutions designed for 1.6T and 3.2T era. We believe our continued investment in our core assets through R&D and acquisitions helps ensure we are not just keeping pace with the next-generation technology, we are helping to define it. Importantly, we now have the financial flexibility to diligently evaluate and pursue the strategic investments that will accelerate our growth. We enter fiscal 2027 with momentum, with clarity of purpose, and with a stronger Semtech than we have had in years.

Speaker #3: The AI data center buildout is one of the most significant infrastructure investments in a generation. And we believe Semtech is well-positioned with a broad, purpose-built portfolio of solutions designed for the 1.6T and 3.2T era.

Speaker #3: We believe our continued investment in our core assets through R&D and acquisitions helps ensure we are not just keeping pace with next-generation technology.

Speaker #3: We are helping to define it. And importantly, we now have the financial flexibility to diligently evaluate and pursue the strategic investments that will accelerate our growth.

Speaker #3: We enter fiscal 2027 with momentum, with clarity of purpose, and with a stronger Semtech than we have had in years. I want to thank our employees, our customers, and our shareholders for their continued confidence in us.

Hong Hou: I want to thank our employees, our customers, and our shareholders for their continued confidence in us. We're just getting started, and the opportunities ahead have never been more compelling. Our key focuses for 2027 fiscal year include, 1, accelerating business growth by supporting customer ramps with sufficient availability and strong operational metrics as we compete in a capacity-constrained environment. 2, intensify R&D investment to add new growth drivers and solution differentiation by maintaining diligent governance of R&D investment with a goal of driving customer wins and delivering strong financial returns. 3, transforming Semtech by strengthening our winning culture and making major progress in portfolio optimization. With that, I will now turn the call to Mark for additional details on our financial results and our outlook for the first quarter of fiscal 2027. Mark?

Speaker #3: We're just getting started, and the opportunities ahead have never been more compelling. Our key focuses for the 2027 fiscal year include: 1. Accelerating business growth by supporting customer reps with sufficient availability and strong operational metrics as we compete in a capacity-constrained environment.

Speaker #3: 2. Intensify R&D investment to add new growth drivers and solution differentiation by maintaining diligent governance of R&D investment, with a goal of driving customer wins and delivering strong financial returns.

Speaker #3: Transforming Semtech by strengthening our winning culture and making major progress in portfolio optimization. With that, I will now turn the call to Mark for additional details on our financial results and our outlook for the first quarter of fiscal 2027.

Speaker #3: Mark, thank you. Hong, for Q4, we recorded our eighth consecutive quarter of net sales growth, with record net sales of $274.4 million, above the midpoint of our outlook and up 9% year over year.

Mark Lin: Thank you, Hong. For Q4, we recorded our eighth consecutive quarter of net sales growth, with record net sales of $274.4 million, above the midpoint of our outlook and up 9% year-over-year. For the fiscal year, net sales were $1.05 billion, up 15% year-over-year. Net sales trends by end market, reportable segment, and geographic region are included in the accompanying earnings presentation. Adjusted gross margin was 51.6%, above the midpoint of our outlook. Total semiconductor products gross margin was 61.7%, up 40 basis points sequentially and up 350 basis points year-over-year. Total semiconductor products gross margin was above the high end of our outlook range, the result of favorable mix from our LoRa and data center portfolio.

Speaker #3: For the fiscal year, net sales were $1.05 billion, up 15% year over year. Net sales trends by end market reportable segment and geographic region are included in the accompanying earnings presentation.

Speaker #3: Addressing gross margin, it was 51.6%, above the midpoint of our outlook. Total semiconductor products gross margin was 61.7%, up 40 basis points sequentially and up 350 basis points year over year.

Speaker #3: Total semiconductor products gross margin was above the high end of our outlook range, the result of favorable mix from our LoRa and data center portfolio.

Speaker #3: We expect gross margin contributions from new data center products from our copper and optical 1.6T portfolio, ramping in the second half of this year, will be accretive to both our semiconductor products and signal integrity products' gross margin.

Mark Lin: We expect gross margin contributions from new data center products from our copper and optical 1.6T portfolio ramping in the second half of this year will be accretive to both our semiconductor products and signal integrity products gross margin. IoT Systems and Connectivity gross margin was reflective of mix-related net sales growth in cellular modules, with Q4 at 31.6%. Adjusted net operating expenses were $91.5 million, slightly above the midpoint of our guidance range. Adjusted operating income was $50.0 million. Adjusted operating margin was 18.2%. Adjusted EBITDA was $57.4 million, and adjusted EBITDA margin was 20.9%, with all of these metrics above the midpoint of our guidance range.

Speaker #3: IoT systems and connectivity gross margin was reflective of mix-related net sales growth and cellular modules, with Q4 at 31.6%. Addressing net operating expenses, these were $91.5 million, slightly above the midpoint of our guidance range.

Speaker #3: Addressing operating income, it was $50.0 million. Adjusted operating margin was 18.2%. Adjusted EBITDA was $57.4 million, and adjusted EBITDA margin was 20.9%, with all of these metrics above the midpoint of our guidance range.

Speaker #3: Reflective of capital structure changes, Semtech was in a net interest income position in Q4 at $0.1 million. This reflects a sizable change from the $11.2 million of net interest expense reported a year ago.

Mark Lin: Reflective of capital structure changes, Semtech was in a net interest income position in Q4 at $0.1 million, which reflects a sizable change from the $11.2 million of net interest expense reported a year ago. For fiscal year 2026, adjusted net interest expense was $11.5 million, compared to $70.6 million in fiscal year 2025. We recorded adjusted diluted earnings per share of $0.44 above the midpoint of our guidance, and full-year adjusted diluted earnings per share was $1.71. Operating cash flow for Q4 was $61.5 million, sequentially up 30% from $47.5 million and up 84% from $33.5 million a year ago.

Speaker #3: For fiscal year 2026, adjusted net interest expense was $11.5 million, compared to $70.6 million in fiscal year 2025. We recorded adjusted diluted earnings per share of $0.44, above the midpoint of our guidance, and full year adjusted diluted earnings per share was $1.71.

Speaker #3: Operating cash flow for Q4 was $61.5 million, sequentially up 30% from $47.5 million, and up 84% from $33.5 million a year ago.

Speaker #3: Free cash flow for Q4 was $59.1 million, sequentially up 32% from $44.6 million, and up 91% from $30.9 million a year ago.

Mark Lin: Free cash flow for Q4 was $59.1 million, sequentially up 32% from $44.6 million and up 91% from $30.9 million a year ago. Operating cash flow and free cash flow for the standalone Q4 each exceeded the amounts reported for all of fiscal year 2025, driven by improvements in both our capital structure and operating performance. Strong cash flow generation has allowed us the operational flexibility to invest in R&D projects as well as to invest strategically via tuck-ins. The increased R&D investment in our core data center, LoRa, and sensing portfolio has yielded strong returns. The aggregate consideration for the force sensing portfolio we acquired in October 2025 and the laser engagement business we acquired in March 2026 is less than the free cash flow we generated from Q4.

Speaker #3: Operating cash flow and free cash flow for the standalone fourth quarter each exceeded the amounts reported for all of fiscal year 2025, driven by improvements in both our capital structure and operating performance.

Speaker #3: Strong cash flow generation has allowed us the operational flexibility to invest in R&D projects, as well as to invest strategically via tokens. The increased R&D investment in our core data center, LoRa, and sensing portfolio has yielded strong returns.

Speaker #3: The aggregate consideration for the four sensing portfolio we acquired in October 2025 and the laser engagement business we acquired in March 2026 is less than the free cash flow we generated from Q4.

Speaker #3: I believe our balancing of R&D spending, along with prudent use of capital for capacity expansion and acquisitions, positions us to generate meaningful long-term returns for our shareholders.

Mark Lin: I believe our balancing of R&D spending, along with prudent use of capital for capacity expansion and acquisitions, positions us to generate meaningful long-term returns for our shareholders. We ended Q4 with a cash and cash equivalents balance of $195.2 million and debt was $503 million, unchanged from last quarter. Our adjusted net leverage ratio was 1.3 as of the close of Q4, down sequentially from 1.5 and down year-over-year from 2.3. Now turning to our outlook for Q1 of fiscal year 2027. We currently expect net sales of $283 million ±$5 million, up 13% year-over-year at the midpoint.

Speaker #3: We ended Q4 with a cash and cash equivalents balance of $195.2 million, and debt was $503 million, unchanged from last quarter. Our adjusted net leverage ratio was 1.3 as of the close of Q4, down sequentially from 1.5 and down year over year from 2.3.

Speaker #3: Now turning to our outlook for the first quarter of fiscal year 2027. We currently expect net sales of 283 million dollars, plus or minus 5 million dollars, up 13% year over year at the midpoint.

Speaker #3: We expect net sales from an infrastructure end market to increase sequentially, supported by projected sequential data center growth of 12%, including initial copper-rich production shipments supporting a hyperscaler at the tail end of the quarter.

Mark Lin: We expect net sales from our infrastructure end market to increase sequentially, supported by projected sequential data center growth of 12%, including initial CopperEdge production shipments supporting a hyperscaler at the tail end of the quarter. We expect net sales from our high-end consumer end market to increase about 9% sequentially or about 13% year-over-year, benefiting from improved seasonal trends, market share gain in our TVS products, and contributions from the force sensing portfolio we acquired in Q4. We expect net sales from our industrial end market to be about flat, with LoRa increases offsetting decreases in IoT systems and connectivity. Based on expected product mix and net sales levels, we expect adjusted gross margin to be 52.8% ± 50 basis points.

Speaker #3: We expect net sales from our high-end consumer end market to increase about 9% sequentially, or about 13% year over year, benefiting from improved seasonal trends, market share gain in our TVS products, and contributions from the four sensing portfolio we acquired in the fourth quarter.

Speaker #3: We expect net sales from our industrial end market to be about flat, with LoRa increases offsetting decreases in IoT systems and connectivity. Based on expected product mix and net sales levels, we expect adjusted gross margin to be 52.8%, plus or minus 50 basis points.

Speaker #3: Our gross margin outlook for our total semiconductor products is expected to be 60.4%, plus or minus 50 basis points, down 130 basis points sequentially, and includes initial ramp costs from the HIFO acquisition.

Mark Lin: Our gross margin outlook for our total semiconductor products is expected to be 60.4% ±50 basis points, down 130 basis points sequentially and include initial ramp costs from the HieFo acquisition. Adjusted net operating expenses are expected to be $96.9 million ±$1 million, resulting in adjusted operating margin at the midpoint of 18.6%. Included in the higher Q1 adjusted operating expense outlook are R&D costs associated with the addition of the force sensing business, along with increased investment in support of our growing data center portfolio, including the HieFo acquisition. We have demonstrated strong returns on our R&D investment and expect incremental returns from these investments.

Speaker #3: Adjusted net operating expenses are expected to be 96.9 million dollars, plus or minus 1 million dollars, resulting in adjusted operating margin at the midpoint of 18.6%.

Speaker #3: Included in the higher first quarter adjusted operating expense outlook are R&D costs associated with the addition of the four sensing business, along with increased investment in support of our growing data center portfolio, including the HIFO acquisition.

Speaker #3: We have demonstrated strong returns on our R&D investment and expect incremental returns from these investments. Adjusted EBITDA is expected to be 59.5 million dollars, plus or minus 3 million dollars, resulting in adjusted EBITDA margin at the midpoint of 21%.

Mark Lin: Adjusted EBITDA is expected to be $59.5 million ± $3 million, resulting in adjusted EBITDA margin at the midpoint of 21%. We expect adjusted interest and other expense net to be approximately $0.5 million. We expect an adjusted normalized income tax rate of 17% for all of fiscal year 2027, an increase from 15% in fiscal year 2026 due to a geographical shift in pre-tax profits. These amounts are expected to result in adjusted diluted earnings per share of $0.45 ± $0.03 based on a weighted average share count of 96.6 million shares.

Speaker #3: We expect adjusted interest and other expense, net, to be approximately $0.5 million. We expect an adjusted normalized income tax rate of 17% for all of fiscal year 2027, an increase from 15% in fiscal year 2026 due to a geographical shift in pre-tax profits.

Speaker #3: These amounts are expected to result in adjusted diluted earnings per share of $0.45, plus or minus $0.03, based on a weighted average share count of 96.6 million shares.

Speaker #1: Thank you, Mark. We can now turn the call back to the operator for the question and answer session.

Hong Hou: Thank you, Mark. We can now turn the call back to the operator for the question and answer session.

Speaker #2: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator 2: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Sean O'Loughlin with TD Cowen.

Operator: Thank you. We'll now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Sean O'Loughlin with TD Cowen.

Speaker #2: A confirmation ton will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys.

Speaker #2: One moment, please, while we pull for questions. Thank you. Our first question is from Sean O'Glocklin with TD Cowen.

Speaker #3: Hey, guys. Congrats on a solid result and continuing to execute on your strategy. I wanted to ask a question on the HIFO acquisition. I think the strategic rationale you laid out is pretty straightforward, but I was wondering if you could expand on the initial applications you're targeting.

Sean O'Loughlin: Hey, guys. Congrats on the solid results and continuing to execute on your strategy. I wanted to ask a question on the HieFo acquisition. I think, you know, the strategic rationale you laid out is pretty straightforward, but wondering if you could expand on, you know, the initial applications you're targeting. Sounds like mostly transceiver side. Maybe more importantly, where are you for the indium phosphide-based products in the qualification or design cycles at some of your customers, and what should be our expectations for when some of that starts to fold into the model in a material way?

Speaker #3: Sounds like mostly transceiver side, and then maybe more importantly, where are you for the indium phosphide-based products in cycles at some of your customers, and what should be our expectations for when some of that starts to fold into the model in a material way?

Speaker #4: Yeah. Thank you, Sean. With a question. So the HIFO initial product right now in production is a gain chip used in tunable lasers. Those are the high-end lasers to support the transmission over 80 kilometers, 40 kilometers for metro and data center interconnect applications.

Hong Hou: Yeah. Thank you, Sean, for the question. The HieFo initial product right now in production is a gain chip used in tunable lasers. Those are the high-end lasers to support the transmission over 80 kilometers, 40 kilometers for metro and data center interconnect applications. By leveraging about 4 decades of laser design experience, they have been the leading supplier for gain chips for ITLA. This is a product already in volume production and demand is increasing, and right now is capacity limited. This product for 2027 probably will be contributing roughly about a high-teens level of revenue. You know, we are adding capacity as we speak, in the second week as a proud owner of this asset.

Speaker #4: By leveraging about four decades of laser design experience, they have been the leading supplier for gain chips for IPLA. This is a product already in volume production, and demand is increasing.

Speaker #4: And right now, its capacity is limited. So this product, for 2027, probably will be contributing roughly about a high TIN level of revenue. But we are adding capacity as we speak in the second week as a proud owner of this asset.

Speaker #4: We have also demonstrated we'll showcase tomorrow at the OFC the intensity modulated direct drive lasers of CW lasers used in optical transceivers. Those lasers really well designed to support high conversion efficiency for example, wall plug efficiency at a room temperature.

Hong Hou: We have also demonstrated. We'll showcase tomorrow at the OFC, the intensity modulated direct drive lasers, our CW lasers used in optical transceivers. Those lasers are really well designed to support high conversion efficiency. For example, wall plug efficiency at the room temperature, the 42%. That is much higher than a typical about 25%. Our temperature performance is outstanding, and the far field beam profile is outstanding. That make it much easier to couple into single mode fiber our silicon photonics waveguide. We do not have enough capacity right now to support the industry demand. After the announcement, you can just imagine, we got multiple customers reaching out and asking for samples.

Speaker #4: The 42%, that is much higher than a typical about 25%. Then over temperature performance is outstanding and the far-field beam profile is outstanding. So that makes it much easier to couple into single-mode fiber or silicon photonics waveguide.

Speaker #4: And we do not have enough capacity right now to support the industry demand after the announcement. You can just imagine we got to multiple customers reaching in and asking for samples.

Speaker #4: So, we will be able to provide samples to the key customers to support the evaluation when we are building capacity to support the future growth.

Hong Hou: We will be able to provide samples to the key customers to support the evaluation and when we are building capacity to support the future growth. As for putting in a model, probably once we have a better understanding on the equipment lead time and the capacity in the future periods, we will provide more guidance on the revenue contribution from lasers, CW lasers. Right now we're planning to intercept at a 3.2 T transceivers. Of course, it can support one point six T transceiver as well.

Speaker #4: As for putting in the model, probably once we have a better understanding on the equipment lead time and the capacity, in the future periods we will provide more guidance on the revenue contribution from CW lasers.

Speaker #4: Right now, we're planning to intercept at a 3.2T transceiver. Of course, it can support one 1.6T transceiver as well.

Speaker #3: Great, thanks, and appreciate all the color there. If I could just ask a real quick follow-up, maybe for Mark on that topic—how should we be thinking about the CapEx line as you talk about those capacity expansions at Alhambra? And I guess maybe Hong alluded to the answer to this question in his previous comment about understanding equipment lead times.

Sean O'Loughlin: Great. Thanks. Appreciate all the color there. If I could just ask a real quick follow-up maybe for Mark on that topic. You know, how should we be thinking about the CapEx line as you talk about those capacity expansions at Alhambra? You know, I guess Hong alluded to the answer to this question in his previous comment about understanding equipment lead times. You know, how everybody in the Indium Phosphide industry seems to be ramping capacity and, you know, are you guys, I guess, for lack of a better term, at the back of the line there?

Speaker #3: But how is it that everybody in the Indian phosphide industry seems to be ramping capacity, and are you guys, I guess for lack of a better term, at the back of the line there?

Speaker #4: Yeah, so the CapEx intensity is moderate. And the fact that we already have the key capabilities—right now, we just need to selectively add capacity in some areas.

Hong Hou: Yeah. The CapEx intensity is moderate. You know, the fab already have the key capabilities. Right now we just need to selectively add in capacity in some areas. I know the whole industry is ramping up, and equipment and test equipment, fab equipment in high demand as well. You know, we will be very creative in combination with the new and used market and to look at the fab and test equipment. The intensity, I would say, of the CapEx can be easily supported with, say, for example, one quarter of the free cash flow as we have demonstrated in the past quarters.

Speaker #4: So I know the whole industry is ramping up, and equipment and test equipment, fab equipment, are in high demand as well. But we will be very creative in combining with the new and used market and to look at the fab and test equipment.

Speaker #4: The intensity, I would say, of the CapEx can be easily supported with, say, for example, one quarter of the free cash flow, as we have demonstrated in the past quarter.

Speaker #5: Yeah, Sean, and the wrap is over multiple quarters. But I think Semtech's world-class operations team is on it. We really had the planning during diligence, and the other good news is all of this CapEx, I believe, qualifies for Section 48D investment tax credit—35%—and then there's some additional government grant programs.

Mark Lin: Yeah, Sean, the ramp is over multiple quarters, but I think Semtech's world-class operations team is on it. We already had the planning during diligence. The other good news is, you know, all this CapEx, I believe is qualifies for, you know, Section 48C investment tax credit, 35%. Then there's some additional government grant programs, you know, that are available, especially, to strengthen US semiconductor manufacturing capacity.

Speaker #5: They're available, especially to strengthen U.S. semiconductor manufacturing capacity.

Speaker #3: Thanks, guys.

Tore Svanberg: Thanks, guys.

Sean O'Loughlin: Thanks, guys.

Speaker #4: Thank you.

Hong Hou: Thank you.

Speaker #2: Our next question is from Thor Svanberg with Stifel.

Operator 2: Our next question is from Tore Svanberg with Stifel.

Operator: Our next question is from Tore Svanberg with Stifel.

Speaker #6: Yes, thank you. Hong, Mark, congrats on the results. So my first question is on CopperEdge. As that business now starts to ramp in fiscal '27, can you give us any sense for how big that could be?

Tore Svanberg: Yes, thank you, Hong, Mark, congrats on the results. My first question is on CopperEdge. As that business now starts to ramp in fiscal 2027, can you give us any sense for, you know, how big that could be? You know, maybe tens of millions of dollars. And if you can't give us the size, perhaps you could at least give us the mix between actual ACC cables versus linear equalizers.

Speaker #6: Maybe tens of millions of dollars. And if you can't give us the size, perhaps you could at least give us the mix between actual ACC cables versus linear equalizers.

Speaker #4: Yeah, so Tori, thank you for the question. We are supporting the ramp, we're getting forecast, and we're getting the materials ready, as we gave the guidance in our prepared remarks.

Hong Hou: Yeah. Tore, thank you for the question. We are supporting the ramp. We're getting forecast and we're getting the materials ready as we give the guidance in our prepared remarks towards the end of this fiscal quarter. In April timeframe, we'll start shipping to the cable manufacturers that who are our direct customers to support the rack level volume ramp in the mid of the year. Everything is on schedule. As for the mix between DAC and the ACC, it's still they are in the process of right now doing this rack level testing system validation. We will be getting better idea probably by in a month or two on the support.

Speaker #4: Towards the end of this fiscal year—well, this fiscal quarter, in the April timeframe—we'll start shipping to the cable manufacturers who are our direct customers to support the rack-level volume ramp in the middle of the year.

Speaker #4: So everything is on schedule. As for the mix between DAC and the ACC, they are still in the process right now of doing this rack-level testing system validation.

Speaker #4: So we will be getting a better idea probably in a month or two on the support. But we are getting the long-range forecast so that we can get a wafer start in the fab and prepare the material readiness. As I indicated, that's a very key focus for our operations, so at this point, it's still too early to tell.

Hong Hou: We are getting the long-range forecast so that we can get wafer starts in the fab and prepare the material readiness. As I indicated, that's a very key focus for our operations. At this point, it's still too early to tell. As for linear equalizer onboard, there are multiple customers supporting our activities. You know, I do believe that some of those, based on the level of engagement, it will be getting qualified within the coming quarters. Just on the linear equalizer, the ACC side, you know, the MSA establishment with 11 or 12 founding members are tasked and at work already start drafting the specifications. You know, this is still the early stage of the ACC, and different customers experiencing different performance.

Speaker #4: But as for linear equalizer onboard, there are multiple customers supporting our activities, and I do believe that some of those, based on the level of engagement, will be getting qualified within the coming quarters.

Speaker #4: So just on the linear equalizer, the ACC side, the MSA establishment with the 11 or 12 funding members are tasked and at work already, starting to draft the specifications. This is still the early stage of the ACC, and some customers are experiencing different performance.

Speaker #4: It is very important to have this MSA, and to draft the specification and educate the industry on what to expect with a certain level of reach, gauge, and data rate.

Hong Hou: It is very important to have this MSA and to draft the specification and educate the industry on what to expect with a certain level of the reach, range, and, you know, and data rate. With the common understanding of MSA, I do believe this technology is gonna be proliferated much faster. We have already seen some other hyperscalers lining up to get their rack designed by using ACC.

Speaker #4: So, with the common understanding of MSA, I do believe this technology is going to be proliferated much faster. We have already seen some other hyperscalers lining up to get their racks designed by using ACC.

Speaker #5: Yeah, that's very helpful. Thank you. And as my follow-up, and maybe more of a clarification question: So, you talked about lower growth—20%—longer term, but then you talked about a $35 to $45 million quarterly run rate.

Tore Svanberg: Yeah, that's very helpful. Thank you. As my follow-up and maybe more of a clarification question, you talked about LoRa growing 20% longer term, but then you talked about a $35 to 45 million quarterly run rate. You just did $40. What exactly is that 35/45 range? I mean, are you expecting some volatility this year or if you could just clarify what you meant by that. Thank you.

Speaker #5: You just did 40. So, what exactly is that 35 to 45 range? I mean, are you expecting some volatility this year or—yeah, if you could just clarify what you meant by that.

Speaker #5: Thank you.

Speaker #4: Yeah, thank you, Tori. So, historically, we have been seeing the overall trend of lower revenue has been increasing. But quarter to quarter, it's a little bit bumpy due to the project-based deployment of demand.

Hong Hou: Yeah. Thank you, Tore. Historically, we have been seeing, you know, overall trend of LoRa revenue has been increasing, but quarter-over-quarter is a little bit bumpy, due to the project-based deployment of demand. That's why we give a range of ±$5 million. You see that sliding scale continues to go up with the center point. I feel like I have never been this excited about our LoRa strategy. It's really with the dual band to increase the bandwidth to address Edge AI applications, with the LoRa Plus to really get multiple applications in one SKU with the software and hardware all supported by us, and with the Amazon Sidewalk, you know, the mass market.

Speaker #4: That's why we give a range of plus or minus $5 million. But you see the sliding scales continue to go up with the center point.

Speaker #4: So, I feel like I have never been this excited about our lower strategy. It's really with the dual band to increase the bandwidth to address edge AI applications with a lower plus, to really get multiple applications in one SKU, with software and hardware all supported by us.

Speaker #4: And with the Amazon Sidewalk and the mass market, so adding the value-added market with the mass market, really, we've got multiple growth drivers. So I think that's why you're giving us conviction that a 20% growth rate is very doable. When we can help the ecosystem to adopt a LoRa Plus protocol faster, we expect the growth rate to accelerate.

Hong Hou: Adding the value-added market, with it at the mass market, really we got multiple growth drivers. I think, that's why you're giving us conviction that, you know, 20% growth rate is very doable. When we can help, the ecosystem to adopt a LoRa Plus protocol faster, we expect the growth rate to accelerate.

Speaker #5: Very clear. Thank you.

Tore Svanberg: Very clear. Thank you.

Speaker #4: Thank you.

Hong Hou: Thank you.

Speaker #2: Our next question is from Christopher Roland with Susquehanna.

Operator 2: Our next question is from Christopher Rolland with Susquehanna.

Operator: Our next question is from Christopher Rolland with Susquehanna.

Speaker #7: Hey, guys. Thank you for the question. I guess my first one is on the Indian Foside laser acquisition. I guess, first a clarification: this is all going to be internally manufactured materials?

Christopher Rolland: Hey, guys. Thank you for the question. I guess my first one is on the Indium Phosphide laser acquisition. I guess first a clarification, this is all going to be internally manufactured materials. Just wanted to clarify that. Secondly, if you could talk about maybe your go-to-market strategy here and maybe even some revenue synergies with some of your other parts. Are you gonna kind of bundle this with FiberEdge? Are you gonna, you know, perhaps go direct to hyperscalers? How are you gonna approach this market? Thank you.

Speaker #7: Just wanted to clarify that. And secondly, if you could talk about maybe your go-to-market strategy here, and maybe even some revenue synergies with some of your other parts?

Speaker #7: Are you going to kind of bundle this with FiberEdge? Are you going to perhaps go direct to hyperscalers? How are you going to approach this market?

Speaker #7: Thank you.

Speaker #4: Yeah, thank you, Chris. Those are very good questions. To answer your first question: yes, the fab we acquired is vertically integrated. Namely, we do the EPI growth of EPI wafers.

Hong Hou: Yeah. Thank you, Chris. That's very good questions. To answer your first question, yes, the fab we acquired is vertically integrated. Namely, we do the epi growth of epi wafers. We process wafers, we test it, internally, and we do use the ecosystem on back-end packaging to increase the capacity. That part, you know, we are doing really well. These lasers, because with the amount involved the regrowth process, so we do internally, that's how we are able to get the superior performance in conversion efficiency and over temperature performance. As for your second question, go-to-market strategy. You are absolutely right. You know, we know that 100 gig per lane in transition to 200 gig per lane, it already puts so much stress in to the ecosystem.

Speaker #4: We process wafers, with testing done internally. And we do use the ecosystem on backend packaging to increase the capacity. So that part, we are doing really well.

Speaker #4: These lasers, because of the involved regrowth process—so we do that internally. That’s how we are able to get the superior performance in conversion efficiency and over-temperature performance.

Speaker #4: As for your second question, go-to-market strategy, you are absolutely right. We know that 100-gig per line, in transition to 200-gig per line, they already put so much stress into the ecosystem.

Hong Hou: You know, we're really challenging the device designers with the performance margin. When we evolve the data rate to 400 gigs per lane, they really don't hold a lot of margin to give out. The co-development and co-optimization is so key in order to get the best electronic component with the best optical electronic component. Now we own two sides of the equation, so we'll be able to mix and match to provide the best integrated solution. When we have that, we will provide the chipsets with a reference design to our customer base. This way, we will be helped to accelerate the time to market for them, and in return, we make our components more sticky, right? You know, you use this kind of electronic component, like a TIA, a laser driver, modulator driver.

Speaker #4: So we're really challenging the device designers with the performance margin. And when we evolve the data rate to 400 gig per line, there's really not a whole lot of margin to give out.

Speaker #4: So the co-development and co-optimization is so key in order to get the best electronic component with the best optoelectronic component. So now we own two sides of the equation.

Speaker #4: So, we'll be able to make some match to provide the best integrated solution. And when we have that, we will provide the chipsets with the reference design to our customer base.

Speaker #4: This way, we will be helped to accelerate the time to market for them, and in return, we make our components more sticky, right? So, if you use this kind of electronic component, like a TIA or laser driver, modulator driver, using our optical components, you will pretty much get a guarantee to work to deliver 400-gig performance.

Hong Hou: Using our optical components, you will pretty much get a guarantee to work to deliver 400 gig performance. That's why we're saying, you know, we anticipate the major cut-in point is 3.2T transceiver modules. It could be earlier than that.

Speaker #4: That's why we're saying we anticipate the major cutting point is 3.2T transceiver modules. It could be earlier than that.

Christopher Rolland: That's great. That's a fantastic strategy. One question I get from investors is around the eventuality of CPO, particularly for scale up. Jensen here at GTC was talking a little bit about the coexistence of both copper and optical in the rack. Some pushback I get from investors is around the role of copper, the closer that optical moves to the ASIC. Obviously, you're expanding your market with lasers here into the CPO world. Perhaps you could also address that kind of pushback on copper, where you see copper playing a role, not only in the next two years, but all the way through 2030, for example, even as you move CPO to the ASICs.

Speaker #7: That's great. That's a fantastic strategy. One question I get from investors is around the eventuality of CPO, particularly for scale-up. Jensen here at GTC was talking a little bit about the coexistence of both copper and optical in the rack.

Speaker #7: But some pushback I get from investors is around the role of copper, the closer that optical moves to the ASIC. Obviously, you're expanding your market with lasers here.

Speaker #7: Into the CPO world. But perhaps you could also address that kind of pushback on copper, where you see copper playing a role not only in the next two years, but all the way through 2030, for example, even as you move CPO to the ASIC.

Speaker #4: Great. Thank you, Chris. I listened to Jensen's call as well. So basically, what I was trying to say over the last year, he clarified that so well.

Hong Hou: Great. Thank you, Chris. I listened to Jensen's call as well. Basically, what I was trying to say over the last year, but he clarified it so well. Copper scale up is always gonna be there, and CPO scale up is only be making more sense in the multi-rack systems. For example, he was talking about NVL576 across 8 racks. That way, because, you know, you're using active copper cable, it's very hard to get 8 racks all point to point interconnected. You use the out first opportunity, the signal out of the XPU to convert into optical. Optical not only be able to interconnect within racks and, but it can also interconnect between racks. The same thing for the Kyber platform. It was talking about NVL1152.

Speaker #4: So copper scale-up is always going to be there. And CPO scale-up is only going to make more sense in multi-rack systems. For example, he was talking about Oberon NVL576 across eight racks.

Speaker #4: That way, because you're using active copper cable, it's very hard to get eight racks all point-to-point interconnected. So you use the first opportunity—the signal out of the XPU—to convert into optical.

Speaker #4: Optical—not only will you be able to interconnect within a rack, but it can also interconnect between racks. The same thing for the fiber platform he was talking about, NVL1152.

Speaker #4: That's also an eight-rack system on the NVL144. And that the CPO scale-up makes sense. So, in general, I think the copper scale-up is going to be the mainstream—it's going to be primarily used for within the eight rack.

Hong Hou: That's also an 8-rack system on the NVL144. The CPO scale-up makes sense. In general, I think the copper scale-up is gonna be the mainstream, is gonna be primarily used for within a rack. The CPO scale-up is gonna be used in multiple racks. Don't put a terminal value on the copper yet. The industry are formulating an NPO, near package optics, as a complement to CPO. This way, CPO is one company thing, right? An MPO can define a specification to have specific geometry layout the I/O pin out and keep-out zone to leverage the entire ecosystem's innovation to make it more scalable, more affordable.

Speaker #4: The CPO scale-up is going to be used in multiple racks, so don't put a terminal value on the copper yet. And the industry also is formulating an NPO—near package optics.

Speaker #4: It's a complement to CPO. So this way, CPO is one company thing, right? But NPO can define a specification to have specific geometry, the I/O pinout, and keep-out zone to leverage the entire ecosystem's innovation to make it more scalable, more affordable.

Speaker #4: So, when in a CPO, we may not have much content in there except for lasers. But in NPO, we will be all over the place with the laser drivers, TIAs, and lasers.

Hong Hou: When in a CPO, we may not have much content in there except for lasers, but in NPO, we will be all over the place with the laser drivers, TIAs, and lasers. Even silicon photonics modulator, as I mentioned, that is a very natural expansion of our portfolio by the internal development.

Speaker #4: And even silicon photonics modulator, as I mentioned, that is a very natural expansion of our portfolio by internal development.

Speaker #7: Thanks.

Operator 2: Thanks.

Christopher Rolland: Thanks.

Speaker #4: Thank you.

Hong Hou: Thank you.

Speaker #1: Our next question is from Tristan Gara with Robert W. Baird.

Operator 2: Our next question is from Tristan Gerra with Robert W. Baird.

Operator: Our next question is from Tristan Gerra with Robert W. Baird.

Tristan Gerra: Hi, good afternoon. You've talked about the rising interest from hyperscalers about LPOs. Could you talk about the recent Arista XPO announcement and what it does to the LPO ecosystem? You know, any way to quantify, you know, what the ramp is going to look like medium term, and when you expect the big inflection point in LPO revenue.

Speaker #8: Hi. Good afternoon. You've talked about the rising interest from hyperscalers regarding LPOs. Could you talk about the recent Arisa XPO announcement, and what it means for the LPO ecosystem?

Speaker #8: And is there any way to quantify what the ramp is going to look like, medium term, and when you expect the big inflection point in LPO revenue?

Hong Hou: Great. Thank you, Tristan. XPO, Arista just released that MSA. We are a very active member of the MSA. XPO defined a high density, low power, and provide high reliability MSA for front panel switch, for example. To keep the same reliability, but they will be able to collapse the form factor from essentially 4 RU into 1 without giving out any capacity. It basically removes the packaging overhead. Because liquid cooling is available, they can develop the cold plate so that again in between the optical transceivers. That is just great. Really, that build upon the confidence on LPO, and that build upon the innovation from the entire ecosystem with multiple module manufacturers.

Speaker #4: Great. Thank you, Tristan. So, XPO—Arisa just released that MSA. We are a very active member of the MSA. XPO defined a high-density, low-power, high-reliability MSA for front panel switch, for example.

Speaker #4: To keep the same relics, but they will be able to collapse the form factor from essentially 4RU into one, without giving out any capacity.

Speaker #4: So it’s basically removing the packaging oversight overhead because liquid cooling is available. They can develop the cold plate so that it gets in between the optical transceivers.

Speaker #4: And that is just great and really builds upon the confidence in LPO. And that builds upon the innovation from the entire ecosystem with multiple module manufacturers.

Speaker #4: NPO, on the other hand, is a little bit more involved because that's involved the development of common specification on, say, geometry, keep-out zone, the I/Os, and the shoreline configurations.

Hong Hou: MPO, on the other hand, is a little bit more involved because that involved the development of common specification on, say, geometry, keep out zone, the IOs and the short line, you know, configurations. Essentially, MPO is, in a way, is XPO on board. XPO is this high density package on the front panel of the box. In both configurations, we're gonna be having a lot of content in there. Again, the lasers, the modulator drivers, the modulator itself, and TIAs. We welcome this type of MSA. It's really going into our direction.

Speaker #4: So essentially, NPO is, in a way, XPO on board. XPO is just high-density package on the front panel of the box. In both configurations, we're going to be having a lot of content in there.

Speaker #4: Again, the lasers and the modulator drivers, the modulator itself, and TIAs. And so we welcome this type of MSA. It's really going into our direction.

Speaker #8: Okay, that's great color for my follow-up. You've mentioned in the past some ACC opportunities on board. Could you provide maybe a little bit more feedback on what that is, what exactly is the use case for that, and how meaningful that could get over time?

Tristan Gerra: Okay. That's great color. For my follow-up, you've mentioned in the past some ACC opportunities on board. Could you provide maybe a little bit more feedback on what that is? You know, what exactly is the use case for that, and how meaningful that could get over time?

Speaker #4: Yeah. The copper edge linear equalizer on board, our customers are defining five, six different use cases in all to utilize the redrive capability to extend the link and improve the link budget.

Hong Hou: Yeah. The CopperEdge linear equalizer onboard, our customers are defining five, six different use cases in how to utilize the redrive capability to extend the link and improve the link budget. It can be on the switch, can be on the merchant GPU board, can be on the ASIC board of hyperscalers. It can also be on the backplane, in an active backplane by our cable partners.

Speaker #4: So it can be on the switch. It can be on the merchant GPU board. It can be on the ASIC board of hyperscalers. It can also be on the backplane in an active backplane by a cable partner.

Tristan Gerra: Great. Thank you very much.

Speaker #8: Great. Thank you very much.

Hong Hou: Thanks. Thank you.

Speaker #4: Thank you. Thank you.

Speaker #1: Our next question is from Quinn Bolton with Needham & Company.

Operator 2: Our next question is from Quinn Bolton with Needham & Company.

Operator: Our next question is from Quinn Bolton with Needham & Company.

Speaker #9: Hi, this is Robert on for Quinn here. Congrats on the quarter. Just one: you've been active in doing acquisitions and have expressed intent to increase R&D with some of your capital.

Robert: Hi, this is Robert on for Quinn Bolton here. Congrats on the quarter. Just one on, you've been active in doing acquisitions and have expressed intent to increase R&D with some of your capital up until this point, but any updates on potential divestitures? Last we heard, I think, you know, ongoing and, you know, roughly in the third or fourth inning. Any update on that process would be great.

Robert Morelli: Hi, this is Robert on for Quinn Bolton here. Congrats on the quarter. Just one on, you've been active in doing acquisitions and have expressed intent to increase R&D with some of your capital up until this point, but any updates on potential divestitures? Last we heard, I think, you know, ongoing and, you know, roughly in the third or fourth inning. Any update on that process would be great.

Speaker #9: Up until this point, any updates on potential divestitures? Last we heard, I think it was ongoing, and roughly in the third or fourth inning. So any update on that process would be great.

Speaker #4: Yeah, Robert, thanks for calling in. I'm not really good at sports analogies, but I think that we're making good progress. I'm optimistic for a good conclusion.

Hong Hou: Yeah, Robert, thanks for calling in. I'm not really good at sports analogies, but I think that we're making good progress. I'm optimistic about a good conclusion. At this point, I'd say that maybe incremental from last quarter, the interested parties are spending some dollars on external consultants, so financial due diligence and on legal costs. We're at that stage, and, you know, when there's additional kind of skin in the game, I think, you know, that does point towards a successful conclusion with the cellular module divestiture in the near term.

Speaker #4: At this point, I'd say that, maybe incremental from last quarter, the interested parties are spending some dollars on external consultants—for financial due diligence—and on legal costs.

Speaker #4: So we're at that stage. And when there's additional kind of skin in the game, I think that does point towards a successful conclusion with the cellular module divestiture in the near term.

Speaker #9: Thanks. And just as a follow-up, it sounds like there are many tailwinds coming across for LPO as well as copper. And I think last week, we kind of heard them ramping kind of in a similar time frame this year.

Robert: Thanks. Just as a follow-up, you know, it sounds like there are many tailwinds coming across for LPO as well as copper. I think, you know, last week, we kind of heard them ramping kind of in a similar time frame this year. Can you just refresh that for us as it sounds like ACCs could be ramping a little earlier now? Which do you see as the larger revenue opportunity over kind of the coming 12 months?

Robert Morelli: Thanks. Just as a follow-up, you know, it sounds like there are many tailwinds coming across for LPO as well as copper. I think, you know, last week, we kind of heard them ramping kind of in a similar time frame this year. Can you just refresh that for us as it sounds like ACCs could be ramping a little earlier now? Which do you see as the larger revenue opportunity over kind of the coming 12 months?

Speaker #9: Can you just refresh that for us? Because it sounds like ACCs could be ramping a little earlier now. And then, which do you see as the larger revenue opportunity over the coming 12 months?

Speaker #4: Yeah. As Robert said, we gave the timeline for the ACC ramp—it's on time, on schedule. And then the 1.60 fiber edge product. Then beyond that, as I said, could be the ACC with other hyperscalers.

Hong Hou: Yeah, Robert. We gave the timeline ACC ramp. It's on time, on schedule. The 1.60 FiberEdge product. Beyond that, as I said, could be linear, the ACC with other hyperscalers, linear equalizer on board, and the lasers and 400 gig. We like them all. At this point, it is too early to call which one is a bigger opportunity, but we like them all and all gonna be contributing pretty significant ways.

Speaker #4: Linear equalizer on board, and the lasers, and 400 gig. So we like them all. And at this point, it is too early to call which one is the bigger opportunity.

Speaker #4: But we like them all, and all are going to be contributing in pretty significant ways.

Speaker #9: Sounds great. Thanks, guys.

Cody Acree: Sounds great. Thanks, guys.

Robert Morelli: Sounds great. Thanks, guys.

Speaker #4: Thank you.

Hong Hou: Thank you.

Speaker #1: Our next question is from Joe Moore with Morgan Stanley.

Operator 2: Our next question is from Joe Moore with Morgan Stanley.

Operator: Our next question is from Joe Moore with Morgan Stanley.

Speaker #8: Great, thank you. You talked about 1.60 starting to grow in your TIA business and other places. Can you talk about the line of sight that you have to 800 still growing?

Joe Moore: Great. Thank you. You talked about 1.6T starting to grow in your TIA business and other places. Can you talk about the line of sight that you have to 800 still growing? I assume it's still growing for now and you're layering in the higher speeds on top of it. You know, how long will that persist? At what point does it start transitioning over more?

Speaker #8: I assume it's still growing for now in your layering in the higher speeds on top of it. How long will that persist, and at what point does it start transitioning over more?

Speaker #4: That's right. So, Joe, we did mention in the prepared remarks that 800 gig is a foundation. The growth is strong. Demand is strong and broad-based.

Hong Hou: That's right. Joe, we did mention in the prepared remarks, the 800G is a foundation. The growth is strong, demand is strong and broad-based. That's the given. That goes very strong, at least throughout the FY 2027. As for the industry, it's rolling out new XPUs and then all the I/Os go to 200G. They're gonna be evolving into 1.6 and in a low power 1.6 optics, we're actually very well positioned, even better than 800G.

Speaker #4: So that's the given. That goes very strong, at least throughout FY27. And as for the industry, rolling out new XPUs, and then all the I/Os go to 200 gig.

Speaker #4: So they're going to be evolving into 1.60. And in low power 1.60 optics, we're actually very well positioned—even better than 800 gig.

Joe Moore: Okay. Thank you.

Speaker #8: Okay. Thank you.

Speaker #4: Yeah. Thank you.

Hong Hou: Yeah, thank you.

Speaker #1: Our next question is from Craig Ellis with B. Riley Securities.

Operator 2: Our next question is from Craig Ellis with B. Riley Securities.

Operator: Our next question is from Craig Ellis with B. Riley Securities.

Speaker #10: Yeah, thanks for sneaking me in. And guys, congratulations on both the execution and a really strategic-looking acquisition. Hong, I think near the end of your prepared remarks, you commented that you thought data center year-on-year revenue this year could be up around 50%.

Craig Ellis: Yeah. Thanks for sneaking me in. Guys, congratulations on both the execution and a really strategic looking acquisition. Hong, I think near the end of your prepared remarks, you commented that you thought data center year-on-year revenue this year could be up around 50%. One, just confirming that I heard that right. Two, can you help us understand what the biggest growth drivers are or rank the growth drivers that you see driving that degree of growth?

Speaker #10: One, just confirming that I heard that right. And two, can you help us understand what the biggest growth drivers are, or rank the growth drivers that you see driving that degree of growth?

Speaker #4: Yeah, thank you, Craig. Yes, you heard it right. Year over year, we expect the data center revenue to grow 50% this year. So the driver is ACC with a hyperscaler 1.60 fiber edge, second half of the year.

Hong Hou: Yeah. Thank you, Craig. Yes, you heard it right. Year-over-year, we expect the data center revenue to grow 50% this year. The driver is ACC with a hyperscaler, 1.60 FiberEdge, second half of the year. Then there might be even linear equalizer on board contributing to the growth.

Speaker #4: And then there might be even a linear equalizer on board, contributing to the growth.

Craig Ellis: That's helpful. Thank you. Mark, congratulations on the strength and you too, Hong, on the strength in Semtech's gross margin and what we're seeing in signal integrity. It's really nice to see those mid high sixties levels reattained. The comments on accretive second half products, are we signaling that gross margin for the segment could start with a seven handle later this year or next year? Or would you still expect to be in the sixties?

Speaker #10: That's helpful. Thank you. And then, Mark, congratulations on the strength. And you too, Hong, on the strength—and SEMI's gross margin and what we're seeing in signal integrity.

Speaker #10: It's really nice to see those mid-high 60s levels re-attained. The comments on accretive second-half products—are we signaling that gross margin for the segment could start with a 7-handle later this year or next year?

Speaker #10: Or would you still expect to be in the 60s?

Hong Hou: The new products that we introduced do have accretive gross margins, so I'm very pleased with that. It's a great return on the R&D that we put into the products, and they do contribute to growing gross margin. We still also have other products, so at 800 gig, right? I'm not expecting it to be in the sevens, but firmly in this ZIP code.

Speaker #4: So, the new products that we introduced do have accretive gross margins, so I'm very pleased with that. It's a great return on the R&D that we put into the products.

Speaker #4: And they do contribute to growing gross margin. But we still also have other products. So, at 800 gig, right? So, I'm not expecting it to be in the 7s.

Speaker #4: But firmly in this zip code.

Speaker #10: Yeah, well, congratulations on where it is. Thanks, guys.

Craig Ellis: Yeah. Well, congratulations on where it is. Thanks guys.

Speaker #4: Thank you, Craig.

Hong Hou: Thank you.

Speaker #1: Our next question is from Cody Akri with Benchmark Stone.

Operator 2: Our next question is from Cody Acree with Benchmark.

Operator: Our next question is from Cody Acree with Benchmark.

Speaker #11: Thanks, guys. Take my question. Maybe just following up on Craig's question. You didn't mention LPOs among the drivers of that 50% data center growth.

Cody Acree: Thanks guys for taking my question. Maybe just following up on Craig's question. You didn't mention LPOs among the drivers of that 50% data center growth. Any reason for leaving that out? Maybe can you just talk about the breadth of expansion of your engagements with ACC and LPOs over the last few months and how you expect that to those to progress over the course of the year?

Speaker #11: Any reason for leaving that out? And maybe, can you just talk about the breadth, the expansion of your engagements with ACC and LPOs over the last few months?

Speaker #11: And how do you expect those to progress over the course of the year?

Hong Hou: Thank you, Cody. Yes, the LPO continue to grow and as we said, the Q4, we delivered just as we gave the guidance, mid-single digit and signaled the first ramp and to continue to ramp on the LPO, you know. But we got them, in the FiberEdge, product category, so included in there. The LPO adoption is proliferating, and that's also build the confidence for this XPO and NPO, strategy. ACC is also getting more and more accepted by the industry. I mentioned that, the hyperscaler, one hyperscaler start ramping mid-year, and then more hyperscalers are embracing this ACC as well. Linear equalizer with multiple customers. The engagement has been going really strong.

Speaker #4: Thank you, Cody. So yes, the LPO continues to grow and, as we said, in Q4 we delivered just as we gave the guidance—mid-single digit.

Speaker #4: And signaled the first ramp. And it continued to ramp on the LPO, but we got in the Fiber Edge product category, so included in there.

Speaker #4: The LPO adoption is proliferating, and that's also built the confidence for this XPO and MPO strategy. Then ACC—it's also getting more and more accepted, but the industry, I mentioned that the hyperscaler, one hyperscaler started ramping mid-year.

Speaker #4: And then more hyperscalers are embracing this ACC as well. Linear Equalizer with multiple customers—the engagement has been going really strong. So I do believe that we not only have growth drivers lined up for this year, but also have multiple growth drivers lined up for future periods beyond.

Hong Hou: I do believe that we not only have growth drivers lined up for this year and have multiple growth drivers lined up from future periods beyond FY 2027.

Cody Acree: Great. Thanks for that color. Mark, any thoughts on your OpEx trends for the year?

Speaker #11: Great. Thanks for that, Tyler. Mark, any thoughts on your OPEX trends for the year?

Hong Hou: Yeah. You know, I'm pleased that, you know, we're able to have the flexibility to invest in the business. Our outlook for next quarter in OpEx growth is really R&D. I believe we demonstrated strong returns on investment and, you know, our investment in R&D certainly yields stronger returns than interest expense, for example. You know, but we do remain disciplined in our R&D investments, focusing on our core data center portfolio on LoRa and PerSe. You know, the two recent acquisitions do add some incremental R&D, but these are in our core portfolios.

Mark Lin: Yeah. You know, I'm pleased that, you know, we're able to have the flexibility to invest in the business. Our outlook for next quarter in OpEx growth is really R&D. I believe we demonstrated strong returns on investment and, you know, our investment in R&D certainly yields stronger returns than interest expense, for example. You know, but we do remain disciplined in our R&D investments, focusing on our core data center portfolio on LoRa and PerSe. You know, the two recent acquisitions do add some incremental R&D, but these are in our core portfolios.

Speaker #4: Yeah, so I'm pleased that we're able to have the flexibility to invest in the business. Our outlook for next quarter in OPEX growth is really R&D.

Speaker #4: So, I believe we demonstrated strong returns on investment. And our investment in R&D certainly yields stronger returns than interest expense, for example. But we do remain disciplined in our R&D investments, focusing on our core data center portfolio, on LoRa, and per se.

Speaker #4: And the two recent acquisitions do add some incremental R&D, but these are in our core portfolios.

Cody Acree: All right, great. Thanks, guys.

Speaker #11: All right. Great. Thanks, guys.

Hong Hou: Thank you.

Craig Ellis: Thanks, Cody.

Mark Lin: Thanks, Cody.

Speaker #4: Thank you. Thanks, Cody.

Operator 2: Thank you. Our last question is from Scott Searle with Roth Capital Partners.

Operator: Thank you. Our last question is from Scott Searle with Roth Capital Partners.

Speaker #1: Thank you. Our last question is from Scott Searle with Roth Capital Partners.

Scott Searle: Hey, guys. Thanks for sneaking me in under the wire. Just real quick on LoRa, wondering if you could provide a little bit more color. In the past, China was such a big percentage of the mix. I'm wondering how it was in the quarter and the pipeline of opportunities there. Will you continue to diversify away from the Chinese marketplace? And as part of that, you know, Sidewalk has cropped up from time to time as being a large opportunity. It's been, I think, slow to date. I'm wondering if you could calibrate when we might start to see that contributing in a more meaningful fashion. And as a follow-up, just on the protection and sensing side, I think you indicated that there was a large win that kicks into Q1.

Speaker #12: Hey, guys. Thanks for sneaking me in under the wire. Just real quick on LoRa—wondering if you could provide a little bit more color in the past.

Speaker #12: China was such a big percentage in the mix. I'm wondering how it was in the quarter and the pipeline of opportunities there. We continue to diversify away from the Chinese marketplace.

Speaker #12: And as part of that, Sidewalk has cropped up from time to time as being a large opportunity. It's been, I think, slow to date.

Speaker #12: I'm wondering if you could calibrate when we might start to see that contributing in a more meaningful fashion. And as a follow-up, just on the protection and sensing side, I think you indicated that there was a large win that kicks into the first quarter.

Scott Searle: I'm wondering if you could just clarify that and provide any additional color. Thanks.

Speaker #12: I'm wondering if you could just clarify that and provide any additional color. Thanks.

Hong Hou: Okay. Thank you. LoRa, right now, the growth is broad-based across multiple regions. China certainly is a good driver. In Europe and in North America, the growth is equally strong, and it's all benefited from multiple growth drivers out there. Sidewalk, you know, certainly, it had a little bit of false start several years ago, but at CES in January, they had over 10 product demos all embedded with LoRa chips inside. They're gonna start deploying in March in North America. They had a clear plan to proliferate into other countries. We'll see this time, but that can be a pretty significant opportunity for Semtech. I would let Mark address the TVS question.

Speaker #4: Okay, thank you. LoRa, right now, the growth is broad-based across multiple regions. China certainly is a good driver, and in Europe and in North America, the growth is equally strong.

Speaker #4: And it's all benefited from multiple growth drivers out there. So Sidewalk, certainly, it had a little bit of a false start several years ago. But at CES in January, they had over 10 product demos, all embedded with LoRa chips inside.

Speaker #4: So they're going to start deploying in March in North America. Had a clear plan for proliferating into other countries, so we'll see this time.

Speaker #4: But that can be a pretty significant opportunity for Semtech. So I would like Mark to address the TVS question.

Mark Lin: Yeah. TVS, we're seeing growth above, let's say, you know, a proxy of handset volumes, unit volumes. We have a number of good design wins in TVS. Also, there's a little bit of a geopolitical tailwind that we believe is sustainable over a number of quarters that's leading to our better than seasonal guide for Q1.

Speaker #11: Yeah. So, TVS—we're seeing growth above, let's say, a proxy of handset unit volumes. So we have a number of good design wins in TVS.

Speaker #11: And also, there's a little bit of a geopolitical tailwind that we believe is sustainable over a number of quarters. That's leading to our better-than-seasonal guide for Q1.

Scott Searle: Great. Thanks so much. Nice job on the quarter.

Speaker #12: Great, thanks so much. Nice job on the quarter.

Mark Lin: Thanks, Scott.

Hong Hou: Thank you.

Speaker #11: Thanks, guys.

Speaker #10: Thank you.

Operator 2: Thank you. I would now like to hand the call back over to Mitch Haws for any closing remarks.

Operator: Thank you. I would now like to hand the call back over to Mitch Haws for any closing remarks.

Speaker #4: See you.

Speaker #1: Thank you. I would now like to hand the call back over to Mitch Haws for any closing remarks.

Mitchell Haws: That concludes today's call. Thanks to all of you for joining us today. We look forward to seeing you at various investor events over the coming weeks and at OFC starting tomorrow. Thank you.

Speaker #13: Thanks. That concludes today's call. Thanks to all of you for joining us today. We look forward to seeing you at various investor events over the coming weeks.

Speaker #13: And at OFC, starting tomorrow. Thank you.

Operator 2: We thank you again for your participation. You may now disconnect your lines.

Operator: We thank you again for your participation. You may now disconnect your lines.

Q4 2026 Semtech Corp Earnings Call

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