Q1 2026 Lattice Semiconductor Corp Earnings Call

May 4, 2026

Speaker #2: Ladies and gentlemen, greetings, and welcome to the Lattice Semiconductor First Quarter 2026 Earnings Conference Call. At this time, all participants are in the listen-only mode.

Operator 2: Ladies and gentlemen, greetings and welcome to the Lattice Semiconductor Q1 2026 Earnings Conference Call. At this time, all participants are in the listen only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal an operator by pressing star and 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today, Mr. Rick Muscha, Vice President of Investor Relations. Please go ahead.

Operator: Ladies and gentlemen, greetings and welcome to the Lattice Semiconductor Q1 2026 Earnings Conference Call. At this time, all participants are in the listen only mode. A brief question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal an operator by pressing star and 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today, Mr. Rick Muscha, Vice President of Investor Relations. Please go ahead.

Speaker #2: A brief question-and-answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please signal an operator by pressing * and 0 on your telephone keypad.

Speaker #2: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host for today, Mr. Rick Muscha, Vice President of Investor Relations.

Speaker #2: Please go ahead.

Speaker #3: Thank you, operator, and good afternoon, everyone. With me today are Fouad Tamer, LATTICE CEO; Lorenzo Flores, LATTICE CFO; and Sanjoy Maiti, AMI CEO. We'll provide a financial and business review of the first quarter of 2026, an overview of the AMI acquisition, and the business outlook for the second quarter of 2026.

Rick Muscha: Thank you, operator. Good afternoon, everyone. With me today are Ford Tamer, Lattice's CEO, Lorenzo Flores, Lattice's CFO, and Sanjoy Maity, AMI's CEO. We'll provide a financial and business review of Q1 2026, an overview of the AMI acquisition, and the business outlook for Q2 2026. Both a copy of our earnings press release and the press release announcing our planned acquisition of AMI can be found at our company website in the investor relations section at latticesemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available, and that actual results may differ materially.

Speaker #3: Both a copy of our earnings press release and the press release announcing our planned acquisition of AMI can be found on our company website in the investor relations section at latticemi.com.

Speaker #3: I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company.

Speaker #3: We wish to caution you that such statements are predictions based on information that is currently available and an actual result may differ materially. We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks.

Rick Muscha: We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs, and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This call includes and constitutes the company's official guidance for Q2 2026. If at any time after this call we communicate any material changes to this guidance, we intend that such updates will be done using a public forum such as a press release or publicly announced conference call. We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Speaker #3: These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

Speaker #3: This call includes and constitutes the company's official guidance for the second quarter of 2026. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum.

Speaker #3: Such as a press release or publicly announced conference call. We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends.

Speaker #3: For historical periods, we provide a reconciliation of these non-GAAP financial measures to GAAP financial measures that can be found on the investor relations section of our website at latticemi.com.

Rick Muscha: For historical periods, we provide reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the investor relations section of our website at latticesemi.com. Lastly, we've streamlined our financial reporting to better align with our strategic focus. Beginning this quarter, we'll break out revenue across two primary end markets: Compute and Communications and Industrial and Embedded. Our consumer business is now included within the Industrial and Embedded end market. For comparability, we've recast all prior period results so you can make a direct apples to apples comparison. With that, I'll turn the call over to our CEO, Ford Tamer.

Speaker #3: Lastly, we've streamlined our financial reporting to better align with our strategic focus. Beginning this quarter, we'll break out revenue across two primary markets, compute and communications, and industrial and embedded.

Speaker #3: Our consumer business is now included within the industrial and embedded end market. For comparability, we've recast all prior period results so you can make a direct apples-to-apples comparison.

Speaker #3: With that, I'll turn the call over to our CEO, Fouad Tamer.

Speaker #4: Thank you, Rick, and welcome, everyone, to our first quarter earnings call. LATTICE delivered an excellent start to 2026 with results that underscore both strong market tailwinds and our disciplined execution against a clear strategy.

Ford Tamer: Thank you, Rick, and welcome everyone to our Q1 earnings call. Lattice delivered an excellent start to 2026, with results that underscore both strong market tailwinds and our disciplined execution against a clear strategy. Our Q1 performance exceeded expectations. Our Q2 outlook reflects our expected continued momentum across the business. This is the 7th earnings call since I joined Lattice. I hope we have now demonstrated that we consistently say what we do and do what we say. These positive factors in aggregate provide the foundation for our proposed acquisition of AMI. This acquisition positions Lattice to create the industry's most comprehensive, secure management and control platform and enables us to deepen our customer relationships and expand our long-term growth opportunity. Now turning to our results and outlook.

Speaker #4: Our first quarter performance exceeded expectations, and our second quarter outlook reflects our expected continued momentum across the business. This is the seventh earnings call since I joined LATTICE, and I hope we have now demonstrated that we consistently say what we do and do what we say.

Speaker #4: And these positive factors in aggregate provide the foundation for our proposed acquisition of AMI. This acquisition positions LATTICE to create the industry's most comprehensive secure management and control platform and enables us to deepen our customer relationships and expand our long-term growth opportunity.

Speaker #4: Now, turning to our results and outlook. Revenue for the first quarter was $170.9 million, representing 42% year-over-year growth, with traction across all end markets.

Ford Tamer: Revenue for Q1 was $170.9 million, representing 42% year-over-year growth, with strengths across all end markets. Our Compute and Communications end market achieved record revenue, driven by continuous momentum in data center AI applications. In Q1, 62% of our revenue came from Compute and Communications products, with expanding opportunities ahead. As Rick highlighted in the safe harbor, we have now merged our industrial and automotive end market with our consumer end market into what we now term Industrial and Embedded. The revenue from our Industrial and Embedded end market grew more than 20% sequentially, reflecting improving market conditions and expanding adoption of Lattice solutions. As importantly, along with increased consumption, channel inventory reduced from 3 months last quarter to close to 2 months of inventory on hand. We expect this trend to continue to under 2 months in Q2.

Speaker #4: Our compute and communications end market achieved record revenue, driven by continued momentum in data center AI applications. In Q1, 62% of our revenue came from compute and communications products, with expanding opportunities ahead.

Speaker #4: As Rick highlighted in the Safe Harbor, we have now merged our industrial and automotive end market with our consumer end market into what we now term industrial and embedded.

Speaker #4: The revenue from our industrial and embedded end market grew more than 20% sequentially, reflecting improving market conditions and expanding adoption of Lattice solutions. As importantly, along with increased consumption, China inventory reduced from three months last quarter to close to two months of inventory on hand.

Speaker #4: And we expect this trend to continue to under two months in Q2. As we anticipated, profitability grew faster than revenue, with EPS up 86% year-over-year.

Ford Tamer: As we anticipated, profitability grew faster than revenue, with EPS up 86% year-over-year. These results demonstrate the operating leverage in our model and our ability to scale efficiently as revenue accelerates. Demand trends continue to build across AI servers, networking, industrial automation, and emerging physical AI applications. We are seeing accelerated bookings, which now support a strong backlog that extends well into 2027. We're also witnessing improved customer visibility and healthy design win momentum across our FPGA portfolio. Taken together, we're confident that we're in the early innings of a multi-year growth cycle and in our ability to deliver sustained above-market growth for the foreseeable future. Our results also highlight the progress we've made in evolving Lattice into a system-level solutions company. Customers increasingly value Lattice not just for low-power programmable hardware, but for complete solutions spanning connectivity, security, management, and control.

Speaker #4: These results demonstrate the operating leverage in our model and our ability to scale efficiently as revenue accelerates. Demand trends continue to build across AI servers, networking, industrial automation, and emerging physical AI applications.

Speaker #4: We are seeing accelerated bookings, which now support a strong backlog that extends well into 2027. We're also witnessing improved customer visibility and healthy design-wind momentum across our FPGA portfolio.

Speaker #4: Taken together, we're confident that we're in the early innings of a multi-year growth cycle and in our ability to deliver sustained, above-market growth for the foreseeable future.

Speaker #4: Our results also highlight the progress we've made in evolving Lattice into a system-level solutions company. Customers increasingly value Lattice not just for low-power programmable hardware, but for complete solutions spanning connectivity, security, management, and control.

Speaker #4: As system complexity increases, particularly in AI-driven and advanced computing architectures, our customers are giving the highest priority to platforms that reduce integration risk, shorten development cycles, and enable faster deployment at scale.

Ford Tamer: As system complexity increases, particularly in AI-driven and advanced computing architectures, our customers are giving their highest priority to platforms that reduce integration risk, shorten development cycles, and enable faster deployment at scale. These trends continue to expand Lattice's role within customer systems, increase attach rates, and drive higher value per design. We also continue to benefit from our everywhere companion chip strategy, positioning Lattice broadly across the ecosystem. Rather than competing with CPUs, GPUs, or other processors, our low-power FPGAs enable and enhance them, providing secure boot, power sequencing, platform management, IO aggregation, sensor bridging, and control. This approach allows Lattice to participate across hyperscale data centers, communication infrastructure, industrial automation, aerospace and defense, automotive, medical, and emerging physical AI applications while remaining silicon agnostic and ecosystem neutral.

Speaker #4: These trends continue to expand Lattice's role within customer systems, increase attach rates, and drive higher value per design. We also continue to benefit from our 'everywhere companion chip' strategy, positioning Lattice broadly across the ecosystem.

Speaker #4: Rather than competing with CPUs, GPUs, or other processors, our low-power FPGAs enable and enhance them, providing secure boot, power sequencing, platform management, I/O aggregation, sensor bridging, and control.

Speaker #4: This approach allows LATTICE to participate across hyperscale data centers, communication infrastructure, industrial automation, aerospace and defense, automotive, medical, and emerging physical AI applications while remaining silicon agnostic and ecosystem neutral.

Speaker #4: Looking to the second quarter, our revenue guidance of $185 million at the midpoint represents nearly 50% year-over-year growth. This underscores our confidence in the accelerating momentum of the business.

Ford Tamer: Looking to the second quarter, our revenue guidance of $185 million at the midpoint represents nearly 50% year-over-year growth. This underscores our confidence in the accelerating momentum of the business. Our midpoint EPS outlook of $0.44 reflects roughly 80% year-over-year growth. It highlights the powerful operating leverage in our model and differentiated products we bring to market. We maintain a disciplined capital strategy and believe we'll be able to consistently drive earnings growth that significantly outpaces revenue growth. We are committed to continue to do so. Turning now to the planned acquisition of AMI we announced earlier today. We are excited to have signed a definitive agreement to acquire AMI, a leader in firmware, orchestration, and system-level manageability.

Speaker #4: Our midpoint EPS outlook of 44 cents reflects roughly 80% year-over-year growth. It highlights the powerful operating leverage in our model and differentiated products we bring to market.

Speaker #4: We maintain a disciplined capital strategy and believe we'll be able to consistently drive earnings growth that significantly outpaces revenue growth. And we are committed to continue to do so.

Speaker #4: Turning now to the planned acquisition of AMI we announced earlier today. We are excited to have signed a definitive agreement to acquire AMI, a leader in firmware, orchestration, and system-level manageability.

Speaker #4: The combination of Lattice's low-power programmable hardware with AMI's industry-leading solutions, including BIOS, BMC, and platform security, creates the industry's most complete secure management and control platform.

Ford Tamer: The combination of Lattice's low-power programmable hardware with AMI's industry-leading solutions, including BIOS, BMC, and platform security, create the industry's most complete secure management and control platform. Together, we'll enable customers to accelerate development, simplify system integration, and bring increasingly complex platforms to market faster across AI servers, advanced compute, communication infrastructure, and industrial applications. Strategically, this acquisition represents a pivotal milestone in advancing Lattice's long-term growth strategy. AMI's firmware is expected to remain processor and silicon agnostic, preserving open ecosystems and customer choice, while Lattice FPGAs provide a complementary hardware foundation, reinforcing our everywhere companion chip strategy. We expect this transaction to be accretive to gross margin, free cash flow, and EPS on a non-GAAP basis. It also supports our trajectory toward exceeding a $1 billion annual revenue run rate by the end of 2026.

Speaker #4: Together, we'll enable customers to accelerate development, simplify system integration, and bring increasingly complex platforms to market faster across AI servers, advanced compute, communication infrastructure, and industrial applications.

Speaker #4: Strategically, this acquisition represents a pivotal milestone in advancing Lattice's long-term growth strategy. AMI's firmware is expected to remain processor and silicon agnostic, preserving open ecosystems and customer choice, while Lattice FPGAs provide a complementary hardware foundation, reinforcing our everywhere companion chip strategy.

Speaker #4: We expect this transaction to be accretive to gross margin, free cash flow, and EPS on a non-GAAP basis. It also supports our trajectory toward exceeding a $1 billion annual revenue run rate by the end of 2026.

Speaker #4: We look forward to welcoming the talented AMI team to Lattice and expect this combination to strengthen our system-level roadmap and long-term growth profile significantly.

Ford Tamer: We look forward to welcoming the talented AMI team to Lattice and expect this combination to strengthen our system-level roadmap and long-term growth profile significantly. Looking forward, we are encouraged by the continued durability of demand across our end markets, the depth of customer engagement, and the expanding role of Lattice's place in next-generation systems. With a differentiated strategy, a scalable financial model, and an increasingly complete platform spanning hardware, firmware, security, manageability, and control, we are confident that Lattice is exceptionally well-positioned for the future. With that, I will turn over the call to Lorenzo for a comprehensive review of our Q1 results. Lorenzo?

Speaker #4: Looking forward, we're encouraged by the continued durability of demand across our end markets, the depths of customer engagement, and the expanding role LATTICE plays in next-generation systems.

Speaker #4: With a differentiated strategy, a scalable financial model, and an increasingly complete platform spanning hardware, firmware, security, manageability, and control, we are confident that LATTICE is exceptionally well-positioned for the future.

Speaker #4: With that, I'll turn over the call to Lorenzo for a comprehensive review of our first-quarter results. Lorenzo, thank you for it, and good afternoon, everyone.

Lorenzo Flores: Thank you, Ford, and good afternoon, everyone. We will begin with an overview of our Q1 2026 financial performance and our Q2 outlook, followed by an overview of our planned AMI acquisition. With a quarter this good and guidance this strong, it is worth repeating some of what Ford said. Revenue reached $170.9 million, growing 42% year-over-year and 17% quarter-over-quarter. Earnings performance was even stronger, as Q1 non-GAAP EPS demonstrated the leverage in our model. EPS grew more than 80% year-over-year to $0.41, a 30% increase quarter-over-quarter and above the high end of our guidance. We expect Q2 to continue this growth trend, and I'll detail our guidance in a few moments. Back to Q1. Revenue growth was driven by a record performance in Compute and Communications, up 86% year-over-year and 15% sequentially.

Speaker #4: We will begin with an overview of our first-quarter 2026 financial performance and our second-quarter outlook, followed by an overview of our planned AMI acquisition.

Speaker #4: With a quarter this good and guidance this strong, it is worth repeating some of what Ford said. Revenue reached $170.9 million, growing 42% year-over-year and 17% quarter-over-quarter.

Speaker #4: Earnings performance was even stronger, as Q1 non-GAAP EPS demonstrated the leverage in our model. EPS grew more than 80% year-over-year to $0.41, a 30% increase quarter-over-quarter, and above the high end of our guidance.

Speaker #4: We expect Q2 to continue this growth trend, and I'll detail our guidance in a few moments. Back to Q1, revenue growth was driven by a record performance in compute and communications, up 86% year-over-year and 15% sequentially.

Speaker #4: We continue to benefit from strong data center growth as Ford told you. Additionally, our industrial and embedded end market grew 21% quarter-over-quarter, primarily driven by increased demand in factory automation, robotics, and medical applications.

Lorenzo Flores: We continued to benefit from strong data center growth, as Ford told you. Our industrial and embedded end market grew 21% quarter-over-quarter, primarily driven by increased demand in factory automation, robotics, and medical applications. Q1 non-GAAP gross margin was a little better than expected at 70%, up 60 basis points quarter-over-quarter and 100 basis points year-over-year. Our gross margin continues to reflect the value and differentiation our products provide for our customers. Non-GAAP operating expense was $60.8 million, up roughly 8% sequentially and 18% on a year-over-year basis. Much of the sequential increase is from performance-based bonuses and commissions as our revenue and profitability are exceeding expectations. We also continue to invest in order to capitalize on our near and long-term opportunities.

Speaker #4: Q1 non-GAAP gross margin was a little better than expected at 70%, up 60 basis points quarter-over-quarter and 100 basis points year-over-year. Our gross margin continues to reflect the value and differentiation our products provide for our customers.

Speaker #4: Non-GAAP operating expense was 60.8 million dollars, up roughly 8% sequentially and 18% on a year-over-year basis. Much of the sequential increase is from performance-based bonuses and commissions as our revenue and profitability are exceeding expectations.

Speaker #4: We also continue to invest in order to capitalize on our near- and long-term opportunities. Our Q1 non-GAAP operating margin expanded 370 basis points to 34.4%, and our EBITDA margin increased 310 basis points to 39.6%.

Lorenzo Flores: Our Q1 non-GAAP operating margin expanded 370 basis points to 34.4%, and our EBITDA margin increased 310 basis points to 39.6%. Both were a little better than expected. Q1 cash flow was impacted by last year's annual bonus payout as well as revenue linearity in the quarter associated with our rapid growth. GAAP net cash flow from operating activities for Q1 2026 was $50.3 million compared to $57.6 million in Q4. Free cash flow trended with operating cash flow. In Q1, free cash flow was $39.7 million, down from $44 million in Q4. We expect a strong recovery of cash flow as we continue to grow. During Q1, we repurchased $15 million of stock.

Speaker #4: Both were a little better than expected. Q1 cash flow was impacted by last year's annual bonus payout, as well as revenue linearity in the quarter associated with our rapid growth.

Speaker #4: GAAP net cash flow from operating activities for the first quarter of 2026 was $50.3 million, compared to $57.6 million in Q4. Free cash flow trended with operating cash flow.

Speaker #4: In Q1, free cash flow was $39.7 million, down from $44 million in Q4. We expect a strong recovery of cash flow as we continue to grow.

Speaker #4: During Q1, we repurchased 15 million dollars of stock. We ended the quarter with 140 million in cash and no debt. Now for our guidance.

Lorenzo Flores: We ended the quarter with $140 million in cash and no debt. Now for our guidance. We are targeting closing the AMI acquisition in Q3, this guidance reflects expectations for Lattice standalone. In Q2 2026, we expect revenues to grow in the range of $175 million to $195 million. At the midpoint of this range, this is almost 50% growth from Q2 2025 and 8% over Q1. We expect gross margin to be 70% ±1% on a non-GAAP basis. We expect non-GAAP operating expense to be between $64 million and $67 million. Most of the growth in OpEx will be in R&D and reflects disciplined investments to drive long-term, sustained revenue growth. We expect income tax rate for Q2 to be between 4% and 6% on a non-GAAP basis.

Speaker #4: We are targeting closing the AMI acquisition in Q3, so this guidance reflects expectations for Lattice standalone. In Q2 2026, we expect revenues to grow in the range of $175 million to $195 million.

Speaker #4: At the midpoint of this range, this is almost 50% growth from Q2 25 and 8% over Q1. We expect gross margin to be 70% plus or minus 1% on a non-GAAP basis.

Speaker #4: We expect non-GAAP operating expense to be between $64 and $67 million. Most of the growth in OPEX will be in R&D and reflects disciplined investments to drive long-term, sustained revenue growth.

Speaker #4: We expect the income tax rate for Q2 to be between 4% and 6% on a non-GAAP basis. We anticipate non-GAAP EPS to be in the range of $0.42 per share to $0.46 per share.

Lorenzo Flores: We anticipate non-GAAP EPS to be in the range of $0.42 per share and $0.46 per share. At the midpoint of this guidance, we expect that we would again exceed 80% year-over-year earnings growth as we continue to demonstrate the leverage in our model. Turning now to the AMI transaction. I am just as excited as Ford, our board of directors, and our leadership team that we have entered into a definitive agreement to acquire AMI. AMI is a leader in platform firmware, secure boot, device management, and system control software. This acquisition represents a strategic expansion of Lattice's capabilities to deliver system-level solutions, further accelerating our growth.

Speaker #4: At the midpoint of this guidance, we expect that we would again exceed 80% year-over-year earnings growth as we continue to demonstrate the leverage in our model.

Speaker #4: Turning now to the AMI transaction. I am just as excited as Ford, our board of directors, and our leadership team that we have entered into a definitive agreement to acquire AMI.

Speaker #4: AMI is a leader in platform firmware, secure boot, device management, and system control software. This acquisition represents a strategic expansion of LATTICE's capabilities to deliver system-level solutions, further accelerating our growth.

Speaker #4: The total consideration of the deal is expected to be 1.65 billion dollars, with 1 billion of cash and 650 million of equity. This is approximately 5.4 million shares based on the closing price on May 1st.

Lorenzo Flores: The total consideration of the deal is expected to be $1.65 billion, with $1 billion of cash and $650 million of equity. This is approximately 5.4 million shares based on the closing price on 1 May. We expect the acquisition to be equally compelling from a financial perspective. With AMI, we expect our revenue to exceed an annual run rate of $1 billion by the end of this year. We anticipate AMI's software-centric asset-light model will further enhance Lattice's already strong business model. We expect that the transaction will be immediately accretive to gross margin, free cash flow, and EPS on a non-GAAP basis. We will cover our pro forma expectations in more details after we close the transaction. In closing, we are truly excited about our organic growth and financial performance.

Speaker #4: We expect the acquisition to be equally compelling from a financial perspective. With AMI, we expect our revenue to exceed an annual run rate of $1 billion by the end of this year.

Speaker #4: We anticipate AMI's software-centric, asset-light model will further enhance Lattice's already strong business model. We expect that the transaction will be immediately accretive to gross margin, free cash flow, and EPS on a non-GAAP basis.

Speaker #4: We will cover our pro forma expectations in more detail after we close the transaction. In closing, we are truly excited about our organic growth and financial performance.

Speaker #4: We are all very enthusiastic about the opportunity to combine Lattice's strengths with those of AMI. Finally, the Lattice team remains focused on execution and taking advantage of the expanding growth opportunities ahead.

Lorenzo Flores: We are all very enthusiastic about the opportunity to combine Lattice's strengths with those of AMI. Finally, the Lattice team remains focused on execution and taking advantage of the expanding growth opportunities ahead. We are well-positioned to drive continued short and long-term revenue growth, expand our operating margin, increase free cash flow, and grow earnings faster than revenue. Operator, that concludes our formal remarks. We can now open the call for questions.

Speaker #4: We are well positioned to drive continued short- and long-term revenue growth, expand our operating margin, increase free cash flow, and grow earnings faster than revenue.

Speaker #4: Operator, that concludes our formal remarks. We can now open the call for questions.

Speaker #2: Operator, before we jump into questions, can we introduce with us today AMI CEO, Sanjoy Maiti, who has a few remarks. Sanjoy?

Rick Muscha: Operator, before we jump into questioning, can we introduce, with us today AMI CEO Sanjoy Maity, who has a few remarks. Sanjoy?

Ford Tamer: Operator, before we jump into questioning, can we introduce, with us today AMI CEO Sanjoy Maity, who has a few remarks. Sanjoy?

Speaker #3: Hello. Thank you, Ford. At AMI, our management team, our employees, board, investors, and I are equally excited to be joining with you and the Lattice Semiconductor team.

Sanjoy Maity: Hello. Thank you, Ford. At AMI, our management team, our employees, board, investors, and I, we are equally excited to be joining with you and the Lattice Semiconductor team. The strategic combinations with Lattice Semiconductor pairs the low-power programmable leader with the leader in the platform firmware and infrastructure manageability for cloud and AI data centers. Lattice and AMI, we shared a long history, a collaboration, and a common vision for secure management and control platform. Now together, we can build on that foundation, extending the reach of Lattice's low-power FPGAs and AMI's trusted platform. While we will maintain the open, silicon-agnostic, multi-vendor support our customers value, we also share the same commitment to disciplined execution, strong margins, and focus on building values for our investors. Thank you again. I'm very excited and looking forward to build a great future together.

Speaker #3: The strategic combinations with Lattice Semiconductor pairs the low-power programmable leader with the leader in platform firmware and infrastructure manageability for cloud and AI data centers.

Speaker #3: Lattice and AMI each shared a long history of collaboration and a common vision for a secure management and control platform. Now, together, we can build on that foundation, extending the reach of Lattice's low-power FPGAs and AMI's trusted platform.

Speaker #3: While we will maintain the open, silicon-agnostic, multi-vendor support our customers value, we also share the same commitment to disciplined execution, strong margins, and focus on building value for our investors.

Speaker #3: Thank you again. I'm very excited and looking forward to building a great future together.

Speaker #2: Sanjoy, great to have you here. Welcome to LATTICE. And operator, we can now take questions.

Ford Tamer: Sanjoy, great to have you here. Welcome to Lattice. Operator, we can now take questions.

Speaker #4: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad.

Operator 2: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Ruben Roy with Stifel. Please state your question.

Operator: Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. Our first question is from Ruben Roy with Stifel. Please state your question.

Speaker #4: A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue.

Speaker #4: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions.

Speaker #4: Our first question is from Ruben Roy, with STEIFEL. Please state your question.

Speaker #5: Yes, thank you. Hey guys, congratulations on the strong results and outlook and the deal announcement. I guess Ford, to start, in the press release, you talk about doubling the SAM opportunity here.

Ruben Roy: Yes, thank you. Hey, guys, congratulations on the strong results and outlook and the deal announcement. I guess, Ford, to start, in the press release, you talk about doubling the SAM opportunity here. Can you talk about how we should think about that expansion? How much is incremental addressable opportunity from AMI and their existing firmware install base versus, you talk about combined solution categories, et cetera, you know, that perhaps neither company could attack independently. Can you help us with that? I guess as part of that question, the core business is inflecting, particularly on the compute side. If you think about 2026, how are you thinking about mix of revenue from servers specifically and maybe AI overall? Thank you.

Speaker #5: Can you talk about how we should think about that expansion—how much is incremental addressable opportunity from AMI and their existing firmware installed base versus when you talk about combined solution categories, etc.?

Speaker #5: That perhaps neither company could attack independently. Can you help us with that? And I guess as part of that question, the core business is inflecting particularly on the compute side.

Speaker #5: If you think about 2026, are you thinking about a mix of revenue from servers specifically, and maybe AI overall? Thank you.

Speaker #2: Thank you, Ruben. Good question. So yes, we expect our total served, or the serviceable available, market to us to double from about what we think was about $6 billion currently to about $12 billion jointly with AMI over the next three to four years.

Ford Tamer: Thank you, Ruben. Good question. Yes, we expect our total the served or the service available market to us to double from about what we think was about $6 billion currently to about $12 billion jointly with AMI over the next 3 to 4 years. That main increase will come from this Compute and Communications sub-segment. As you pointed out, the two major indicators in that segment are the percent server and the percent AI. These are a good follow-on question on the percent server that has been growing steadily for us from sort of the teens a couple of years ago to this year, expected to be in about 38% of our revenue, total revenue coming from server.

Speaker #2: And that main increase will come from this compute and communication subsegment. And as you pointed out, the two major indicators in that segment are the percent server and the percent AI, and so these are good a good follow-on question on the percent server that has been growing steadily for us from sort of the teens a couple of years ago to this year expected to be in about 38% in our of our revenue total revenue coming from server.

Speaker #2: And the second facet to the question in this compute and communications market or subsegment is the percent of our revenue coming from AI. And again, it grew from the mid-teens in '24 to the high teens last year, to where we expect it to be about 25% of revenue in 2026.

Ford Tamer: The second facet to the question in this Compute and Communications market or sub-segment is the % of our revenue coming from AI. Again, it grew from the mid-teens in 2024 to the high teens last year to where we expect it to be about 25% of revenue in 2026. AMI plus Lattice is going to be uniquely positioned to be able to provide solutions to customers in this Compute and Comms market.

Speaker #2: And AMI plus Lattice is going to be uniquely positioned to be able to provide solutions to customers in this compute and comms market.

Speaker #5: That's great. Thank you, Ford. If I could ask a quick follow-up for Lorenzo, it's great to see that you're flagging the deal as immediately accretive on gross margin, free cash flow, EPS.

Ruben Roy: That's great. Thank you, Ford. If I could ask a quick follow-up for Lorenzo. It's great to see that you're flagging the deal as immediately accretive on gross margin, free cash flow, and EPS. Can you give us a framework for the gross margin profile? I know it's early, Lorenzo, but any thoughts on, you know, the software and firmware business relative to, you know, your 70% non-GAAP gross margin run rate at this point? How much of the accretion as you look ahead, would be structural versus maybe dependent on synergies, revenue, or otherwise? Thank you.

Speaker #5: Can you give us a framework for the gross margin profile? I know it's early, Lorenzo, but any thoughts on the software and firmware business relative to your 70% non-GAAP gross margin run rate at this point?

Speaker #5: How much of the accretion, as you look ahead, would be structural versus maybe dependent on synergies, revenue, or otherwise? Thank you.

Speaker #2: Yeah, so I'm going to—actually, that's a great question, Ruben. And we'll get into this again in more detail once we close. The way to think about this acquisition, as Ford said, is it's very strategic and, in the midterm, opens up really significant growth opportunities for us.

Lorenzo Flores: Yeah. That's a great question, Ruben, and, you know, we'll get this again in more detail once we close. The way to think about this acquisition, as Ford said, is it's very strategic and in the midterm opens up really significant growth opportunities for us. The really nice thing about it immediately is thinking about this deal strategically and looking at the very complementary P&L structure, operating model that AMI has is, you know, we are not dependent upon synergies to make the deal accretive. You know, in fact, AMI's business is very high gross margin. It's higher than ours, and we'll share some more detail on that later. You know, they have a different structure, but at the operating margin level, it's pretty close to ours.

Speaker #2: But the really nice thing about it immediately is thinking about this deal strategically and looking at the very complementary P&L structure and operating model that AMI has, is we are not dependent upon synergies to make the deal accretive.

Speaker #2: In fact, AMI's business is very high gross margin. It's higher than ours. And we'll share some more detail on that later. And then they have a different structure, but at the operating margin level, it's pretty close to ours.

Speaker #2: And so, they generate a very significant EBITDA percent of revenue, and that's close to ours and maybe slightly above ours right now. So, if you think about it that way, you can see that there is not a dependency on cost cutting.

Lorenzo Flores: They generate a very significant EBITDA percent of revenue, and that's, you know, close to ours or maybe slightly above ours right now. If you think about it that way, you can see that, you know, there is not a dependency on cost-cutting. We'll look at efficiencies through time, for sure. On a go-forward basis, we're able to fund the debt and cover the interest and still show accretion immediately.

Speaker #2: We'll look at efficiencies through time, for sure. But on a go-forward basis, we were able to fund the debt and cover the interest, and still show accretion immediately.

Speaker #5: Appreciate all the detail. Congrats again.

Ruben Roy: Appreciate all the detail. Congrats again.

Speaker #2: Thank you.

Ford Tamer: Thank you.

Speaker #4: Our next question comes from Christopher Roland with Susquehanna International Group. Please state your question.

Operator 2: Our next question comes from Christopher Rolland with Susquehanna International Group. Please state your question.

Operator: Our next question comes from Christopher Rolland with Susquehanna International Group. Please state your question.

Speaker #6: Hi guys. Thank you for the question. So, yeah, I just wanted to dig in a little bit more on the strategic value of AMI.

Christopher Rolland: Hi, guys. Thank you for the question. Yeah, I just wanted to dig in a little bit more on the strategic value of AMI. I just looked over the website, and it seems like they offer firmware, but also like infra management software. Would love to know just kind of the cross synergies here between Lattice FPGAs and what you're gonna do with this software. Perhaps if you could also talk about the growth rate for AMI. I know you talked about $200 million in revs in 2026, that growth rate expectation moving forward would be very helpful for us as well.

Speaker #6: So I just looked over the website and it seems like they offer firmware, but also infra management software. Would love to know just kind of the cross synergies here between LATTICE FPGAs and what you're going to do with this software.

Speaker #6: And perhaps if you could also talk about the growth rate for AMI. I know you talked about $200 million in revs in '26, but that growth rate expectation moving forward would be very helpful for us as well.

Speaker #2: Yes, thank you, Chris. So let me start in trying to explain this. Let me start by going into my background, where I've done this twice already.

Ford Tamer: Yes. Thank you, Chris. Let me start in trying to explain this. Let me start going through my background, where I've done this twice already. This is the third time that I do something very similar. When I was at Broadcom, we were actually second on the switch market share to Marvell. By the time I left, our team had done a great job becoming number one. One of the key acquisitions we did along the way was a company called Level Seven that provided us with protocol software. What we're able to do is to use that to come up with reference design for the ODMs in Taiwan that made it much faster for customers to go to production with their switch systems.

Speaker #2: So, this is the third time that I do something very similar. So when I was at Broadcom, we were actually second on the switch market share to Marvell.

Speaker #2: And we, by the time I left, our team had done a great job becoming number one. And one of the key acquisitions we did along the way was a company called Level 7.

Speaker #2: That provided us with protocol software, and what we're able to do is to use that to come up with reference designs for the ODMs in Taiwan.

Speaker #2: That made it much faster for customers to go to production with their switch systems. And so this is number one, that was successful and very relevant to the discussion we're having.

Ford Tamer: This is number one that was successful and very relevant to the discussion we're having. Again, this protocol software, don't think about it as software, think about it as hardware. This is very low-level stuff. The second one was at Inphi, where actually, when I joined, we were selling a TIA. By the time I left, we were the number one leader in optical interconnect. In that journey, we decided along the way to have a partnership with Microsoft to deliver a DCI module, you know, for Microsoft for between data center, 80 kilometer at the time was called ColorZ, and some of you on the line know it very well. That sort of complementary addition of a system or subsystem scale, if you wish, with module, was very critical.

Speaker #2: And again, this protocol software—don't think about it as software. Think about it as hardware. So this is very low-level stuff. And then the second one was at Inphi, where we were actually, when I joined, we were selling a TIA. By the time I left, we were the number one leader in optical interconnect.

Speaker #2: And in that journey, we decided along the way to have a partnership with Microsoft to deliver a DCI model. For Microsoft for between data center, 80 kilometer at the time was called Colors.

Speaker #2: And some of you on the line know it very well. And that sort of complementary addition of a system or subsystem skill, if you wish, with module, was very critical.

Speaker #2: We debated at length whether this was going to be a departure from selling silicon and components. But it made—and it was about, almost, 80/20.

Ford Tamer: We debated at length whether this was gonna be a departure from selling silicon and components. It made. It was about almost 80/20. 80% of the business ended up being these components that we're selling as a platform, and 20% of the business was this module that we're selling to. It started with Microsoft. They eventually became the whole market, and today it's very standardized across the whole market. The addition of that module system, subsystem skills were very critical in the success because these folks helped the folks on the silicon side go to market faster and do a better job.

Speaker #2: 80% of the business ended up being these components that we're selling as a platform. And 20% of the business was this module that we're selling to it started with Microsoft.

Speaker #2: They eventually became the whole market. And today, it's very standardized across the whole market. But the addition of that module system, subsystem skills were very critical in the success because these folks had the folks on the silicon side go to market faster and do a better job.

Speaker #2: So the history of AMI has 40 years of developing these test cases and very deep knowledge. Of the whole industry from server to switch to NIC to they're the first ones to be brought up when a CPU gets brought up.

Ford Tamer: The history of AMI is 40 years of developing these test cases and very deep knowledge of the whole industry from server to switch to NIC, you know, they're the first ones to be brought up when a CPU gets brought up. They're the first ones to be brought up when a GPU gets brought up. They're the first ones to be brought up along with a lot of systems. They're a very key complementary partner to the BMC, the Board Management Controller today. We intend to continue to be a very strong partner to all of these, Board Management Controller, the HP, the Nuvoton, the NXP, the others in the market. You know, it's a extremely strategic move for us that complements our, you know, FPGA, low power FPGA business.

Speaker #2: They're the first ones to be brought up when a GPU gets brought up. They're the first ones to be brought up along with a lot of systems.

Speaker #2: They're a very key complementary partner to the BMC, the board manager and controller today. And we intend to continue to be a very strong partner to all of these board manager and controller, the HP, the Nuvoton, the NXP, the others in the market.

Speaker #2: And so, it's an extremely strategic move for us that complements our FPGA, low-power FPGA business. The growth rates are going to be in the high teens, and we expect next year to actually be accelerating.

Ford Tamer: The growth rates are gonna be in the high teens, and we expect next year to be actually accelerating. We do expect to come to solutions to market together that will end up growing our revenue faster than. You could see we're growing at 40% on the revenue. By the way, as you noticed, we grew 80% on EPS, and we should be able to grow faster on both revenue and EPS together in the 2028 timeframe as these solutions go to market. Solutions are being fielded today, in discussions today. We had many discussions with many customers about these solutions. They're very excited about it. It's gonna be a very exciting, you know, growth.

Speaker #2: And we do expect to come to solutions to market together. That will end up growing our revenue faster than—you could see we're growing at 40% on the revenue and, by the way, as you noticed, we grew 80% on EPS.

Speaker #2: And we should be able to grow faster on both revenue and EPS together in the '28 time frame as these solutions go to market.

Speaker #2: Solutions are being fed today in discussions. We had many discussions with many customers about these solutions. They're very excited about it, and it's going to be a very exciting growth.

Speaker #2: Now, we've got a presentation. Investor deck on our website. And if you could turn to it, please. That details the AMI acquisition. And on slide five, it shows you the challenges that the data center faced today.

Ford Tamer: Now, we've got a presentation investor deck on our on our website, if you could turn to it, please. That details the AMI acquisition. On slide 5, it shows you the challenges that the data center face today as you go from managing servers to racks, to pods, now the whole data center, this modularity becomes extremely important. AI is adding a lot of complexity. Uptime, these components, GPU switch are very expensive. Uptime is very key, there is a huge pressure on time to market and shift left, as shown on slide 5. Then if you jump to slide 11. Slide 11 shows. I'm sorry. Slide, yes, 11. It shows the solutions that we're providing together to these challenges.

Speaker #2: As you go from managing servers to racks to pods, now the whole data center this modularity becomes extremely important. AI is adding a lot of complexity.

Speaker #2: Uptime—these components, GPU, switch—are very expensive. Uptime is very key. And there's a huge pressure on time to market and shift left, as shown on slide five. And then if you jump to slide eleven—slide eleven shows—I'm sorry, yes, slide eleven.

Speaker #2: It shows the solutions that we're providing together to these challenges. And so things like rack, boot, power and cooling, retrofit, and plug-and-play are going to be solutions that we provide together, as long as our low-power FPGA and the platform firmware and manageability infrastructure that AMI provides.

Ford Tamer: Things like RackBoot, power and cooling, retrofit, and plug and play are going to be solutions that we provide together, along with our low power FPGA and the platform firmware and manageability infrastructure that AMI provides. Very exciting future ahead.

Speaker #2: So very exciting future ahead.

Speaker #1: Excellent. Thank you for that forward and congrats on this deal. I guess maybe as a follow-up, if you could talk about I think you said you guys said inventory maybe was even under two months at this point in time.

Christopher Rolland: Excellent. Thank you for that, Ford, and congrats on this deal. I guess, maybe as a follow-up, if you could talk about, I think you said, you guys said inventory maybe was even under 2 months at this point in time. I mean, we should have an uplift here. I think we can see it in the guide. If you wanna talk about it more broadly, just as you are no longer burning, and could there potentially even be an opportunity to refill? You know, how are you guys thinking about all this into the future? Next quarter, will we-

Speaker #1: I mean, we should have an uplift here. I think we can see it in the guide. But if you want to talk about it more broadly, just as you are no longer burning and could there potentially even be an opportunity to refill how are you guys thinking about all this into the future?

Speaker #1: And next quarter, what will we be balanced?

Ford Tamer: Yeah. No.

Christopher Rolland: Will we be balanced?

Speaker #2: Yeah, good question. Good question. So, look, I mean, we're very excited about it. And what I would say, Chris, is this is part of telling you what we're going to do, and doing what we say.

Ford Tamer: Yeah, good question. Good question. Look, I mean, we're very excited about it. What I would say, Chris, is this is part of telling you what we're gonna do and do what we say. I told you when we joined, when I joined now about a year and a half ago, this is my seventh quarterly report, that we're gonna bring this under control. When I joined, the numbers were closer to six, and we told you we'll be at three by end of last year, and we did. By end of 2025, we got to three. I told you we're gonna be in the 2s. We are in the 2s. I told you, actually, we'll bring it under 2, and we're on our way to under 2.

Speaker #2: So I told you when we joined, when I joined now about a year and a half ago, this is my seventh quarterly call, that we're going to bring this under control.

Speaker #2: When I joined, the numbers were closer to six. And we told you we'd be by a three by end of last year, and we did. By end of '25, we got to three.

Speaker #2: I told you we're going to be in the twos. We are in the twos. And I told you, actually, we'll bring it under two, and we're on our way to under two.

Speaker #2: The last time the company was under two, we had 10 good quarters ahead, then 1.X. And so, we may be entering a very strong period here.

Ford Tamer: The last time the company was under 2, we had 10 good quarters ahead in 1.x. We may be entering a very strong period here. You know, you could see our Industrial and Embedded business grew 22% sequentially, which is amazing. Amazing. You know, hopefully more to come. Lorenzo, you want to add to this?

Speaker #2: And you could see our industrial embedded business grew 22% sequentially, which is amazing, amazing. And hopefully more to come. Lorenzo, you wanted to add to this?

Speaker #1: Yeah, no, I think the way to think about channel inventory right now is it's no longer a business imperative to bring it down. What we're really working on is keeping the right balance of inventory at the distributors across the globe.

Lorenzo Flores: Yeah, no, I think the way to think about channel inventory right now is it's no longer a business imperative to bring it down. What we're really working on is keeping the right balance of inventory at the distributors across the globe and the right type of inventory so that they can service their customer needs. I think this is what I would characterize as a non-issue for Lattice going forward. We're really happy that we were able to manage through this. Now what we get is much greater visibility, much more direct visibility into what end customers are demanding, so our build is much more efficient.

Speaker #1: And the right type of inventory so that they can service their customer needs. So I think this is what I would characterize as a non-issue for Lattice going forward.

Speaker #1: And really happy that we were able to manage through this. And now what we get is much greater visibility, much more direct visibility into what end customers are demanding.

Speaker #1: So our build is much more efficient.

Speaker #3: Thank you, guys. Appreciate it. Congrats.

Christopher Rolland: Thank you, guys. Appreciate it.

Ford Tamer: Thank you.

Christopher Rolland: Congrats.

Speaker #1: Yep.

Ford Tamer: Yep.

Speaker #3: Our next question comes from Melissa Weathers with Deutsche Bank. Please state your question.

Operator 2: Our next question comes from Melissa Weathers with Deutsche Bank. Please state your question.

Operator: Our next question comes from Melissa Weathers with Deutsche Bank. Please state your question.

Speaker #4: Hi there. Thank you so much for letting me ask a question. Congrats on the nice results and interesting deal. And Sanjay, I'm looking forward to working with you in the future.

Melissa Weathers: Hi there. Thank you so much for letting me ask a question. Congrats on nice results and interesting deal. Sanjoy, I'm looking forward to working with you in the future. I guess for my first question, I wanted to touch on the data center side of things. In the past, you guys have given like an FPGA attach rate per server, it seems like the applications that you can use an FPGA for in the data center is growing massively, those conversations with engineers are happening live. We heard Jensen talk at GTC about using more FPGAs in those racks. Can you help us, I don't know if there's an updated framework that we can think about in terms of FPGA attach in the data center.

Speaker #4: I guess for my first question, I wanted to touch on the data center side of things. In the past, you guys have given an FPGA attach rate per server.

Speaker #4: And it seems like the applications that you can use an FPGA for in the data center are growing massively, and those conversations with engineers are happening live.

Speaker #4: We heard Jensen talk at GTC about using more FPGAs in those racks. So can you help us—I don't know if there's an updated framework that we can think about in terms of FPGA attach in the data center.

Speaker #4: I'm also really curious on the wireline side in addition to the server side. So any help on, I guess, content in the data center would be helpful.

Melissa Weathers: I'm also really curious on the wire line side in addition to the server side. Any help on, I guess, content in the data center would be helpful.

Speaker #2: Yes, thank you, Melissa. So, the couple of trends that I'll highlight from the recent customer visits I had—one was to a server OEM, and they showed me how the unit of rack is now gone. Where they previously had everything in one rack, it's now four racks together: a compute rack, a networking rack, a power rack, and a cooling rack.

Ford Tamer: Yes. Thank you, Melissa. You know, the couple of trends that I'll highlight in the recent customer visits I had to a server OEM, and they showed me how the unit of rack is now gone from where they had, you know, all in one rack to now four racks together, a compute rack, a networking rack, a power rack, and a cooling rack. You know, that's one change that is pretty profound and is gonna allow us to increase our content as in the comms as well as power and cooling. The second one, when you go visit these data centers is you realize now these cooling racks are actually attached by these big pipes coming from the ceiling. It's gonna be much harder to change these cooling rack.

Speaker #2: And so that’s one change that is pretty profound and is going to allow us to increase our content, as in the comms, as well as power and cooling.

Speaker #2: The second one, when you go visit these data centers, is you realize now these cooling racks are actually attached by these big pipes coming from the ceiling.

Speaker #2: It's going to be much harder to change these cooling racks. And so, these cooling racks may have a longevity need that's actually closer to our industrial embedded business, which may last for many years, as opposed to the faster cadence of moving on the compute side.

Ford Tamer: These cooling rack may have a longevity need that's actually closer to our industrial embedded business that may last for many years, as opposed to the faster cadence of moving on the compute side. In the presentation that we have about AMI, we are highlighting RackBoot on slide 11, where now some of these, this is again a new application where the cloud would like to not just power up a server at a time, they'd like to power up the whole rack at one point. You know, we could have some very interesting application FPGA in that new applications. That's pretty exciting.

Speaker #2: In the presentation that we have about AMI, we are highlighting rack boot on slide 11, where now some of these—again, a new application—where the cloud would like to not just power up a server at a time, they'd like to power up the whole rack at one point.

Speaker #2: And we can have some very interesting application RPGA in those new applications, and so that's pretty exciting. The third bullet there on slide 11—you can see that of that AMI application, you can see that people want to go and retrofit some of their older systems for better uptime and better security, better fault detection.

Ford Tamer: The third bullet there on slide 11, you could see that of that AMI application, you could see that people wanna go and retrofit some of their older system for better uptime and for better security, better port detection. Again, that's another new opportunity. We're finding opportunities all the time. You know, from a modeling point of view, we still have this forecast of about 16.5 million server in 2026. We're roughly saying about 3 FPGA per server on overall, okay? That gives you a number of total FPGA. We're roughly saying our, you know, you can calculate the percent. You can calculate the business, right?

Speaker #2: And again, that's another new opportunity. And so we're finding opportunities all the time, and from a modeling point of view, we still have this forecast of about 16.5 million servers in 2026.

Speaker #2: We're roughly saying about three FPGAs per server overall, okay? That gives you a number of total FPGAs. And we're roughly saying you can calculate the percent, you can calculate the business, right?

Speaker #2: We just gave you today, which we don't typically do, but we gave you a breakdown of that server business in Q1, so you could take that 38% I just gave you and you've got our number for Q1.

Ford Tamer: We just gave you today what we don't typically do. We gave you a breakdown of that server business in Q1. You could take that 38% I just gave you, and you've got our number for Q1. You could see how much revenue we have and gives you a bit of a of a ASP. That, that gives you all you need, I think, Melissa.

Speaker #2: You could see how much revenue we have and it gives you a bit of an ASP, so that gives you all you need, I think, Melissa.

Speaker #1: Yeah. By the way, our ASP is continuing to increase. On a per-unit basis, through this progression, we keep finding more value-added opportunities for our customers.

Lorenzo Flores: Yeah. Our, by the way, our ASP is continuing to increase on a per unit basis, through this progression, as we, you know, we keep finding, you know, more value-added opportunities for our customers.

Speaker #2: Yeah. So, as we said in the past, Melissa, what's helping us—number of servers increasing, AI increasing—actually, even in the shorter term, we've seen a big demand increase, not just only from AI, but traditional CPU and storage, because of things like cloud and other agentic type of coding have driven not just the AI, but also the traditional CPU and storage.

Ford Tamer: Yeah. As we said in the past, Melissa, what's helping us, number of server increasing, AI increasing. Actually, even shorter term, we've seen a big demand increase, not just only from AI, but traditional CPU and storage because of things like cloud and other agentic type of coding have driven not just the AI, but also the traditional CPU and storage. The attach rates, we continue to find new applications. New ASP with new product, the ASP continues to increase, hence increasing that server dollar amount.

Speaker #2: The attach rate to continue to find new applications, new ASP, with new product ASP continues to increase. Hence, increasing that server dollar amount.

Speaker #4: Perfect. Thank you for all the callers. And then maybe just a quick follow-up. I mean, these growth rates seem to be a lot faster than maybe what we were expecting coming into the year.

Melissa Weathers: Perfect. Thank you for all the color. Maybe just a quick follow-up. I mean, these growth rates seem to be a lot faster than maybe what we were expecting coming into the year. From a supply perspective, can you just talk about your ability to secure supply? It seems like your customer visibility is increasing, but what about your supplier visibility? Do you have the front end? Do you have the back end? Is anything there that we should be thinking about?

Speaker #4: So, from a supply perspective, can you just talk about your ability to secure supply? It seems like your customer visibility is increasing, but what about your supplier visibility?

Speaker #4: Do you have the front end? Do you have the back end? Is there anything there that we should be looking at?

Ford Tamer: We do. We do. Our Senior Vice President of Operations, Divyesh Shah, has been in the industry for a long time. He lives on a plane and lives at the supplier, and we've had many calls to our supplier. Definitely have our strains. This is definitely straining us, and we're working hard on it, though, and we have been able to secure supply. It comes at a cost. The costs are challenging, but we're working with our customers and our suppliers to deal with this, and we're in good shape.

Speaker #2: We do. Our senior VP of operation, Divya Shah, has been in the industry for a long time. He lives on a plane and lives at the supplier and we've had many calls to our supplier definitely have our strained, our this is definitely straining us and working hard on it, though.

Speaker #2: And we have been able to secure supply. It comes at a cost. So, yes, the cogs are changing, but we're working with our customers and our suppliers to deal with this.

Speaker #2: And we're in good shape.

Speaker #1: Yeah, so I think, unlike some other industry players, our wafers are more legacy node wafers. And to our supply there, it's less challenged. The back end is where we see pressure, and we keep expanding our supply chain in that area to provide a diversity of suppliers and additional capacity.

Lorenzo Flores: Yeah. I think, unlike some other industry players, you know, our wafers are more legacy node wafers, and our supply there is less challenged. The back end is where we see pressure, and we keep expanding our supply chain in that area to provide a diversity of suppliers and additional capacity. We're actually beginning to bring our lead times down as we get that expanded supply.

Speaker #1: And we're actually beginning to bring our lead times down as we get that expanded supply.

Speaker #4: Perfect. Thank you.

Melissa Weathers: Perfect. Thank you. Over.

Speaker #1: So yeah, okay.

Lorenzo Flores: Yeah. Okay.

Speaker #3: Our next question comes from Trishan Gerra with Robert W. Baird. Please state your question.

Operator 2: Our next question comes from Tristan Gerra with Robert W. Baird. Please state your question.

Operator: Our next question comes from Tristan Gerra with Robert W. Baird. Please state your question.

Tristan Gerra: Hi. Good afternoon. Just as a follow-up to a earlier question, is there any step function increase in the content for root of trust security with the upcoming Kiber and Sandman platforms? Also, is there any potential for advanced content in the data center or is that going to be in other end markets?

Speaker #5: Hi. Good afternoon. Just as a follow-up to an earlier question, is there any step function increase in the content for root of trust security with the upcoming cyber and payment platforms?

Speaker #5: And also, is there any potential for event content in data center or is that going to be in other end markets?

Speaker #2: Yeah, we're not commenting on specific platforms, but our security continues to be a major factor in allowing us to grow our business here. So, to the second question,

Ford Tamer: Yeah, we're not commenting on specific platform, but our security continues to be a major factor in allowing us to grow our business here. The second question?

Tristan Gerra: Was regarding events and whether there is any data center potential opportunities for the higher density FPGA that's coming out.

Speaker #5: Was regarding event and whether there is any data center potential opportunities for the higher-density FPGA that's coming out.

Tristan Gerra: Was regarding events and whether there is any data center potential opportunities for the higher density FPGA that's coming out.

Speaker #2: Yes, absolutely. Absolutely. Can you—I'm not sure—can you be a bit more specific? What are—can you—I'm not sure we understand the question.

Ford Tamer: Yes, absolutely. Absolutely. Can you? I'm not sure. Can you be a bit more specific? What are? I'm not sure we understand the question. Go ahead.

Speaker #2: Go ahead.

Speaker #5: Yeah, I was just wondering what type of use cases you see for events, and whether there are any data center applications—potentially data paths or anything else—outside of root of trust security, or even for root of trust security.

Tristan Gerra: Yeah. I was just wondering, you know, what type of use cases you see for Avant, and whether there's any data center applications, you know, potentially data paths or anything else outside of root of trust security or even for a root of trust security for Avant.

Speaker #2: Okay. I'm sorry. I get it now. The mid-range FPGA Avant platform has applications in data centers. So far, it's been mostly our pre-Nexus and Nexus products that are applicable for data centers. As time goes by, Avant may find its way there, but Avant is really focused on our industrial and embedded platforms.

Ford Tamer: Okay, I'm sorry. I get it now. You're asking whether our mid-range FPGA Avant platform has application in a data center. So far it's been mostly our PreNexus and Nexus product is what is applicable for data center. As time goes by, Avant may find its way there, but Avant is really focused on our industrial and embedded platform segment.

Speaker #2: Segment.

Speaker #5: Okay, okay. And then just a quick follow-up: your gross margin seems to be increasing again, and your lead times have been expanding, which typically is good for ASPs.

Tristan Gerra: Okay. Okay. Just a quick follow-up. You know, your gross margin starting to increase again, and your lead times have been expanding, which typically is good for ASPs. I know you only guide a quarter at a time, but what's the potential for gross margin to go higher, given the supply constraint and the state of demand versus supply?

Speaker #5: I know you only guide a quarter of the time, but what's the potential for gross margin to go higher given the supply constraint and the state of demand versus supply?

Speaker #2: Yeah. So we've talked about this a few times, especially leading into the year, where we thought that we should be prudent about our outlook and gross margin because we saw the supply chain increases coming.

Lorenzo Flores: Yeah. You, you know, we've talked about this a few times, you know, especially leading into the year where we thought that we should be prudent about our outlook in gross margin because we saw the supply chain increases coming. What we have been able to do is continue to work with our customers on ways to offset the cost increases we're seeing. We do also, though, expect that the cost pressure will continue and increase relatively in H2 of this year versus H1. We're just, you know, given where we are in the year, we are not gonna give very precise guidance about H2 of the year.

Speaker #2: And what we have been able to do is continue to work with our customers on ways to offset the cost increases we're seeing. We do also, though, expect that the cost pressure will continue and increase relatively in the second half of this year.

Speaker #2: Versus the first half. So we haven't gone— we're just given where we are in the year, we are not going to give very precise guidance about the second half of the year.

Speaker #2: But we are in the range I said before—69.5% plus or minus 1% this quarter. We happen to be at 70%, a little bit higher than that.

Lorenzo Flores: You know, we are in the range, I said before, 69.5% ±1%. This quarter we happen to be, you know, 70%, a little bit higher than that. You know, this is going to be the approximate range we see going forward. You know, we will provide you more specific guidance as we get into H2 on how the cost increases are playing out.

Speaker #2: But this is going to be the approximate range we see going forward, and we will provide you more specific guidance as we get into the second half of the year on how the cost increases are playing out.

Speaker #5: Great. Thank you.

Tristan Gerra: Great. Thank you.

Speaker #3: Our next question comes from Joshua Bocolto with TD Cowen. Please state your question.

Operator 2: Our next question comes from Joshua Buchalter with TD Cowen. Please state your question.

Operator: Our next question comes from Joshua Buchalter with TD Cowen. Please state your question.

Speaker #4: Hi guys, this is Lanny on for Josh. Congratulations on the quarter, and I'll extend my congratulations for the deal as well. Focusing on the core business really quickly, you've mentioned that Lattice is still on track for hitting that over $1 billion run rate in the fourth quarter of this year.

Lannie Trieu: Hi, guys. This is Lannie Trieu on for Joshua Buchalter. Congratulations on the quarter, and I'll extend my congratulations for the deal as well. Focusing on the core business really quickly, you've mentioned that, you know, Lattice is still on track for hitting that over $1 billion run rate in the Q4 of this year. Can you clarify if that's specifically for the core business, or is that inclusive of the AMI acquisition as well, since I know you've given kind of a estimated revenue for the year?

Speaker #4: Can you clarify if that's specifically for the core business or is that inclusive of the AMI acquisition as well? Since I know you've given kind of an estimated revenue for the year.

Speaker #2: It is inclusive of the AMI acquisition.

Ford Tamer: It is inclusive of the AMI acquisition.

Speaker #4: Got it. And then specifically, was there a follow-up to that? Sorry, I had a follow-up question afterwards, but if there are additional thoughts.

Lannie Trieu: Got it. Specifically kind of, was there a follow-up to that? Sorry, I had a follow-up question afterwards, but if there are additional thoughts.

Speaker #2: No, no, go ahead. Go ahead.

Ford Tamer: No. Go ahead.

Speaker #4: Oh, yeah. So as it relates to AMI, I'm curious to know what kind of capabilities this gave Lattice that you didn't have before?

Lannie Trieu: Yeah. As it relates to, you know, AMI, I'm curious to know, you know, what kind of capabilities did this give Lattice that you didn't have before? If you could talk about AMI's current, you know, go-to-market monetization strategy and how that fits in with Lattice's business model currently and then going forward as you integrate together. Thank you.

Speaker #4: And if you could talk about AMI's current go-to-market monetization strategy and how that fits in with Lattice's business model currently, and then going forward as you integrate together.

Speaker #4: Thank you.

Speaker #2: Yeah, thank you. So, first, as you said, we together are expecting to exit the year at this billion run rate, at this roughly 40% free cash flow.

Ford Tamer: Yeah. Thank you. You know, first, as you said, we together expecting to exit the year at this $1 billion run rate at this roughly 40% free cash flow. You could see we'd be able to deliver pretty fast, you know, from there. That's what we think is a beautiful business. The combination is gonna be very strong financially. From a capability point of view, it gives us much stronger system skills jointly that allow us to bring these solutions to customer much faster. It's a capability that we'll be adding. We'll be able to discuss further at our next quarterly call.

Speaker #2: So you could see we'd be able to deliver pretty fast from there. So that's what we think is a beautiful business combination and is going to be very strong financially.

Speaker #2: And then from a capability point of view, it gives us much stronger system skills jointly, and allows us to bring these solutions to customers much faster.

Speaker #2: So it's a capability that we'll be adding. We'll be able to discuss further at the next quarterly call. So when we get in front of you to discuss Q2, and guide to Q3, we'll be able to give you a lot more details on some of the AMI business and going to a bit more of the detail on their financials.

Ford Tamer: When we get in front of you to discuss Q2 and guide to Q3, we'll be able to give you a lot more details on some of the AMI business and go into a bit more of the detail on the, on their financials. Today, we want to, you know, focus on our business, introduce the acquisition, and it's gonna take us a couple of months to close, expected in early Q3. At that time, we'll be able to fully give you all the details on their business.

Speaker #2: But today, we want to focus on our business, introduce the acquisition, and it's going to take us a couple of months to close, expected in early Q3.

Speaker #2: And then, at that time, we'll be able to fully give you all the details on their business.

Lannie Trieu: All right. Thank you very much.

Speaker #4: All right. Thank you very much.

Speaker #3: Our next question comes from Quinn Bolton with Needham & Company. Please state your question.

Operator 2: Our next question comes from Quinn Bolton with Needham & Company. Please state your question.

Operator: Our next question comes from Quinn Bolton with Needham & Company. Please state your question.

Quinn Bolton: Thanks for squeezing me in, guys. I'll also add my congratulations. Ford, maybe just a high-level question on AMI acquisition. AMI talks about security, board management. You've historically talked about, you know, similar things for your FPGAs. Can you just spend a minute, is there any place where the two businesses compete, or is it truly complementary? Does the Lattice FPGA root of trust protect the AMI firmware BIOS, you know, as it resides in the servers? Just, you know, is there any sort of direct overlap between the two businesses?

Speaker #5: Thanks for squeezing me in, guys. I'll also add my congratulations for maybe just a high-level question on AMI acquisition, AMI talks about security, board management.

Speaker #5: You've historically talked about similar things for your FPGAs. And so, can you just spend a minute— is there any place where the two businesses compete?

Speaker #5: Or is it truly complementary? Does the Lattice FPGA root of trust protect the AMI firmware BIOS as it resides in the servers? Is there any sort of direct overlap between the two businesses?

Speaker #2: Yeah, great question, Quinn. We have been working together since 2019, so it's been seven years of close collaboration. There is no place where we compete—it's totally complementary.

Ford Tamer: Yeah, great question, Quinn. We have been working together since 2019, so it's been 7 years of close collaboration. There is no place where we compete. This is totally complementary. It's actually very complementary to our customer and should really benefit our customer and partners. We are committed to remain agnostic. You know, they support all the other silicon partners, and we are partnered to the same silicon partners, so we see it very complementary and beneficial to our, not only the customers, but also the partners. It should be very strong, 1 plus 1 equals 3. Sanjoy is sitting with me today. He plans for 4, 5, and 6, so hopefully. He's laughing here.

Speaker #2: And it's actually very complementary to our customer and should really benefit our customer and partners. And we are committed to remain agnostic day support all the other silicon partners and we are partnered to the same silicon partners.

Speaker #2: So we see it very complementary and beneficial to our not only the customers, but also the partners. And so it should be very strong one plus one equals three.

Speaker #2: And send you all this kitting with me today. He has plans for four, five, and six. So hopefully, and he's laughing here.

Speaker #3: Excellent. Excellent. And then obviously, you guys are great start to the year in terms of revenue growth. I think we came into the year thinking that the server business could be up something like 20 to 40 percent.

Quinn Bolton: Excellent. Excellent. Obviously, you guys, a great start to the year in terms of revenue growth. I think we came into the year, thinking, the server business, could be up something like 20% to 40% in industrial, now I guess the embedded business up 5% to 15%. Looks like you're tracking well above that. I don't know if you're prepared to perhaps talk about growth rates for those businesses, you know, given the strong start to the year, but I figured I'd ask.

Speaker #3: And industrial and now I guess the embedded business up 5 to 15. Looks like you're tracking well above that. I don't know if you're prepared to perhaps talk about growth rates for those businesses given the strong start to the year, but I figured I'd ask.

Speaker #2: Well, so for the year, it's still early. I would say that the trend that started late last year and has led to our results in the first quarter continues.

Lorenzo Flores: Well, you know, for the year, it's still early. I would say that the trend that started late last year and has led to our results in Q1 continues, and that trend is, you know, our business continues to book in very strong. The customers are continuing to increase their demand, and we are booking out even longer in time. At this point in time, you know, we have high confidence that, you know, our growth this year will be strong. It'll be stronger than we originally thought at the beginning of the year. Comms and Compute as an end market will be the key driver of that for the reasons we all know.

Speaker #2: And that trend is our business very, very strong. The customers are continuing to increase their demand. And we are booking out even longer in time.

Speaker #2: So at this point in time, we have high confidence that our growth this year will be strong. It'll be stronger than we originally thought at the beginning of the year.

Speaker #2: Thomson Compute as an end market will be the key driver of that for the reasons we all know. Industrial and embedded, though, is recovering and we saw signs of that in the first quarter.

Lorenzo Flores: The industrial and embedded, though, is recovering, and we saw signs of that in Q1. I would say, you know, the extremely high year-on-year growth rates might not hold for the rest of the year for the Compute and the server, but we'll be pretty strong. The comms business will be aligned. You know, it kind of goes up and down relative to the compute growth rate, but it's still gonna be pretty high. Like I said, industrial and embedded will continue to grow, but probably not at the rate that we saw in Q1 versus Q4 of last year.

Speaker #2: The I would say the extremely high year-on-year growth rates might not hold for the rest of the year for the compute and the server, but we'll be pretty strong.

Speaker #2: And the comms business will be aligned it kind of goes up and down relative to the compute growth rate, but it's still going to be pretty high.

Speaker #2: And like I said, industrial and embedded will continue to grow, but probably not at the rate that we saw in Q1 versus Q4 of last year.

Speaker #2: They did grow 10% year over year. Industrial and embedded. And that's a pretty good range to think about the year.

Lorenzo Flores: They did grow 10% year-over-year, industrial and embedded, and that's a pretty good range to think about the year.

Speaker #5: And Quinn, right now, as Lorenzo was saying, the demand is strong for the foreseeable future and bookings well into '27. And can I ask you a quick just clarification on the deal?

Ford Tamer: Quinn, right now, as Lorenzo was saying, the demand is strong for the foreseeable future and bookings well into 2027.

Quinn Bolton: Got it. Can I ask you a quick just clarification on the, on the deal? Will THL Partners be locked up for any period of time post-close on that $650 million of equity issued, or are they free to sell, once the deal closes?

Speaker #5: Will THL partners be locked up for any period of time post-close on that $650 million of equity issued, or are they free to sell once the deal closes?

Speaker #2: No, go ahead. Yeah, they have a lockup that extends through the year. 25% per quarter. 12 months. 12 months from close. Yeah, 12 months from close.

Lorenzo Flores: No.

Ford Tamer: Go ahead.

Lorenzo Flores: Yeah, they have a lockup that extends through the year. It's, you know, 25% per quarter.

Ford Tamer: 12 months. 12 months from close.

Lorenzo Flores: Yeah, 12 months from close. For a year, not through the year. Thank you.

Speaker #2: For a year, not through the year. Thank you.

Speaker #5: Perfect. Okay. Thank you.

Quinn Bolton: Perfect. Okay, thank you.

Speaker #3: Our next question comes from Duke Quinn Jiang with Bank of America. Please state your question.

Operator 2: Our next question comes from Duksan Jang with Bank of America. Please state your question.

Operator: Our next question comes from Duksan Jang with Bank of America. Please state your question.

Speaker #6: Hi. Thank you for taking the question and congrats on the strong results as well. Just following up on some of the earlier gross margin questions, you've been talking about bookings well into a strong well into '27, backlog is building up, the lead times are expanding.

Duksan Jang: Hi, thank you for taking the question, and congrats on the strong results as well. Just following up on some of the earlier gross margin questions. You've been talking about bookings strong well into 2027. Backlog is building up. The lead times are expanding. You also said the AMI margins are stronger. Is it possible that the margin structure now is more structurally just higher than before? I think you're touching into untouched territories. I think you haven't really sustained 70+ before, but now should we think, this is something more achievable at this point?

Speaker #6: You also said the AMI margins are stronger. So is it possible that the margin structure now is more structurally just higher than before? I think you're touching into untouched territories.

Speaker #6: I think you haven't really sustained 70 plus before. But now, should we think this is something more achievable at this point?

Speaker #2: No, Dustin, this opens up opportunities for us that we may have been shied away from before and across the various markets. So we don't intend to go much above that.

Ford Tamer: No, Duksan, this opens up opportunities for us that we may have been shied away from before and across the various markets. We don't intend to go much above that. Can we? Sure we can, but I think right now there are opportunities for us that we haven't gone after that we could go after. It could potentially open up a higher top line.

Speaker #2: And we can be sure we can, but I think right now there are opportunities for us that we haven't gone after that we could go after.

Speaker #2: So it could potentially open up a higher top line.

Speaker #3: Got it. And then one follow-up is just on broader competitiveness of the supply chain. And I asked this because clearly Intel has now divested Altera and it's now a standalone company.

Duksan Jang: Got it. One follow-up is just on broader competitiveness of the supply chain. I ask this because clearly Intel has now divested Altera, and it's now a standalone company. We haven't heard much since from them, but they clearly have a much different supply chain with the internal manufacturing team. Do you think that gives them a lot more advantage in this supply constraint environment? And if not, could you explain why? Thank you.

Speaker #3: We haven't heard much since from them, but they clearly have a much different supply chain with the internal manufacturing team. So do you think that gives them a lot more advantage in this supply-constrained environment?

Speaker #3: And if not, could you explain why? Thank you.

Speaker #2: Yeah. Look, we are supplier have been fantastic are with UMC, Samsung, and TSMC on the fab side. And extremely supportive and we have strong assembly and test partners.

Ford Tamer: Yeah, look, our supplier have been fantastic. We are with UMC, Samsung, and TSMC on the fab side. Extremely supportive and, you know, we have strong assembly and test partners. We're adding more because this is where the shortages are. So far we feel very good of our supply chain, our ability to supply. That's not an issue for us.

Speaker #2: We're adding more because this is where the shortages are. And so far, we feel very good about our supply chain, our ability to supply.

Speaker #2: So that's not an issue for us.

Speaker #3: All right. Thank you. Ladies and gentlemen, that concludes the time we had for the Q&A session. I will now turn the call back to the companies Rick Musche for any closing comments.

Duksan Jang: All right. Thank you.

Operator 2: Ladies and gentlemen, that concludes the time we had for the Q&A session. I will now turn the call back to the company's Rick Muscha for any closing comments.

Operator: Ladies and gentlemen, that concludes the time we had for the Q&A session. I will now turn the call back to the company's Rick Muscha for any closing comments.

Speaker #2: Great. Thanks, everyone, for joining us on the call today. We'll be attending the following investor events this quarter. The JPMorgan 2026 Global TMT Conference on May the 19th in Boston.

Rick Muscha: Great. Thanks everyone for joining us on the call today. We'll be attending the following investor events this quarter: the J.P. Morgan 2026 Global TMT Conference on 19 May in Boston, and the TD Cowen 54th Annual TMT Conference in New York City on 28 May. This completes our call. Thank you very much for your participation, and have a good evening.

Speaker #2: And the TD Cowen 54th Annual TMT Conference in New York City on May 28th. This completes our call. Thank you very much for your participation and have a good evening.

Speaker #1: Goodbye.

[Analyst]: Goodbye.

Operator 2: Thank you. Ladies and gentlemen, the conference call of Lattice Semiconductor has concluded. Thank you for your participation. You may now disconnect your lines.

Operator: Thank you. Ladies and gentlemen, the conference call of Lattice Semiconductor has concluded. Thank you for your participation. You may now disconnect your lines.