Lattice Semiconductor — Q3 2026 Earnings Summary

Financial Performance:

• Q3 2026 revenue reached $291.0 million, an 118.3% year-over-year increase and 44.7% quarter-over-quarter increase.
• GAAP gross margin was 67.4% (down 50 basis points YoY); Non-GAAP gross margin was 70.9% (up 140 basis points YoY).
• GAAP net income was $11.2 million ($0.08 per diluted share), a 301.1% increase YoY; Non-GAAP net income was $103.7 million ($0.72 per diluted share), a 171.7% increase YoY.
• Adjusted EBITDA was $131.0 million with a 45.0% margin, up 940 basis points YoY.
• GAAP operating cash flow was $95.0 million (32.7% margin); Non-GAAP free cash flow was $77.6 million (26.7% margin).
• Operating expenses were $172.2 million on a GAAP basis (87.0% YoY increase) and $86.7 million on a Non-GAAP basis (60.8% YoY increase).
• R&D expense as a percentage of revenue was 27.6% GAAP (down 960 bps YoY) and 19.0% Non-GAAP (down 520 bps YoY).
• SG&A expense as a percentage of revenue was 20.6% GAAP (down 1040 bps YoY) and 10.7% Non-GAAP (down 550 bps YoY).
• Long-term debt on the balance sheet as of October 3, 2026, was $869.1 million.
• Inventory days improved to 116 days in Q3 2026 from 193 days in Q3 2025.

Guidance and Future Outlook:

• Q4 2026 revenue is expected to be between $325 million and $345 million, implying approximately 130% YoY growth.
• Q4 2026 Non-GAAP gross margin is expected to be 72.0% (+/- 1%).
• Q4 2026 Non-GAAP operating expenses are projected between $95 million and $101 million.
• Q4 2026 Non-GAAP net income per share is expected to be between $0.82 and $0.86.
• Q4 2026 Non-GAAP income tax rate is expected to be between 4% and 6%.
• Management expects Industrial and Embedded revenue growth to accelerate to 70% YoY in Q4.
• Management expressed confidence in growth into 2027 and beyond, citing strong bookings, backlog, and design wins.

Business Segments and Product Lines:

• FPGA revenue grew approximately 90% YoY, driven by Compute and Communications demand.
• AMI revenue contributed $39.1 million in Q3 2026 (13% of total revenue), reflecting results from the acquisition date of July 27, 2026.
• Compute and Communications end market revenue was $171.9 million (59% of total); Industrial and Embedded was $80.0 million (28% of total).
• New product revenue grew more than 70% YoY and is tracking to reach 25% of FPGA revenue in 2026.
• Launched Lattice Mach-N2 family with integrated flash, hardware Root of Trust, and post-quantum cryptography; samples shipped to Compute & Communications customers.
• Released Lattice Prompt, enabling natural-language access to the FPGA design flow with claimed 10X productivity gains on common tasks.
• Released Lattice Sentry 5.0, the industry's first PQC-enabled platform firmware resilience solution.
• Announced collaboration with Arm combining AGI CPU server platforms, Lattice FPGAs, and AMI firmware for next-gen AI data centers.
• Announced fully validated AMI Rack Manager support for AMD Helios rackscale solutions and Aptio V/MegaRAC OneTree for 6th Gen AMD EPYC.
• Released AMI Rack Manager 1.0 for centralized monitoring and management of rack infrastructure.
• Announced production-ready support for SK Hynix RAS Library in AMI MegaRAC OneTree.
• Released AMI Data Center Manager 6.2 with enhanced firmware provisioning and GPU diagnostics.

Market and Competitive Landscape:

• Revenue growth is fueled by accelerating data center AI demand and recovery in Industrial & Embedded applications.
• Hosted technical summits in Taipei and Shenzhen with over 700 attendees, featuring partners including NVIDIA, Intel, Advantech, and Qualcomm.
• Announced the Secure Control and Management Plane (SCMP) at the OCP Global Summit with AMD, Arm, Intel, Microsoft, and NXP.
• Lattice MachXO5-NX TDQ FPGAs won the 2026 CyberSecurity Breakthrough Award for Post-quantum cryptography Solution of the Year.
• Asia accounted for 76% of Q3 2026 revenue; Americas 16%; Europe (incl. Africa) 8%.
• 81% of revenue came through Distribution channels; 19% through Direct channels.

Risks and Challenges:

• Risks include potential failure to successfully integrate AMI's business within the anticipated timeframe or realize expected synergies.
• Indebtedness incurred for the AMI acquisition ($869.1 million) poses risks regarding debt service, interest rate changes, and covenant restrictions.
• Risks related to impairment of goodwill and acquired intangible assets recorded from the AMI acquisition.
• Concentration of demand among limited customers and end markets, specifically AI and data center infrastructure.
• Dependence on third-party foundry, assembly, and test providers for manufacturing capacity.
• Potential cybersecurity incidents and vulnerabilities in third-party or open-source components.
• Global economic conditions, trade disputes, tariffs, and export controls affecting demand and costs.
• Cyclical nature of the semiconductor industry and fluctuating customer purchasing patterns.

Management Commentary and Tone:

• CEO Ford Tamer stated the company delivered record revenue and non-GAAP EPS, with strong momentum in AI and Industrial applications.
• CFO Lorenzo Flores highlighted operating leverage, translating accelerating demand into faster earnings growth.
• Management emphasized a focus on profitable growth, expanding free cash flow, reducing debt, and delivering long-term shareholder value.
• Management noted the AMI acquisition meaningfully expands opportunities in security, control, and management solutions.
• Early commercial momentum was cited across security retrofit, rack boot, plug and play, and power and cooling solutions.

Other Key Points:

• Lattice completed the acquisition of AMI on July 27, 2026.
• Cash paid for business acquisition, net of cash acquired, was $971.3 million in the nine months ended October 3, 2026.
• Proceeds from long-term debt, net of issuance costs, were $912.7 million in the nine months ended October 3, 2026.
• Repayment of long-term debt was $50.0 million in the nine months ended October 3, 2026.
• Repurchase of common stock was $15.0 million in the nine months ended October 3, 2026.
• Stock-based compensation expense was $122.8 million for the nine months ended October 3, 2026.
• The company updated its end market reporting effective Q1 2026 to disaggregate revenue into "Compute and Communications" and "Industrial and Embedded."
• AMI revenue is presented as a separate end market beginning in Q3 2026.