Allegro MicroSystems reported a sequential uptick in quarterly revenue driven primarily by its automotive business, which still accounts for over 75% of total sales. After several quarters of contraction, the company posted a low single-digit percentage increase in revenues compared to the prior quarter, reflecting a gradual stabilization in automotive semiconductor demand. Management highlighted recovery in traction-inverter and motor-control IC orders, offsetting weakness in legacy power-management products.

Although data center applications represent only about 10% of Allegro’s revenue base, this segment has become a focal point for investors seeking growth leverage. In the most recent quarter, data center sales grew more than 30% sequentially, fueled by increased demand for current-sensor and protection devices in AI server platforms. The outsized growth in this narrow vertical has supported a premium valuation, even as it remains a modest contributor to overall top-line results.

Allegro’s adjusted earnings per share were reported at $0.15 for the quarter, up from $0.07 a year ago and slightly above consensus. However, the company’s adjusted figures exclude significant stock-based compensation expenses totaling roughly $20 million, or about $0.05 per share. After accounting for these non-cash charges, true earnings appear to track closer to $0.20–$0.30 per share on an annualized basis, raising questions about the sustainability of reported profitability.

Despite mixed fundamentals, Allegro’s stock trades at roughly eight times trailing sales, a level that demands robust execution on both automotive recovery and data center expansion. At this multiple, any shortfall in anticipated growth or margin improvement could exert downward pressure. Investors will be watching upcoming order trends in EV powertrain applications and capital spending plans in hyperscale data centers to justify the current valuation.