Semtech Reports Margin Drop, 12% QoQ LoRa Growth and 35% Q2 Data Center Target
SMTC•Semtech's Signal Integrity Products gross margin declined from 67.4% in Q4 to 62.7% in Q1 as the company divests several module businesses, posing integration and transition challenges. The LoRa business grew 12% QoQ and 14% YoY while data-center revenue is expected to rise 35% in Q2 (85% YoY).
1. Module Divestitures and Margin Impact
Semtech is in the process of divesting several module businesses, which contributed to a gross margin decline in its Signal Integrity Products segment from 67.4% in Q4 to 62.7% in Q1. Management highlighted potential integration and transition challenges as operations adjust to the business exits and reallocate resources.
2. LoRa Segment Performance
The LoRa segment delivered net sales growth of 12% quarter-over-quarter and 14% year-over-year, driven by increased deployments in smart utilities, smart buildings, and asset management. Semtech emphasized continued investment in LoRa-enabled solutions to capitalize on growing end-node and gateway demand across multiple verticals.
3. Data Center Growth and Capacity Expansion
Semtech is targeting 35% sequential revenue growth in its data center segment for Q2, equating to 85% year-over-year growth, underpinned by ramping 800G FiberEdge and LPO products and upcoming 1.6T CopperEdge and FiberEdge ramps. The company has been preparing for this surge over the past 18 months and plans to double or triple capacity to meet expected demand.
4. Technology Developments in ACC and Lasers
Work on ACC MSA specifications is ongoing, with finalization expected to accelerate adoption once industry participants align. Semtech is also advancing narrow linewidth CW lasers for coherent light interconnects and developing high-power DWDM CPO laser source solutions to support future high-bandwidth data-center applications.
