What Lattice Semiconductor (LSCC) Said on Its Q3 Earnings Call

Lattice Semiconductor (NASDAQ:LSCC) reported record third-quarter 2026 revenue and issued fourth-quarter guidance above its prior outlook, citing broad-based demand for its field-programmable gate arrays, or FPGAs, and a better-than-expected contribution from its recently acquired AMI business.

Third-quarter revenue totaled $291 million, up 45% sequentially and 118% from a year earlier. Non-GAAP earnings per share were $0.72, more than 155% above the prior-year period and above the high end of the company’s guidance, according to Chief Executive Officer Ford Tamer.

The company forecast fourth-quarter revenue of $325 million to $345 million, with a midpoint of $335 million. At that midpoint, revenue would rise about 130% year over year and 15% sequentially. Lattice projected non-GAAP EPS of $0.82 to $0.86 for the fourth quarter, compared with the $0.84 midpoint cited by management.

FPGA Growth Led by Compute and Communications

FPGA revenue reached $252 million in the third quarter, rising approximately 90% year over year and 25% sequentially. Lattice said its Compute & Communications business delivered record revenue, increasing 132% from the prior-year quarter and 36% sequentially, driven by data-center artificial intelligence applications.

Tamer said demand is being supported by AI infrastructure investment, deployments of servers for agentic inference, increased AI content per server and higher FPGA attachment rates in more complex architectures. He also cited growing security requirements as a factor supporting demand.

Management said it expects server units to grow from roughly 20 million in 2026 to about 25 million in 2027. Lattice also expects AI servers to account for approximately 40% of server shipments in 2027, up from an estimated 25% in 2026. Tamer said the company’s FPGA attachment rate per server has risen from one to two to three and now “starts with a four,” without providing a more specific figure.

Industrial & Embedded revenue increased 35% year over year and 7% sequentially. The company said demand was improving across factory automation, robotics, aerospace and defense, medical equipment and autonomy applications. Management expects the segment to accelerate in the fourth quarter and continue growing into 2027 as new design wins enter production.

AMI Acquisition Adds Revenue and Product Opportunities

Lattice closed its acquisition of AMI on July 27. AMI contributed $39 million of revenue during the two months it was included in the third quarter, exceeding the company’s expectations. Chief Financial Officer Lorenzo Flores said the business benefited from a more favorable mix of higher-margin revenue during the period.

Flores said Lattice continues to view AMI as an approximately $200 million-plus annual run-rate business, with expectations for meaningful growth in 2027. He added that non-core AMI operations are expected to exit over time and that AMI margins should expand into the high-70% range.

The company introduced four combined Lattice-AMI offerings during the quarter: streaming rack boot, security retrofit, plug-and-play deployment, and power and cooling management. Tamer said the security retrofit solution has generated the strongest customer interest, with tens of customers in proof-of-concept engagements. The first customer is expected to enter production in the current quarter, while broader production is anticipated in 2027 and a more meaningful revenue contribution is expected in 2028.

Lattice also launched the Secure Control and Management Plane Initiative with AMD, Arm, ASPEED, Intel, Jabil, Microsoft and NXP. Tamer said four additional industry participants have indicated they intend to join the effort.

Margins, Cash Flow and Debt Reduction

Third-quarter non-GAAP gross margin was 70.9%, above company expectations. Non-GAAP operating expenses were $86.7 million, up about 29% sequentially, primarily reflecting AMI and continued product-roadmap investment.

Non-GAAP operating margin expanded 280 basis points sequentially to 41.1%, while EBITDA margin increased 200 basis points to 45%. Cash flow from operations totaled $95 million, up from $88.3 million in the second quarter, and free cash flow was $77.6 million.

Lattice paid down $50 million of debt during the quarter. Flores said the company expects net leverage to fall below two times EBITDA by the end of 2026 and plans to continue reducing debt aggressively in 2027 while investing in growth opportunities.

For the fourth quarter, Lattice forecast non-GAAP gross margin of 72%, plus or minus 1 percentage point, and non-GAAP operating expenses of $95 million to $101 million. The company expects a non-GAAP tax rate of 4% to 6%.

2027 Outlook and Supply Position

Management said its fourth-quarter outlook implies approximately $1 billion in full-year 2026 revenue, roughly 90% growth over 2025, with FPGA revenue expected to exceed $900 million. Full-year non-GAAP EPS is expected to be approximately $2.50, up about 140% year over year.

For 2027, Lattice said it sees a path to revenue growth of at least 60% from its projected 2026 revenue base. The company expects Compute & Communications to remain its fastest-growing end market, while Industrial & Embedded continues its recovery and AMI contributes for a full year.

Tamer said backlog extends into 2028 and cited customer supply agreements, AI-driven content expansion, new product ramps and normalized channel inventory as supports for the outlook. The company said it does not expect to deliberately rebuild channel inventory, instead seeking to maintain current levels while adding internal inventory to support anticipated demand.

Management also said it has secured multiyear supply arrangements and believes it has capacity to support demand beyond the growth assumptions included in its 2027 outlook. Flores said supply-related delinquencies and lead times have declined significantly following constraints earlier in the year.

About Lattice Semiconductor (NASDAQ:LSCC)

Lattice Semiconductor Corporation (NASDAQ: LSCC) designs and develops low-power programmable semiconductor devices and related software. Its product portfolio includes field-programmable gate arrays (FPGAs), complex programmable logic devices, programmable system control solutions, and connectivity products that enable customers to configure and update electronic systems after manufacturing.

The company’s products are used in communications and networking equipment, industrial systems, automotive applications, data-center and computing hardware, consumer electronics, and aerospace and defense products.