Lattice Q2 Earnings Call Highlights AI Growth and AMI Expansion

LSCC Sees Broad AI Infrastructure Demand

Chief executive officer Fouad Tamer said that Compute and Communications revenues reached a record, rising 18% sequentially and 83% year over year. Growth reflected demand across AI servers and the supporting networking, storage and cloud infrastructure.

Tamer said that FPGA attachment rates and content are increasing as servers require more security, power management, cooling control and connectivity functions. Higher complexity is also supporting stronger pricing for newer products.

AI-related revenues remain on track to reach or exceed 25% of 2026 revenues. Management stressed that AI spending is also lifting demand for traditional servers and related infrastructure beyond products directly attached to accelerators.

Lattice Benefits From Industrial Recovery

Industrial and Embedded revenues rose 17% sequentially and 36% year over year, supported by industrial automation, aerospace and defense, medical, robotics and other physical AI applications.

Tamer said that channel inventory had returned to the company’s targeted range, shifting management’s attention from inventory normalization toward securing sufficient supply. New design wins are beginning to ramp across several end markets.

The company expects Industrial and Embedded to remain a growth contributor through the rest of 2026 and into 2027. Chief financial officer Lorenzo Flores noted that Lattice has limited automotive exposure, reducing the drag from weakness in that market.

LSCC Converts Revenue Growth Into Earnings

Revenues reached $201.1 million, up 62.2% year over year and surpassed the Zacks Consensus Estimate of $185.1 million. Non-GAAP earnings per share (EPS) of 53 cents beat the consensus estimate of 44 cents.

Non-GAAP gross margin increased 240 basis points year over year to 71.7%, aided by favorable product and customer mix. Non-GAAP operating margin expanded sequentially to 38.3%, while adjusted EBITDA margin reached 43%.

Flores said that operating leverage allowed earnings to grow more than 120% year over year. Free cash flow totaled $81.3 million, representing a 40.4% margin, as profitability and cash generation strengthened faster than revenue.

Lattice Uses AMI to Expand Its Platform

Tamer said that the completed AMI acquisition combines Lattice’s low-power FPGAs with platform firmware and infrastructure-management software, creating a broader management and control offering for AI data centers.

AMI is expected to exit 2026 at an annual revenue run rate above $200 million, with gross margin above 75% and EBITDA margin above 40%. Its revenues are split approximately 60% between boot firmware and 40% infrastructure manageability.

Management expects the combination to double Lattice’s addressable market. Tamer said that feedback from roughly 100 hyperscalers, equipment manufacturers and ecosystem partners reinforced confidence in joint customer opportunities.

LSCC Guides to Another Record Quarter

Lattice expects third-quarter revenues in the range of $245 million to $265 million, including approximately two months of AMI contribution. The stand-alone FPGA business is projected to generate revenues of $210 million to $230 million.

Non-GAAP EPS is forecasted to be between 54 cents and 58 cents. Combined non-GAAP gross margin is expected to be 69.5%, plus or minus one percentage point, while operating expenses are projected to be in the range of $83 million to $90 million.

Flores said that AMI should become meaningfully accretive to EPS beginning in the fourth quarter. The company expects to exit 2026 at a $1.2 billion annual revenue run rate, supporting its longer-term aspiration of reaching $3 billion by 2030.

Lattice Addresses Supply and Integration Risks

A Deutsche Bank analyst asked whether supply limitations could restrict growth. Tamer said that assembly capacity remained constrained, although new capacity agreements and supplier qualifications should bring supply and demand into balance by September.

A Jefferies analyst questioned cost pressure. Tamer said that supplier costs and expedite fees were rising, with Lattice planning to absorb some increases and pass some through to customers.

Management also clarified that AMI’s low-margin hardware pass-through activity will be exited by year-end. Flores said that the transition temporarily affects third-quarter gross margin but is not part of AMI’s expected $200 million run-rate business.

LSCC Maintains an Expansion-Focused Posture

Management’s tone remained confident about sustained demand, design wins and operating leverage. Backlog now extends through 2027, supported by capacity commitments with suppliers and corresponding customer agreements.

The company’s priorities are integrating AMI, securing supply, investing in research and development and converting above-market revenue growth into faster earnings and cash-flow expansion.

Zacks Rank and Style Scores Signals

LSCC currently carries a Zacks Rank #2 (Buy). Its Growth Score of A indicates strong growth characteristics, while its Value Score of F and Momentum Score of D point to weaker valuation and price-momentum attributes. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The VGM Score of C reflects a mixed combined profile despite the favorable Growth Score. The Zacks Rank can change as analysts revise their earnings estimates following the newly reported results.

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