Lattice's Q2 Earnings Top Estimates on AI Demand and Record Revenue

LSCC Delivers Broad-Based Revenue Growth

Lattice generated record revenues of $201.1 million, up 17.7% sequentially and 62.2% from the year-ago quarter. Compute & Communications reached another record, fueled by continued AI infrastructure investments, higher FPGA attach rates and increasing demand from data center customers.

Industrial & Embedded also continued its recovery, benefiting from healthy channel inventories and improving demand across industrial automation, aerospace and defense, medical, robotics and emerging physical AI applications. Management noted that multiple new design wins are beginning to ramp and expects the segment to remain an important growth contributor through the remainder of 2026.

Lattice Expands Profitability Amid Operating Leverage

Profitability improved at a faster pace than revenues during the quarter. Non-GAAP gross margin expanded 240 basis points year over year to 71.7%, benefiting from a favorable product and customer mix.

Non-GAAP operating expenses increased 29.5% year over year to $67.1 million, primarily reflecting continued investments in research and development, along with higher performance-based bonuses and sales commissions. Despite the higher spending, non-GAAP operating income surged 126.2% year over year to $77.1 million, while adjusted EBITDA margin improved to 43% from 34.1% a year ago.

Lattice's Cash Flow Supports Financial Flexibility

Lattice continued to convert higher earnings into robust cash generation. Cash flow from operating activities increased to $88.3 million from $38.5 million in the year ago quarter.

Free cash flow reached $81.3 million, representing a free cash flow margin of 40.4% compared with 25.2% in the previous quarter. Management attributed the sequential improvement to stronger operating performance and the timing of annual bonus payments made during the first quarter.

As of July 4, 2026, the company had $173.3 million in cash and cash equivalents compared with $133.9 million at the end of 2025. Long-term operating lease liabilities (net of current portion) were $32.6 million, down from $36.1 million at the end of 2025.

Lattice Completes Transformational AMI Acquisition

During the quarter, Lattice completed its acquisition of AMI, combining its low-power FPGA portfolio with AMI's firmware and infrastructure management software. Management believes the transaction doubles the company's addressable market and strengthens its position in AI data center infrastructure.

The company expects AMI to operate at a revenue run rate exceeding $200 million by the end of 2026, with non-GAAP gross margins above 75% and EBITDA margins above 40%. Lattice also expects the acquisition to become meaningfully accretive to earnings beginning in the fourth quarter after integration-related adjustments normalize.

LSCC Issues Strong Third-Quarter Outlook

Management projected FPGA revenues between $210 million and $230 million for the third quarter. Including approximately two months of AMI contribution, total revenues are expected to be between $245 million and $265 million, implying a midpoint of $255 million.

Non-GAAP gross margin is expected to be 69.5%, plus or minus 1%, while non-GAAP operating expenses are projected between $83 million and $90 million. Non-GAAP earnings are expected in the range of 54-58 cents per share. Management expects continued AI infrastructure demand, expanding backlog, sustained design-win momentum and the AMI acquisition to support accelerating revenue, earnings and cash flow growth.

Zacks Rank

Lattice currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Keysight Technologies, Inc. KEYS is scheduled to release third-quarter fiscal 2026 earnings on Aug. 18. The Zacks Consensus Estimate for earnings is pegged at $2.46 per share, suggesting growth of 43.02% from the year-ago reported figure.

Keysight has a long-term earnings growth expectation of 19.44%. The company delivered an average earnings surprise of 9.46% in the last four reported quarters.

Analog Devices, Inc. ADI is set to release third-quarter fiscal 2026 earnings Aug. 19. The Zacks Consensus Estimate for earnings is pegged at $3.33 per share, implying growth of 62.44% from the year-ago reported figure.

Analog Devices has a long-term earnings growth expectation of 31.04%. The company delivered an average earnings surprise of 5.48% in the last four reported quarters.

Applied Materials, Inc. AMAT is scheduled to release third-quarter fiscal 2026 earnings on Aug. 13. The Zacks Consensus Estimate for earnings is pegged at $3.36 per share, suggesting growth of 35.48% from the year-ago reported figure.

Applied Materials has a long-term earnings growth expectation of 32.44%. The company delivered an average earnings surprise of 6.06% in the last four reported quarters.

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