Semtech Corporation (Nasdaq: SMTC) is a provider of high-performance semiconductors and cloud connectivity services, focused on IoT systems and enabling connectivity for various markets like infrastructure, industrial, and consumer electronics.

For the fourth quarter and fiscal year 2025, Semtech reported net sales of $251 million, a 6% sequential increase and a 30% rise year-over-year from $192.9 million in Q4 FY 2024. For the full fiscal year, net sales totaled $909.3 million, up 5% from $868.8 million in FY 2024. The company demonstrated a notable increase in margins, with an adjusted gross margin of 53.2%, up 80 basis points sequentially and 430 basis points year-over-year. This resulted in an adjusted operating margin of 19.9%, which is up 160 basis points sequentially and 1,070 basis points compared to Q4 FY 2024.

Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) stood at $57.8 million, translating to an adjusted EBITDA margin of 23%, reflecting a 140 basis point increase sequentially and up 1,050 basis points year-over-year. The adjusted diluted earnings per share rose to $0.40, compared with $0.26 in Q3 FY 2025 and significantly improved from a loss of $0.06 in Q4 FY 2024.

In Q4, adjusted net operating expenses were $83.7 million, aligned with guidance and reflecting a sequential increase aimed at bolstering R&D initiatives. The company reported operating cash flow of $33.5 million and free cash flow of $30.9 million. Semtech ended FY 2025 with a cash and cash equivalents balance of $151.7 million, incorporating principal payments on its credit facility. Notably, net debt was significantly reduced, totaling $411 million at the end of FY 2025, a decrease of $868 million or approximately 68% year-over-year from $1.3 billion.

Looking ahead to the first quarter of FY 2026, Semtech projects net sales of approximately $250 million, plus or minus $5 million, indicating an expected year-over-year increase of 21% at the midpoint. The adjusted gross margin is anticipated to be around 53%, with adjusted operating expenses projected at $87 million. Adjusted operating income for the first quarter is projected at $45.5 million, resulting in an adjusted operating margin of 18.2%. The expected adjusted net interest expense is $6.3 million, targeting an adjusted diluted earnings per share estimate of $0.37, plus or minus $0.03, based on a weighted average share count of 90.1 million shares.

Overall, Semtech’s fourth quarter and FY 2025 results reveal a trend of financial improvement, characterized by consistent sequential growth across key metrics, positioning the company for ongoing operational efficiency and strategic growth in FY 2026.