Lattice Semiconductor’s Earnings Call: Balancing Achievements and Challenges

Lattice Semiconductor Corporation ((LSCC)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Lattice Semiconductor Corporation presented a balanced sentiment, highlighting both achievements and challenges. The company showcased a strong gross margin and positive momentum in design wins, particularly in key segments such as communications, computing, and industrial. However, the call also addressed significant challenges, including a year-over-year revenue decline, ongoing inventory issues, and macroeconomic uncertainties related to tariffs.

Record Gross Margin

The company reported a non-GAAP gross margin of 69%, marking a 690 basis point increase compared to the previous quarter. This achievement underscores Lattice Semiconductor’s resilience and financial discipline amidst a challenging economic environment.

Strong Design Win Momentum

Lattice Semiconductor experienced record levels of new design wins, particularly in small and mid-range FPGAs. The revenue from new products exhibited strong double-digit growth both sequentially and year-on-year, reflecting the company’s successful innovation and market penetration.

Positive Performance in Key Segments

Key segments such as communications and computing recorded their first year-on-year growth in two years, while the industrial and automotive sectors grew by 6% sequentially. This performance indicates a positive trend in these critical areas for the company.

Successful Stock Buyback Program

The company successfully repurchased approximately $25 million of common stock, reducing dilution by 4.6%. With $75 million remaining under the current Board authorization, Lattice Semiconductor continues to focus on enhancing shareholder value.

Strong Free Cash Flow

Lattice Semiconductor reported a free cash flow of $23.3 million in Q1, with a free cash flow margin of 19.4%. This strong cash flow position supports the company’s ongoing investments and strategic initiatives.

Revenue Decline

Despite the positive aspects, the company faced a 15% decline in revenue for Q1 2025 compared to the previous year. This decline highlights the challenges Lattice Semiconductor is facing in maintaining its revenue growth trajectory.

Ongoing Inventory Challenges

The company is dealing with ongoing inventory challenges, with channel inventory continuing to decrease. However, it may take a couple more quarters to reach the target levels, indicating a need for continued focus on inventory management.

Macro and Tariff Uncertainties

Lattice Semiconductor expressed caution regarding potential indirect impacts from tariffs, which could affect the second half outlook. The company remains vigilant in monitoring these macroeconomic factors.

Decline in Client Revenue

The decline in the communications and compute segment was driven by a reduction in client revenue related to older platforms. This highlights the need for the company to innovate and adapt to changing market demands.

Forward-Looking Guidance

For the second quarter of 2025, Lattice Semiconductor provided guidance with expected revenue ranging between $118.5 million and $128.5 million. The company anticipates maintaining a gross margin of 69% plus or minus 1% on a non-GAAP basis. Operating expenses are projected to be between $50.5 million and $52.5 million, with an income tax rate of 5% to 6% on a non-GAAP basis. Net income per share is expected to be between $0.22 and $0.26. Lattice Semiconductor emphasized its focus on cost controls, operational efficiency, and sustaining shareholder value amidst potential macroeconomic and tariff-related uncertainties.

In conclusion, Lattice Semiconductor Corporation’s earnings call reflected a balanced sentiment, with strong achievements in gross margin and design wins, alongside challenges such as revenue decline and macroeconomic uncertainties. The company remains focused on addressing these challenges while maintaining its strategic initiatives to drive future growth.