Why Lattice Semiconductor Rallied Today
Key Points
Lattice delivered a revenue beat and stronger-than-expected Q1 guidance.
Its data center segment is now a majority of revenue, overtaking auto and industrial applications.
Still, the stock looks expensive after a 150% run over the past year.
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Shares of Lattice Semiconductor (NASDAQ: LSCC) rallied 12.2% on Wednesday as of 1:43 p.m. EDT.
Lattice makes field-programmable gate arrays (FPGAs), a niche semiconductor product that had previously been used mostly in industrial and automotive "edge computing" applications. However, FPGAs are also used in server motherboards, and the AI revolution is now elevating Lattice's data center business to a majority of its revenue.
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Lattice's fourth-quarter earnings report last night showed strong earnings and, perhaps more importantly, a much stronger-than-expected revenue acceleration in its current-quarter guidance.
Lattice comes in hot for 2026
In the fourth quarter, Lattice grew revenue 24.2% to $145.8 million, exceeding analyst expectations, while adjusted (non-GAAP) earnings per share grew 116% to $0.32, meeting expectations in the quarter.
However, the real reason for today's jump was first-quarter guidance; management forecasts revenue between $158 million and $172 million, which would amount to just over 37% year-over-year growth, along with adjusted EPS of $0.36 at the midpoint, good for 64% year-over-year growth. That revenue guidance was well above the roughly $160 million estimated by Wall Street analysts.
The acceleration, unsurprisingly, is coming mainly from the data center segment, which grew from 49% of Lattice's revenue in the year-ago quarter to 64% of revenue in the fourth quarter. What's interesting is that the industrial and automotive segments continued to struggle, down year-over-year; however, after a long post-pandemic slump, management teams in these sectors anticipate stabilization and recovery in the year ahead.
Image source: Getty Images.
Lattice isn't cheap, but its earnings could show massive growth
Today's surge is a nice bump for Lattice, but the stock has already been anticipating a recovery for some time. Shares are up about 150% since "Liberation Day" in April 2025, and currently trade for 64 times this year's adjusted earnings estimates, even with 50% earnings growth baked in.
Therefore, while the AI revolution and stabilizing auto and industrial segments should propel earnings higher this year, much of that upside appears baked in at this point.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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