Allegro (ALGM) Q4 2026 Earnings Transcript

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DATE

Thursday, May 7, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Michael Doogue
• Chief Financial Officer — Derek D'Antilio
• Director of Investor Relations — Jalene Hoover

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TAKEAWAYS

• Quarterly Revenue -- $243 million, reflecting 6% sequential growth and 26% year-over-year growth.
• Quarterly Non-GAAP EPS -- $0.17, increasing 13% sequentially and 183% year over year; net income was $32 million.
• Quarterly Gross Margin -- 50%, compared to 49.9% in the prior quarter and 45.6% in the year-ago quarter.
• Quarterly Operating Margin -- 15.6%, up from 15.4% in the previous quarter and 9% in the same quarter last year.
• Quarterly Adjusted EBITDA Margin -- 20.4%.
• Quarterly Free Cash Flow -- $19 million, with operational cash flow of $36 million and capital expenditures of $17 million.
• Quarterly Data Center Sales -- Rose 41% sequentially, contributing 14% of total sales, up from 10% in the prior quarter.
• Quarterly Automotive Sales -- $164 million, flat sequentially, up 18% year over year; Focused Auto (xEV and ADAS) grew 25% year over year in the quarter.
• Quarterly Industrial and Other Sales -- $79 million, up 23% sequentially and 49% year over year, led by data center and robotics.
• Quarterly Magnetic Sensor Revenue -- $141 million, rising 2% sequentially and 21% year over year.
• Quarterly Power Products Revenue -- $102 million, up 12% sequentially and 35% year over year.
• Full-Year Revenue -- $890 million, up 23% from the prior year.
• Full-Year Auto Sales -- $629 million, increasing 17%, representing 71% of total sales.
• Full-Year Focused Auto Sales -- $349 million, up 30%, accounting for 55% of total auto sales.
• Full-Year Industrial and Other Sales -- $261 million, up 38%, with data center more than quadrupling and making up 10% of total sales.
• Geographic Performance -- Rest of Asia and China led regional growth; rest of Asia grew 44% year over year, China 36%.
• Full-Year Gross Margin -- 49.4%, improving 140 basis points year over year despite a 200 basis-point cost headwind from gold prices.
• Full-Year Operating Margin -- 14.1% of sales.
• Full-Year Adjusted EBITDA Margin -- 19.1% of sales.
• Full-Year EPS -- $0.54, more than doubling from the prior year.
• Full-Year Free Cash Flow -- $125 million, with $60 million in voluntary debt payments, resulting in year-end net debt of $116 million.
• Backlog -- Ended at a multiyear high.
• Design Wins -- Increased over 30% year over year, led by automotive (xEV and ADAS) and data center design activity.
• Product Highlights -- Launched 10MHz TMR current sensor, awarded “2025 Sensor Product of the Year”; launched ASIL D passive TMR angle sensor targeting steer-by-wire ADAS.
• R&D and Product Innovation -- TMR technology represented 30% of sensor product releases; released first isolated gate driver for silicon carbide transistors.
• Q1 Sales Guidance -- Projected revenue of $245 million to $255 million, midpoint implies 23% year-over-year growth.
• Q1 Gross Margin Outlook -- Expected range of 50%-51% (non-GAAP).
• Q1 Operating Expenses Guidance -- Expected to decline sequentially to $80 million, plus or minus $2 million.
• Q1 Non-GAAP EPS Guidance -- $0.19 to $0.23 per share, with projected interest expense of $4 million and a tax rate of approximately 9%.
• Q1 Data Center Outlook -- Data center expected to comprise 16%-17% of total sales, implying sequential growth of 20%-25% for the segment.
• Inventory and Receivables Management -- Days sales outstanding fell to 35 days from 40; inventory days declined to 128 from 133.
• Capital Spending -- Q4 capital expenditures were $17 million, mainly to expand back-end capacity in the Philippines.

SUMMARY

The call spotlighted record quarterly and annual revenue performance, matched by operating leverage improvement and continuing gross margin expansion driven by product mix and cost initiatives. Management emphasized growth in high-value automotive and data center segments, underpinned by multiyear-high backlog and a year-over-year surge in design wins. Guidance calls for another quarter of double-digit revenue and non-GAAP EPS growth, with margin improvement sustained by cost conversion programs and select price increases. Ongoing CapEx targets rising capacity to meet both auto and industrial demand, while regional strength was again led by Asia and China, primarily through focused auto and data center momentum.

• Management attributed “year, free cash flow” to operating improvement and disciplined capital allocation, including $60 million in voluntary debt reduction.
• Investments in innovation produced multiple content-expanding product introductions, such as the industry’s first 10MHz TMR current sensor and ASIL D-compliant angle sensor.
• CFO D'Antilio said, “Gross margin was 50%, up from 49.9% in Q3 and 45.6% in Q4 of fiscal '25,” directly linking factory and cost programs to profitability expansion.
• CEO Doogue described the expansion of fan driver and current sensor content in data center equipment, stating, “our content opportunity per rack scales from approximately $150 in today's servers to over $425 in next-generation AI configurations.”
• Management explicitly stated that auto and industrial inventory levels remain thin, with no broad restocking signs, and model forward growth as “SAAR plus 7% to 10%.”

INDUSTRY GLOSSARY

• SAAR: Seasonally Adjusted Annual Rate, a commonly referenced auto industry metric estimating annualized vehicle sales for demand forecasting.
• xEV: Refers to all types of electric vehicles, including hybrid (HEV), plug-in hybrid (PHEV), and battery-electric (BEV) vehicles.
• ADAS: Advanced Driver-Assistance Systems, electronic systems in vehicles that assist driver safety and automation.
• VLDC: Very Low Duty Cycle motor driver, used in energy-efficient motor control applications.
• CMR: Current Mode Regulation, a type of sensor/magnetic sensing technology referenced for future product leadership.
• TMR: Tunnel Magnetoresistance, describing high-precision sensor technology featured in Allegro’s current and angle sensors.
• ASIL D: Automotive Safety Integrity Level D, the highest integrity level defined in ISO 26262, used in critical safety semiconductor devices.
• SOFR: Secured Overnight Financing Rate, the benchmark interest rate for term loans cited in the context of interest expense calculations.
• OSAT: Outsourced Semiconductor Assembly and Test, referring to third-party providers used for backend chip manufacturing and packaging.

Full Conference Call Transcript

Jalene Hoover: Thank you, Alliah. Good morning, and thank you for joining us today to discuss Allegro's fiscal fourth quarter and full fiscal year 2026 results. I'm joined today by Allegro's President and Chief Executive Officer, Mike Doogue; and Allegro's Chief Financial Officer, Derek D'Antilio. They will provide highlights of our business, review our fourth quarter and full fiscal year 2026 financial results and share our first quarter outlook. We will follow our prepared remarks with a Q&A session. Today's call includes remarks about future expectations, plans and prospects, which are forward-looking statements.

Such statements are based on current expectations and assumptions as of today's date and are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated or projected on today's call. The company assumes no obligation to update these statements, except as required by law. For a discussion of these risks and uncertainties, please refer to today's press release and the risk factors contained in our periodic filings with the SEC. Additionally, we will refer to non-GAAP financial measures during today's call.

Today's earnings press release, which is available on the Investor Relations page of our website at www.alllegromicro.com, contains important information about our non-GAAP financial presentation and also includes reconciliations of our non-GAAP financial measures to the most directly comparable GAAP measures. This call is also being webcast, and a replay will be available in the Events and Presentations section of our IR page shortly. It is now my pleasure to turn the call over to Allegro's President and CEO, Mike Doogue. Mike?

Michael Doogue: Thank you very much, Jalene, and good morning. Thank you all for joining our fourth quarter and full fiscal year 2026 earnings call. We finished fiscal year 2026 with strong momentum, delivering a fifth consecutive quarter of sales growth at $243 million. Fourth quarter EPS was $0.17, nearly tripling year-over-year. FY '26 sales increased by 23% year-over-year to $890 million and EPS more than doubled to $0.54 per share. This performance is a result of our team's dedicated execution of strategic initiatives discussed at our February Analyst Day. In automotive end markets, our focused auto sales, which includes xEV and ADAS, increased 30% in FY '26. Content expansion and share gains drove this growth.

FY '26 growth included gains in steering and braking for ADAS applications, increased adoption of high-voltage traction inverters and ramping programs for VLDC motor drivers and xEV powertrain systems. As a result, total auto sales grew 17% in fiscal 2026, well above our SAAR plus 7% to 10% target coming off an inventory digestion period. Industrial and other end markets led fourth quarter sales growth with a data center up 41% sequentially to establish a new quarterly record at 14% of total sales. For fiscal 2026, industrial and other end markets grew 38%, led by data center and robotics and automation. This is well above our high-teens sales growth target for our industrial business.

Our high-efficiency motor drivers for 3-phase data center fans continue to gain traction. Historically, these fans cooled CPUs and GPUs but they've now expanded into power supplies and into network switching equipment. We're also seeing growing adoption of our high-speed current sensors in power supplies, battery backup units and capacitor backup units across the data center. Our data center content is not limited by unit volume growth. We are seeing strong growth as a result of our expanding product portfolio and the adoption of new high-voltage data center architectures. As AI racks move from 15 kilowatts to 1 megawatt of power consumption, Allegro's content scales with power per rack.

Because we solve the thermal and sensing challenges that come with extreme power density, our content opportunity per rack scales from approximately $150 in today's servers to over $425 in next-generation AI configurations. I'd like to share a few highlights from my trip to Asia last month, where I met with our top data center customers in Taiwan and Vietnam. Three things stood out. First, customers expect data center fan volumes to grow for the foreseeable future, even as liquid cooling is adopted. Continued growth is driven by fan proliferation into power supplies and into network switching equipment, which use a large number of fans and are rarely liquid cooled.

Second, design win activity for our current sensors in power supplies and backup systems is large and growing. Both Hall and TMR current sensors are shipping or will soon ship across multiple hyperscaler platforms in AC to DC, PFC and DC-to-DC power stages. Current sensors for data centers are emerging as a meaningful new growth pillar, and we expect this to be an area of significant growth over the next several years. And finally, we're seeing significant design in progress for high-voltage drivers and data center power supplies. In addition to data centers record performance, robotics and automation sales doubled year-over-year in fiscal 2026.

We saw increasing adoption of our sensors in factory and building automation applications during the year, along with growing engagement and design wins with humanoid robotics customers. For example, we secured two design wins with leading Chinese robotic companies for use in robotic joints during the quarter. In the first win, our current sensors were selected over local alternatives based on superior performance and our smaller package size. In the second win, our latest inductive sensor was selected in an approximate 90 IC per robot opportunity, where small form factor, high-precision motor control capability and our local coil design expertise were decisive factors. Initial shipments will begin in calendar 2026 with volumes expected to increase in 2027.

Now turning to design win and backlog momentum. Our fiscal '26 design wins increased more than 30% year-over-year. Focus auto, including xEV and ADAS, led automotive design win activity with powertrain-agnostic safety, comfort and convenience also achieving strong results. Data center-led industrial design wins for the full year. In addition, we exited the year with a total company backlog sitting at a multiyear high. These metrics give us confidence in our forward-looking momentum. Our R&D investments are guided by our core value innovation with purpose, which drives differentiated sensor and power technology. Great pride in holding the #1 position in magnetic sensing, reflecting our broadest portfolio and our leading performance in the market.

Allegro's magnetic current sensors enhance our technology and market leadership positions in output accuracy, bandwidth and power density. To illustrate this leadership, I'll share some recent examples. In Q4, our 10 megahertz TMR current sensor was named EDN's 2025 Sensor Product of the Year. As the industry's first 10 megahertz TMR IC, it offers the highest bandwidth solution available today, enabling the high-speed control required for next-generation gallium nitride and silicon carbide power systems across xEV, data center and robotics applications. We also expanded our sensor portfolio during the quarter with the release of an ASIL D passive TMR angle sensor. This IC delivers the fail-safe reliability essential for the industry's transition to steer-by-wire ADAS systems.

Those systems support Allegro's 2 to 3x content uplift compared to conventional steering systems. One of our more differentiated and fastest-growing technologies in magnetic sensing is. We expect CMR to extend our leading magnetic sensing position. During fiscal 2026, TMR represented approximately 30% of our sensor product releases offering the superior accuracy, bandwidth and low power consumption that our customers demand. We're also expanding our lead in power ICs, which we expect to drive continued share gains. In fiscal 2026, we released our first isolated gate driver specifically designed for silicon carbide transistors and are seeing strong customer interest.

Our power-through architecture delivers up to 40% greater efficiency -- and we expect to see a 2 to 3x dollar content uplift from isolated gate drivers as customers move toward 800-volt xEV platforms and higher power AI architectures. This is a clear example of how our differentiated technology translates directly into content expansion and share gains. As we enter fiscal 2027, we see demand trends that support continued growth, and we remain confident in our ability to execute towards our target financial model. I'll now turn the call over to Derek to provide additional color on our financial performance as well as our first quarter outlook.

Derek D'Antilio: Thank you, Mike, and good morning, everyone. Starting with our fourth quarter results. Sales were $243 million and non-GAAP earnings per share were $0.17. As a percentage of sales, gross margin was 50%, operating margin was 15.6% and adjusted EBITDA was 20.4%. Q4 sales increased by 6% sequentially and 26% year-over-year. Sales to our automotive customers were essentially flat sequentially at $164 million, including an expected decline in China due to the Chinese New Year. Auto sales increased by 18% over Q4 of FY '25 and focused auto sales, which include xEV and ADAS, increased by 25% versus Q4 of '25. Industrial and other sales increased by 23% sequentially, $79 million and 49% over Q4 of FY '25.

We led by continued strength in data center to record levels. Sales to our data center customers were 14% of Q4 sales, up from 10% in Q3 and 8% in Q2. And as Mike discussed, we are seeing continued strength in data center demand as we move into fiscal '27. From a product perspective, magnetic sensor sales increased by 2% sequentially to $141 million, an increase by 21% over the prior year quarter. Sales of our Power Products increased slightly 12% sequentially to $102 million and 35% over the prior year quarter.

Sales by geography on a ship-to basis were as follows: 30% of sales in the rest of Asia, 25% of sales in China, 17% Japan, 15% of sales in Europe and 13% in the Americas. Now turning to Q4 profitability. Gross margin was 50%, up from 49.9% in Q3 and 45.6% in Q4 of fiscal '25. Operating expenses were $84 million, an increase of $5 million sequentially, largely due to annual payroll tax resets and higher incentive compensation. Operating margin was 15.6% of sales compared to 15.4% in Q3 and an increase of 660 basis points compared to 9% in Q4 of fiscal '25. The effective tax rate for the quarter was 6%.

Interest expense was $5 million, which included $650,000 of expenses related to the repricing of our term loan down another 25 basis points to SOFR plus 175 basis points. The fourth quarter diluted share count was 187 million shares and net income was $32 million or $0.17 per diluted share. Non-GAAP EPS increased by 13% sequentially and 183% over a year ago quarter on sales increases of 6% and 26%, demonstrating the significant operating leverage in our business model. Now turning to a summary of our full fiscal year 2026 results. Total sales increased by 23% year-over-year to $890 million. Auto sales were $629 million, an increase of 17% compared to fiscal '25 and were 71% of our total sales.

Focused auto sales, which is ex EV and ADAS with $349 million, an increase of 30% year-over-year and represented 55% of our auto sales. Industrial and other sales were $261 million, an increase of 38% year-over-year, led by data center, which more than quadrupled and represented 10% of our total FY '26 sales. From a geographical perspective, the rest of Asia and China sales led regional growth. Rest of Asia sales increased 44% year-over-year due to strength in data center and China sales grew 36% year-over-year, led by growth in our Focus Auto. Gross margin for the full year was 49.4%, an improvement of 140 basis points year-over-year.

Operating leverage and factory efficiencies helped to more than offset price and commodity cost increases. The cost of gold in particular, was an approximately 200 basis point headwind in fiscal 2026. And as we move into FY '27, our teams remain focused on our goal to call for conversions as well as other cost reduction in factory efficiency initiatives as we progress towards our gross margin targets. Operating margin was 14.1% of sales. Adjusted EBITDA for the year was 19.1% of sales and earnings per share were $0.54, more than double the prior year. Moving to the balance sheet and cash flow. We ended Q4 with $175 million of cash. Q4 cash flow from operations was $36 million.

CapEx was $17 million and free cash flow was $19 million. For the full year, free cash flow was a record $125 million, and we also made $60 million in voluntary debt payments. Bringing our total debt balance to $285 million and net debt to $116 million exiting the year. From a working capital perspective, fourth quarter DSO was 35 days. Compared to 40 in Q3 and inventory days were 128 days compared to 133 in Q3. Finally, I'll turn to our Q1 fiscal 2027 outlook. We expect first quarter sales to be in the range of $245 million to $255 million. The midpoint of this range equates to a 23% year-over-year increase.

Additionally, we expect the following, all on a non-GAAP basis. Gross margin to be between 50% and 51%. Operating expenses are expected to decline sequentially to $80 million, plus or minus $2 million. Within that, we expect to continue to make strategic investments in R&D and sales to drive above-market growth, and these are funded largely through continued reallocation of resources and process efficiencies. Interest expense is projected to be $4 million. We expect our non-GAAP tax rate to be approximately 9%. We estimate our weighted average diluted share count will be 187 million shares. And as a result, we expect non-GAAP EPS to be between $0.19 and $0.23 per share.

Now I'll turn the call back over to Jalene for questions.

Jalene Hoover: Thank you, Derek. This concludes management's prepared remarks. Before we open the call for your questions, I'd like to share our first fiscal quarter conference line up with you. We will attend TD Cowen's 54th Annual Technology, Media and Telecom Conference in New York on May 27, Evercore's 2026 TMT Global Technology Conference on June 2 in San Francisco, Bank of America Securities 2026 Global Technology Conference on June 3, also in San Francisco; and Mizuho's Technology Conference 2026 on June 9 in New York. We will now open the call for your questions. Alliah, please review our Q&A instructions.

Operator: [Operator Instructions] Our first question comes from the line of Gary Mobley of Loop Capital.

Gary Mobley: I know you mentioned in your prepared remarks that backlog is at a multiyear high. I'm hoping that maybe you can share some additional details in terms of what's changed in the past 90 days as far as revenue KPIs go and then perhaps maybe drilling down by end market. Anything you can provide there would be helpful.

Michael Doogue: In the last 90 days, in the prepared remarks, I talked about a trip, I took to visit data center customers. It gave me increasing confidence that we have a strong story there, especially as we see the current sensors ramping on top of continued strong demand in fan drivers. So we're feeling good about the industrial market as we look ahead. In the automotive space, we're seeing good signs of strength, both in terms of the backlog, but also forward-looking design wins.

And at our Analyst Day, we talked a lot about the importance of our increasing dollar content story, and it's encouraging to see a preponderance of wins in our automotive area coming in those applications that have higher dollar content. So those would be the two most notable trends.

Gary Mobley: Okay. And Derek, I know in the past, you've communicated that the gross profit drop through over the long term, should range between $0.60 and $0.65. It looks like what's embedded in the Q1 guide is something about that, maybe $0.67. So perhaps maybe you can share with us the drop through you expect for the year and perhaps some additional detail by quarter as some seasonal factors might play into the expense equation.

Derek D'Antilio: Sure. And as you can see in the numbers, the Q4 drop-through was in the low 50s, and that typically happens as our annual price negotiations with customers happen in that March quarter. Sort of revenue declines in that quarter for those price negotiations. And even though we negotiate potential cost declines in certain areas, whether it be wafers or OSATs or those sort of things, that takes a quarter or 2 to cycle through inventory. So we see some of that benefit going into our first quarter with a drop who's actually closer to 70% in the first quarter at the guide of 50% to 51%.

I also mentioned on the call that we have had some significant headwinds, particularly commodity costs and recently fuel costs. And I might get the question of what are we going to do with prices we are doing select price increases, but it's very nuanced, that didn't start in Q4, that will start at the end of Q1. And what we, of course, always look to do is offset any sort of cost increases we have with factory efficiencies with improvements with our vendors. And we did a lot of that in 2026.

We improved our gross margin by 140 basis points even with the annual price declines even with the cost headwinds, we'll continue to do that as we go into 2027 and look to do select price increases as we move throughout the year.

Operator: Our next question comes from Quinn Bolton of Needham & Company.

Neil Young: This is Neil Young on for Quinn Bolton. So data center grew pretty strongly quarter-over-quarter. As you look into fiscal year '27, can you help us think about the -- or help us think through the durability of that growth? And specifically, how much of the forward pipeline is still fan driver driven versus the newer current sensor and isolated gate driver opportunities? And then I have a follow-up.

Michael Doogue: Sure. This is Mike. And when we look at the data center business, we see very terrible demand in the call last quarter. There were some back and forth about what is the right growth rate for the business on a long-term basis. And we look at that growth rate for our data center business coming in well north of 20% on a long-term basis. As we look ahead in FY '27, we believe our growth rate will come in well above 20%. We're not going to forward guide with specific numbers, but we do see strength data center coming into FY '27. Back to the question on the mix.

The majority of our business is still with the fan drivers, and that's a good story. It's a good story because, as I mentioned in the prepared remarks, the fans are starting to appear in new locations within the data center build-outs, most notably power supplies. So that business continues to grow and remains strong. On top of that, current sensors in these power supplies, that business started to ramp in FY '26 and we believe it will ramp even more strongly in FY '27. The isolated gate driver business is still 18 to 24 months out from having material revenue in the data center but we're encouraged by design and activity that's happening now.

Derek D'Antilio: And this is Derek. To add one piece of context. Current sensors entering FY '23 virtually 0 part of that data center business. In Q3, it was about 10%. In Q4, it got closer to that 20% of our data center business.

Neil Young: Great. And then you guided June quarter gross margin in the 50% to 51% range, while the longer-term model still is targeting that over 55%. Could you maybe walk us through the biggest drivers of that bridge from here, whether it be op leverage, factory efficiency, mix, new products, et cetera? And which one of those are most controllable versus volume dependent?

Michael Doogue: Sure. The three pieces of that really operating leverage. And so when you look at our model, as Gary pointed out, we're going to grow at about 70% drop-through in the Q1, and that always happens in that quarter. But the typical drop-through is between 60% to 65%. That's our variable contribution margin. So as we put more volume through our back-end facility in Philippines and the fixed cost growing inflation, you get a significant amount of leverage. So if you're plugging your revenue numbers like we have at our Analyst Day, that's the biggest driver of overall gross margin going forward.

The second biggest piece though is improving that variable contribution margin and we talked about this gold to copper conversion program that's ongoing. It's not going to happen all in one quarter. There's customer qualifications that are required. So it will happen over time. But that was a 200 basis point headwind in FY '26 alone. So as we move through that program, that's a significant uplift in addition to negotiating cost savings with our wafer suppliers and others, especially as they get through these geopolitical times right here. Those are the two biggest pieces, and those are the pieces. The second piece is clearly controllable by us.

The first piece is market dependent, which we see good things happening right now. And the third level, which is not insignificant, is continued factory efficiencies. And within FY '26, again, we were able to offset 200 basis points of gold headwinds and still improve our gross margin just through factory efficiencies, and we'll continue to do those things going forward.

Operator: Your next question comes from Joe Quatrochi of Wells Fargo.

Joseph Quatrochi: Maybe first just to start, can you kind of walk through the puts and takes of focus auto for the March quarter, I think that was kind of flattish sequentially? And then how do you think about that kind of accelerating? Or where could that go in fiscal '27?

Michael Doogue: So Focus Auto, the way I look at it, it was up roughly 30% year-over-year in FY '26. So it's demonstrating strength on the annualized basis of FY '26. And I think we'll see something similar in FY '27. And the reason for that goes back to what I mentioned just a few minutes ago, when we look at our design wins, where they're happening, do we have share gains, we get a very positive story in our Focus Auto segment and that we do see strong share gains. We do see significant wins in these areas with expanding dollar content.

So we remain positive on the future of Focus Auto, and we remain positive on our ability to outgrow auto production SAAR plus 7% to 10% because of our strong story between share gains and dollar content gains.

Derek D'Antilio: And Joe, a little specificity on Q4. The reason why focus Auto was flat to down a little bit was largely China -- we have a large business in China on the focus auto that continues to grow. In fact, our design wins were led by China ADAS applications. So that's encouraging for the future. And within that, we're expecting focus auto and auto to be up in Q1 a couple of percentage points. and then Q1 will be led by data center on the industrial side, as you might imagine.

Joseph Quatrochi: Yes, that's helpful color. And maybe just on the industrial side, I think maybe ex data center, that was actually pretty strong sequentially. What's driving that? Is it I assume robotics is still maybe a little bit small, but any help there and just kind of what's driving nondata center industrial?

Michael Doogue: Yes. In our category of robotics and industrial automation, it's not large, but I wouldn't necessarily characterize it as small either. So we saw some meaningful movement there. On the factory automation side of things, we're not talking about certainly humanoid robots but there are a lot of robotic systems in factories, product moving equipment, et cetera, and we're seeing strength there. Additionally, we're seeing strength in energy infrastructure. I think there's some pull-through there perhaps because of data center build-outs, and we see continued strength in the 2-wheeler market as well, 2-wheeler transportation.

Operator: Our next question comes from Timothy Arcuri of UBS.

Timothy Arcuri: Derek, I wanted to ask also on data center and what's being assumed for the guidance in June? Because if it grows in the same -- I mean, it grew 40% in December, it grew 40% in March. If it grows 40% in June, then the rest of the business is down like 3% to 4% and the rest of industrial is down like mid-teens, which doesn't seem to make a lot of sense. So maybe data center is assumed to slow down on a sequential basis in June. Can you kind of go into that?

Derek D'Antilio: So you could -- look, data center was 14% of our total sales in Q4. You could increase that by a couple of percentage points, 2 or 3 percentage points. So in Q1, it will be 16%, 17% of our total sales. which implies 20% to 25% growth in the data center. And I wouldn't call it a slowdown. It's the law of large numbers, right? And so if you take 20% to 25% a quarter, that's still a pretty significant growth rate. Remember, in FY '26, entering the year, data center was still 2% or 3% of our sales as we had a real rebound in fans and then the current sensors the last couple of quarters.

Timothy Arcuri: Okay. Got it. And then -- so it seems like mature node foundry is getting pretty tight. You have two of your three major foundries there. Are you seeing cost pressure? You did cite gold -- pressure from gold. Is some of it like wafer pricing pressure as well? And can you sort of talk about -- you did talk about maybe raising prices a little bit to kind of pass that on. Can you just talk about the foundry costs?

Derek D'Antilio: Yes. So Joe, I think we've done a pretty good job and our foundry partners have been really good working with us. So that's not the biggest headwind we have necessarily right now. I think they've been really good partners. I guess headwind happens to be gold and then more recently, fuel charges for freight and also in our Philippines facility. To touch on the pricing increases, it's not the first place we go. It's not a cost-plus type of situation. We work with these customers. We've worked with for years on finding efficiencies and of course, converting some of those things from gold to copper on the wires. That's the first place.

We will do select price increases that will begin here at the end of Q1. Some of that is surcharges related to those two costs that I mentioned.

Operator: Our next question is from Vijay Rakesh from Mizuho.

Vijay Rakesh: Just a quick question on the data center side again. It looks like if you quadrupled for this fiscal, your content is going up 4x. Just wondering -- sorry, from $150 million to $425 million, I guess. As you look at fiscal '26 -- fiscal '27, '28, any thoughts on how the data center side should grow? And are you going to be breaking it out every quarter?

Michael Doogue: As I mentioned, we look at the long-term data center growth rate north of 20% and what we really see as you go through that evolution of dollar content, it's really driven by architectures and the on-ramp of new technologies in the data center, right, whether it be 800-volt architectures, et cetera. So for our current sensors, Derek mentioned, we saw a nice ramp in FY '26. That will be the next step-up for us and the speed with which they ramp is somewhat correlated to the different architectures that are adopted and when and with what market share but we see nothing but positivity there.

Like I said, we expect FY '27 to be well above a 20% growth rate and we're seeing very positive signs right now from customers and from the architectural evolutions happening out there that seem to benefit Allegro.

Vijay Rakesh: Got it. And in terms of the auto side, are you seeing any memory constraints affecting that in the second half or into '27? That's it.

Michael Doogue: Yes, this is Mike. I'll take that one. Our customers all seem concerned. But when we see it is when somehow orders are impacted, and we are not seeing that. We're seeing no impact of material shortages on our orders. So I know it's tied out there, but it's not really impacting our business at this point, at least as far as we can tell.

Operator: Our next question comes from Tom O'Malley of Barclays.

Matthew Pan: Matthew Pan on for Tom. Just curious, one of the other analog players with high auto exposure is sort of guiding to auto sequential growth in June, pretty well above historic seasonality. Sort of looking at like your guys' historic seasonality in March -- or sorry, in June. And I know you talked about sort of up a couple of points for auto in June. Is there any reason you shouldn't be growing above seasonality there?

Derek D'Antilio: No. I mean our guide total for the March quarter is up about 3% at the midpoint. The range is obviously a little bit higher than that at the high end of that. And within that, auto grows a couple of percentage points as China comes back. And then we're also shipping a significant amount of our products as we talked about into industrial and data center. To be honest, we have a little bit of delinquency that we're starting to build in certain pockets in both auto and in industrial that we're putting some capacity in the back end in the Philippines, as you saw, $17 million in CapEx in Q4.

So that will help with capacity to facilitate both of those.

Matthew Pan: Got it. And just a follow-up on -- we're hearing more about China EVs for exports. How impactful is this to you? And is your content any different on exports?

Michael Doogue: I'll take that one. We remain confident in our China business overall. Certainly, China is the largest automotive market in the world, and we're having good success with China OEMs. I would say from a dollar content perspective, we feel positive about the dollar content we're establishing by OEM in the Chinese OEM landscape. So as those cars may now become export models into the world. We have good dollar content in those cars, and we view that as a good to neutral thing. We have no concern about Chinese cars selling at higher levels relative to a dollar content.

Operator: Our next question comes from the line of Joshua Buchalter of TD Cowen.

Joshua Buchalter: To start, maybe we could -- could you provide an update on what you're seeing in the auto backdrop, specifically on inventories? Like still safe to assume that we're not seeing any meaningful signs of restocking, but that you're comfortable that inventory levels are low. And then should -- I guess, if indeed inventories are at healthy levels, any reason we shouldn't be modeling the 7% to 10% plus SAAR for this fiscal year as we see it right now?

Michael Doogue: So we still see somewhat thin inventory levels in automotive. We've seen no clear signs of restocking, at least not at a broad level. So that's the environment that we're in right now. And when we look to the future, as I mentioned earlier, with share gains, with the dollar we have. We certainly model when we look ahead, SAAR plus 7% to 10%, and that's probably the best model to put forth at this point.

Joshua Buchalter: Okay. And then on the data center side, obviously, CPUs have gotten a lot of renewed attention recently. Is it safe to assume that most of your cooling fan exposure is on the CPU side? Or maybe you can just help us with the CPU versus accelerated servers exposure as we think about your current sensing and the PMIC side of the house in data center?

Michael Doogue: Sure, Josh. I actually did a bit of digging on my trip with customers to just actually model out as cooling is adopted to cool GPUs, CPUs, et cetera, what does that really do to fan demand? And our top customers painted a picture where because of the enormous number of power supplies going into the architectures and the fact that there are fans in those power supplies, they still see a story of growth for fan drivers in the data center even as liquid cooling is adopted. Now to be clear, fans that were cooling GPUs and TPUs will go to liquid cooling. That is a fact.

But the proliferation of fans into the power supplies is significant, and it seems that it more than overcomes the loss of fans when GPUs are liquid cool.

Operator: At this time, I'm showing no further questions in the queue. I would now like to hand it back to Jalene for closing remarks.

Jalene Hoover: Thank you, Alliah. This concludes today's call. Thanks to all of you for taking the time to join us this morning. We look forward to seeing you at various investor events over the coming weeks.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

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