Lattice Semiconductor Stock Surges as AI Data Center Demand Drives Record Revenue and Bullish Forecast

Shares of Lattice Semiconductor rose almost 9% in early trading Tuesday after the chipmaker reported record third-quarter revenue that more than doubled from a year ago. It also forecast fourth-quarter revenue well above Wall Street's expectations, citing demand for artificial intelligence infrastructure.

The Nasdaq-listed stock, which trades under the ticker LSCC, rose $8.24, or 8.63%, to $103.68 shortly after the opening bell. That gives the company a market value of about $13.5 billion. The shares are up about 51% over the past year.

The rally continued gains from Monday's after-hours session, when the stock rose about 7% to $102.26 following the report. The shares had already gained 2.66% during Monday's regular session.

Record quarter

Lattice reported revenue of $291 million for the fiscal third quarter ended Oct. 3, up 118% from a year earlier and 45% from the previous quarter. Analysts had expected about $256 million.

Adjusted earnings, which exclude certain items, were 72 cents per share, about 30% above analysts' estimates. On a GAAP basis, Lattice earned $11.2 million, or 8 cents per share.

The results include the first partial quarter of AMI, a platform firmware company Lattice acquired in July. Executives said AMI's revenue was slightly higher than expected and carried better margins.

AI drives growth

Lattice makes field programmable gate arrays, or FPGAs. These are chips that customers can reprogram after manufacturing, and they are used in servers, industrial equipment and communications systems. Lattice focuses on small and mid-range FPGAs that use little power.

FPGA revenue rose about 90% to a record $252 million, helped by data center AI demand.

The company's Compute & Communications segment had the strongest growth. Revenue there rose 132% to $171.9 million as server deployments for AI inference increased and more Lattice chips were used in each server.

Lattice also said its Industrial & Embedded business is recovering. It expects growth in that segment to accelerate to about 70% year over year in the fourth quarter.

Strong guidance

Lattice expects fourth-quarter revenue of about $335 million, roughly 14% above analysts' consensus estimate. That would be about 130% growth from a year earlier.

CEO Ford Tamer said strong bookings, a growing backlog and new design wins support the outlook. He added that they "reinforce our confidence in growth into 2027 and beyond."

Cash flow and debt

Free cash flow was $77.6 million in the quarter, a margin of 26.7%. The company paid down $50 million of debt and said it plans to bring net leverage below two times EBITDA by the end of 2026.

Inventory also improved. Days of inventory outstanding fell to 116 from 153 in the previous quarter.

New products

During the quarter, Lattice released Lattice Prompt, an AI-assisted development tool, and its Mach N2 FPGA platform. Revenue from new products rose more than 70% from a year earlier.

The company also introduced joint products with AMI, including a rack management solution for data centers.

Valuation

The rally adds to an already high valuation. The stock trades at about 369 times trailing earnings, according to market data. That reflects investor expectations for strong earnings growth from AI-related demand and is far above the semiconductor industry average.

Chief Financial Officer Lorenzo Flores said the quarter showed Lattice's operating leverage, with faster revenue growth leading to even faster growth in earnings.

What to watch

Investors will watch whether Lattice reaches its fourth-quarter target and whether AI demand stays strong into 2027. They will also look at how well AMI is integrated into the business and whether the industrial recovery continues.

Lattice is a smaller player in an FPGA market where larger rivals focus on high-end chips. Its results suggest that AI spending is also reaching suppliers of lower-power, specialized parts used in data centers.