Lattice Semiconductor (LSCC)

Semiconductor designer Lattice Semiconductor (NASDAQ:LSCC) met Wall Streets revenue expectations in Q3 CY2025, with sales up 4.9% year on year to $133.3 million. The company expects next quarter’s revenue to be around $143 million, coming in 0.7% above analysts’ estimates. Its non-GAAP profit of $0.28 per share was in line with analysts’ consensus estimates.

Company Overview

A global leader in its category, Lattice Semiconductor (NASDAQ:LSCC) is a semiconductor designer specializing in customer-programmable chips that enhance CPU performance for intensive tasks such as machine learning.

Competitors in the field-programmable gate array (FPGA) market include longtime leaders Xilinx which was acquired by AMD (NASDAQ:AMD) in early 2022, and Altera that was acquired by Intel (NASDAQ:INTC) in 2015. Samsung and QuickLogic (NASDAQ:QUIK) are other competitors.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Regrettably, Lattice Semiconductor’s sales grew at a mediocre 4.3% compounded annual growth rate over the last five years. This fell short of our benchmark for the semiconductor sector and is a rough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Lattice Semiconductor’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 18.4% annually.

This quarter, Lattice Semiconductor grew its revenue by 4.9% year on year, and its $133.3 million of revenue was in line with Wall Street’s estimates. Additionally, Lattice Semiconductor’s growth inflected positively this quarter, news that will likely give some shareholders hope. Company management is currently guiding for a 21.8% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 20.8% over the next 12 months, an improvement versus the last two years. This projection is healthy and indicates its newer products and services will spur better top-line performance.

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Lattice Semiconductor’s DIO came in at 193, which is 20 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.

Gross profit margin is a key metric to track because it shows how much money a semiconductor company gets to keep after paying for its raw materials, manufacturing, and other input costs.

Lattice Semiconductor’s gross margin is one of the best in the semiconductor sector, and its strong pricing power is a direct result of its differentiated products and technological expertise. As you can see below, it averaged an elite 67.7% gross margin over the last two years. That means Lattice Semiconductor only paid its suppliers $32.26 for every $100 in revenue.

Lattice Semiconductor produced a 67.9% gross profit margin in Q3, marking a 1.1 percentage point decrease from 69% in the same quarter last year. Lattice Semiconductor’s full-year margin has also been trending down over the past 12 months, decreasing by 2.5 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Lattice Semiconductor was profitable over the last two years but held back by its large cost base. Its average operating margin of 8.3% was weak for a semiconductor business. This result is surprising given its high gross margin as a starting point.

Looking at the trend in its profitability, Lattice Semiconductor’s operating margin decreased by 18.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Lattice Semiconductor’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Lattice Semiconductor generated an operating margin profit margin of negative 1.2%, down 7.1 percentage points year on year. Since Lattice Semiconductor’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Lattice Semiconductor’s unimpressive 5.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

In Q3, Lattice Semiconductor reported adjusted EPS of $0.28, up from $0.24 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Lattice Semiconductor’s full-year EPS of $0.89 to grow 57.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Lattice Semiconductor has shown robust cash profitability, and if it can maintain this level of cash generation, will be in a fine position to ride out cyclical downturns while investing in plenty of new products and returning capital to investors. The company’s free cash flow margin averaged 26.2% over the last two years, quite impressive for a semiconductor business.

Taking a step back, we can see that Lattice Semiconductor’s margin was unchanged over the last five years, showing its long-term free cash flow profile is stable.

Lattice Semiconductor’s free cash flow clocked in at $34.03 million in Q3, equivalent to a 25.5% margin. The company’s cash profitability regressed as it was 5.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Lattice Semiconductor’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 21.9%, slightly better than typical semiconductor business.

Companies with more cash than debt have lower bankruptcy risk.

Lattice Semiconductor is a well-capitalized company with $117.9 million of cash and $14.58 million of debt on its balance sheet. This $103.3 million net cash position gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

Updated: December 3, 2025 at 9:36 PM EST

Are you wondering whether to buy Lattice Semiconductor or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Lattice Semiconductor isn’t a terrible business, but it isn’t one of our picks. To kick things off, its revenue growth was mediocre over the last five years. And while its admirable gross margins indicate robust pricing power, the downside is its declining operating margin shows the business has become less efficient. On top of that, its operating margins are low compared to other semiconductor companies.

Lattice Semiconductor’s P/E ratio based on the next 12 months is 52.2x. This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $80.31 on the company (compared to the current share price of $75.03).