Edge AI And IoT Trends Will Drive Chip Adoption

Key Takeaways

• Expanding edge AI and device security markets, along with new product lines, position Lattice for above-industry-average growth and increased market share.
  
• Investments in R&D, supply chain optimization, and higher-margin solutions are expected to drive earnings growth, operational leverage, and shareholder returns.
  
• Reliance on limited suppliers, exposure to cyclical end-markets, and rising competition threaten profitability, innovation, and long-term relevance of core FPGA products.

Catalysts

Develops and sells semiconductor products in Asia, Europe, and the Americas.

• Lattice is poised to benefit from accelerating adoption of edge AI and the proliferation of IoT devices, as demand for low-power, configurable chips increases across automotive, industrial automation, and data center end markets. This growth in edge computing use cases positions Lattice to drive revenue expansion above industry averages into 2026 and beyond.
  
• Major industry shifts toward enhanced device security, including regulatory requirements for post-quantum cryptography, are creating rapidly expanding demand for secure embedded hardware—a space where Lattice has first-mover advantage and is already being designed into next-generation systems. As a result, Lattice is expected to grow its market share and increase design win momentum, boosting future revenues.
  
• The successful ramp and market share gains of new, higher-value product lines such as Avant and Nexus 2, which collectively doubled their share of company revenues from the prior year and continue to capture double-digit growth, provide a clear pipeline for incremental revenues and will accelerate margin expansion over the next several years.
  
• Lattice’s strategic investments in expanding R&D capabilities (such as the new India design center) and ongoing transition to higher-margin software and solution bundles are expected to drive operational leverage. These actions support both incremental earnings growth and net margin improvement in the medium to long term.
  
• Disciplined cost actions, supply chain optimization, and an improving channel inventory position give Lattice the flexibility to allocate resources toward high-growth opportunities while maintaining strong free cash flow generation and supporting buybacks, providing upside for earnings per share as the top line recovers.

Lattice Semiconductor Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Lattice Semiconductor compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Lattice Semiconductor's revenue will grow by 13.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.0% today to 27.3% in 3 years time.
• The bullish analysts expect earnings to reach $201.4 million (and earnings per share of $1.49) by about April 2028, up from $61.1 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 75.0x on those 2028 earnings, down from 95.1x today. This future PE is greater than the current PE for the US Semiconductor industry at 22.3x.
• Analysts expect the number of shares outstanding to grow by 0.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.81%, as per the Simply Wall St company report.

Lattice Semiconductor Future Earnings Per Share Growth

Risks

• Lattice Semiconductor remains highly exposed to supply chain risks and geopolitical tensions, especially as it continues to rely on a small set of foundries and suppliers for advanced process nodes, which could lead to increased costs and squeeze gross margins if trade restrictions tighten or foundry access becomes further constrained.
  
• The company’s strong focus on small and mid-range FPGAs could leave it vulnerable to the commoditization of these products, especially as emerging Asian vendors enter the market with lower-priced alternatives, putting pressure on average selling prices and eroding profitability.
  
• Long-term revenue could be impacted by Lattice’s concentrated end-market exposure in sectors such as Industrial, Automotive, and Communications, which are historically cyclical; any severe downturn or inventory corrections in these segments could undermine stability in earnings and revenue growth.
  
• Technological disruption from the accelerated development of alternative computing paradigms, such as quantum or neuromorphic computing, could decrease future demand for traditional FPGA solutions, reducing the relevance of Lattice’s core products and threatening long-term top-line growth.
  
• Ongoing semiconductor industry consolidation and the dominance of larger competitors with deeper R&D budgets may challenge Lattice’s ability to sustain product innovation, risking market share erosion and increasing risk to sustained earnings and net margins.

Valuation

• The assumed bullish price target for Lattice Semiconductor is $85.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Lattice Semiconductor's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $85.0, and the most bearish reporting a price target of just $42.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $739.1 million, earnings will come to $201.4 million, and it would be trading on a PE ratio of 75.0x, assuming you use a discount rate of 8.8%.
  
• Given the current share price of $42.24, the bullish analyst price target of $85.0 is 50.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.