Semtech (SMTC): Profitability Turnaround Challenges Bearish Narratives with TTM Net Margin at 2.4%

Semtech (SMTC) just posted its Q3 2026 numbers, reporting revenue of $267.0 million and a basic EPS of -$0.03. Looking at recent trends, the company saw total revenue grow from $215.36 million in Q2 2025 to $266.97 million in Q3 2026. EPS moved from -$2.61 in Q2 2025 to positive readings earlier this year before settling slightly negative this quarter. Margins are now back in positive territory after a turbulent stretch, with attention focused on how the turnaround story meets market expectations.

See our full analysis for Semtech.

Up next, we will see how these headline results line up against the key narratives and debates that have been circulating among analysts and investors alike.

See what the community is saying about Semtech

Margins Swing Back to Positive 2.4%

• Trailing twelve month net margin for Semtech returned to a positive 2.4%, marking a stark shift from negative margins over the past year and backing forecasts that anticipate expanding profitability.
• Analysts' consensus view sees this turnaround as a cornerstone for sustained growth, with drivers such as margin expansion in data center and IoT segments supporting the outlook.
  • Consensus narrative notes margin expansion is expected to continue, with profit margins forecast to reach 19.9% over three years.
  • The shift in margin supports bullish long-term earnings expectations. However, past volatility and risks from product mix changes remain front of mind.

Curious what’s fueling this margin leap and how far it could go? 📊 Read the full Semtech Consensus Narrative.

Share Price Trades Far Above DCF Fair Value

• Semtech's current share price stands at $73.45, placing it well above its DCF fair value estimate of $47.22 and above the consensus analyst target price of $80.21.
• Despite the premium to fair value, analysts' consensus view notes that the gap to the $80.21 price target signals both high growth expectations and underlying caution.
  • Consensus narrative highlights the 8.4% upside gap from today's share price to the analyst target, which indicates limited near-term upside for new investors at this level.
  • Valuation multiples at 6.6x price-to-sales remain higher than the industry average, suggesting that future growth will need to materialize in order to justify current pricing.

One-Off $53 Million Loss Didn't Derail Profit Turnaround

• A single significant one-off loss of $53.4 million impacted results this year, but trailing twelve month net income still went positive to $28.6 million, revealing resilience in the underlying business.
• Consensus narrative notes the company’s ability to absorb extraordinary costs reinforces the stability of the broader turnaround story.
  • Margin recovery persisted in spite of impairment-driven setbacks, supporting the forecast of robust annual earnings growth of 93.65% for the next three years.
  • Even with this setback, positive net income and improved net margin counter arguments that profitability would be threatened by isolated losses.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Semtech on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Semtech research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

See What Else Is Out There

Semtech’s premium valuation and persistent gap between its share price and fair value mean new investors face limited upside and higher risk at current levels. If a more compelling price tag is what you’re after, discover these 926 undervalued stocks based on cash flows that could offer much stronger value for your next investment move.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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