Semtech (SMTC): Valuation in Focus Following Strong Q2 Results and Expansion Into AI and IoT Markets

After delivering stronger-than-expected results for the second quarter of fiscal 2026, Semtech (SMTC) is grabbing the attention of both seasoned followers and first-time observers. The company not only surpassed earnings estimates but also unveiled a suite of new LoRa Gen 4 transceivers designed to tap deeper into IoT and emerging AI-enabled markets. These wins, along with a bullish outlook for next quarter, fueled by growth in data centers, high-end consumer, and infrastructure, help explain why investors are watching the next moves closely.

Momentum has clearly been building for Semtech through 2025, with the stock rising 36% over the past year and up a substantial 40% in the past 3 months alone. Between rapid increases in both revenue and net income and a steady drumbeat of product launches and customer wins, such as the LR2022 and LR2012 hitting the pipeline, the company’s narrative has shifted. Investors seem increasingly open to pricing in more ambitious growth scenarios, especially as new products promise expanded reach in high-value markets.

So after big recent moves and accelerating business momentum, does Semtech present a buying opportunity here, or is the market already looking ahead and factoring in all the upside?

Most Popular Narrative: 40% Undervalued

The prevailing narrative currently sees Semtech as significantly undervalued, with analysts setting a fair value well above the recent market price.

Accelerating demand from hyperscale data centers and AI infrastructure is driving robust, multi-year growth across Semtech's high-margin data center business. This is supported by design wins in advanced optical (FiberEdge), low-power (LPO), and active copper interconnects (CopperEdge/ACC). As data rates move from 400G to 800G and 1.6T, Semtech stands to capture significant revenue and margin expansion from new content per deployment.

Want to know why analysts see so much upside for Semtech? The secret is in ambitious growth projections and a profit trajectory that many in the market are still catching up to. Just what are the assumptions driving this elevated valuation? Find out how a blend of future earnings power and margin expansion could make the current price look like a bargain.

Result: Fair Value of $63.25 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing integration challenges and declining gross margins in key segments could quickly shift expectations for Semtech. These factors may serve as critical catalysts for re-evaluation.

Find out about the key risks to this Semtech narrative.

Another View: Is the Market Overlooking Something?

Looking from a different angle, the market approach values Semtech above the industry average. This suggests it is not as cheap as first thought. Could investors be focusing too much on future growth and missing present risks?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding Semtech to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own Semtech Narrative

If you have a different perspective or want to dig into the numbers yourself, you can explore the data and craft a personal view in just a few minutes. Do it your way.

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.

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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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