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Can Semtech's 1.6T Ramp Accelerate its Data Center Growth?
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Key Takeaways
SMTC's data-center revenues hit a record $100 million in Q2 fiscal 2027, rising 91% year over year.
SMTC expects 1.6T CopperEdge and FiberEdge products to contribute over 50% of Q3 FY27 data-center revenues.
SMTC's fiscal 2027 backlog is fully booked, while over 70% of its fiscal 2028 target is already covered.
Semtech Corporation (SMTC - Free Report) is seeing strong demand for its data center products as hyperscalers increase spending on AI infrastructure. The company’s data center revenues reached a record $100 million in the second quarter of fiscal 2027, up 39% sequentially and 91% year over year. Growth was driven by continued strength in 800G products, along with the ramp of 1.6T CopperEdge and FiberEdge solutions. Management expects this momentum to continue, with data center revenues projected to increase 45% sequentially and 160% year over year in the third quarter of fiscal 2027.
The 1.6T transition could become an important growth driver for Semtech. Management expects 1.6T FiberEdge and CopperEdge products to account for more than 50% of total data center revenues in the third quarter of fiscal 2027. Semtech is also gaining market share in optical connectivity, where its FiberEdge business has grown from about 18% market share in 800G two years ago to more than 50%. Further, the company expects its 1.6T FiberEdge market share to exceed 50% by the end of fiscal 2027.
The company is also preparing for the next stage of data center growth. Semtech is expanding its photonics portfolio through gain chips, high-power CW lasers, semiconductor optical amplifiers and photodiodes. These products are aimed at higher-speed applications, including 3.2T transceivers and co-packaged optics. Management expects its content per transceiver to increase from high single-digit dollars to high double-digit dollars as data center speeds move from 800G to 3.2T.
Strong customer demand supports SMTC’s prospects as well, with the company reporting that its backlog for the remainder of fiscal 2027 was fully booked and more than 70% of its target for fiscal 2028 was already covered. Management is also working with manufacturing partners to secure additional capacity for fiscal 2028 and beyond. If it can meet customer requirements and maintain its product momentum, the 1.6T ramp could remain an important driver of Semtech’s data center growth over the next several quarters.
How Competitors Fare Against SMTC
Semtech faces stiff competition from Marvell Technology (MRVL - Free Report) and MACOM Technology Solutions (MTSI - Free Report) in high-speed data center connectivity.
MRVL offers optical digital signal processors, switching products, transimpedance amplifiers (TIAs) and drivers for high-speed optical connectivity. Its data center revenues reached a record $2.17 billion in the second quarter of fiscal 2027, up 46% year over year. Demand for its 800G products remains strong, while its 1.6T business is ramping rapidly. The company now expects fiscal 2027 revenues to grow about 45% year over year to roughly $12 billion, with data center revenues up about 60%.
MTSI is also expanding its presence in high-speed data center connectivity. Its portfolio includes 800G and 1.6T products, linear equalizers for copper interconnects, high-speed TIAs and drivers, and photodetectors. Data center remained MTSI’s fastest-growing business in the third quarter of fiscal 2026, with revenues of $137.6 million, up about 40% sequentially and 81.5% year over year. The company reported a record book-to-bill ratio of 1.6 in the third quarter of fiscal 2026 and expects fiscal 2026 data center growth of about 74%.
SMTC’s Price Performance, Valuation & Estimates
Shares of SMTC have jumped 127.1% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixed industry’s return of 45.2%.
SMTC YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SMTC trades at a forward price-to-sales ratio of 9.82, higher than the industry’s average of 8.42. The Zacks Value Score of F suggests that SMTC stock is overvalued.
SMTC Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SMTC’s fiscal 2027 earnings is pegged at $3.48 per share, unchanged over the past 30 days, indicating a 103.5% increase from the previous year.
View the Zacks #1 Rank List
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Can Semtech's 1.6T Ramp Accelerate its Data Center Growth?
Key Takeaways
Semtech Corporation (SMTC - Free Report) is seeing strong demand for its data center products as hyperscalers increase spending on AI infrastructure. The company’s data center revenues reached a record $100 million in the second quarter of fiscal 2027, up 39% sequentially and 91% year over year. Growth was driven by continued strength in 800G products, along with the ramp of 1.6T CopperEdge and FiberEdge solutions. Management expects this momentum to continue, with data center revenues projected to increase 45% sequentially and 160% year over year in the third quarter of fiscal 2027.
The 1.6T transition could become an important growth driver for Semtech. Management expects 1.6T FiberEdge and CopperEdge products to account for more than 50% of total data center revenues in the third quarter of fiscal 2027. Semtech is also gaining market share in optical connectivity, where its FiberEdge business has grown from about 18% market share in 800G two years ago to more than 50%. Further, the company expects its 1.6T FiberEdge market share to exceed 50% by the end of fiscal 2027.
The company is also preparing for the next stage of data center growth. Semtech is expanding its photonics portfolio through gain chips, high-power CW lasers, semiconductor optical amplifiers and photodiodes. These products are aimed at higher-speed applications, including 3.2T transceivers and co-packaged optics. Management expects its content per transceiver to increase from high single-digit dollars to high double-digit dollars as data center speeds move from 800G to 3.2T.
Strong customer demand supports SMTC’s prospects as well, with the company reporting that its backlog for the remainder of fiscal 2027 was fully booked and more than 70% of its target for fiscal 2028 was already covered. Management is also working with manufacturing partners to secure additional capacity for fiscal 2028 and beyond. If it can meet customer requirements and maintain its product momentum, the 1.6T ramp could remain an important driver of Semtech’s data center growth over the next several quarters.
How Competitors Fare Against SMTC
Semtech faces stiff competition from Marvell Technology (MRVL - Free Report) and MACOM Technology Solutions (MTSI - Free Report) in high-speed data center connectivity.
MRVL offers optical digital signal processors, switching products, transimpedance amplifiers (TIAs) and drivers for high-speed optical connectivity. Its data center revenues reached a record $2.17 billion in the second quarter of fiscal 2027, up 46% year over year. Demand for its 800G products remains strong, while its 1.6T business is ramping rapidly. The company now expects fiscal 2027 revenues to grow about 45% year over year to roughly $12 billion, with data center revenues up about 60%.
MTSI is also expanding its presence in high-speed data center connectivity. Its portfolio includes 800G and 1.6T products, linear equalizers for copper interconnects, high-speed TIAs and drivers, and photodetectors. Data center remained MTSI’s fastest-growing business in the third quarter of fiscal 2026, with revenues of $137.6 million, up about 40% sequentially and 81.5% year over year. The company reported a record book-to-bill ratio of 1.6 in the third quarter of fiscal 2026 and expects fiscal 2026 data center growth of about 74%.
SMTC’s Price Performance, Valuation & Estimates
Shares of SMTC have jumped 127.1% in the year-to-date period compared with the Zacks Semiconductor - Analog and Mixed industry’s return of 45.2%.
SMTC YTD Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SMTC trades at a forward price-to-sales ratio of 9.82, higher than the industry’s average of 8.42. The Zacks Value Score of F suggests that SMTC stock is overvalued.
SMTC Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for SMTC’s fiscal 2027 earnings is pegged at $3.48 per share, unchanged over the past 30 days, indicating a 103.5% increase from the previous year.
Image Source: Zacks Investment Research
SMTC currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.