Analyst(s): Dr. Bob Sutor
Publication Date: November 8, 2024
Lattice Semiconductor reported its Q3 2024 financial results, highlighting a strategic focus on improving operational efficiency and pursuing growth in AI-enabled technologies. The company maintained strong gross margins and enacted cost-saving measures, including a workforce reduction, in response to market conditions.
What is Covered in this Article:
- An overview of Lattice’s Q3 2024 financial performance, including revenue, gross margins, and net income.
- Details on restructuring efforts and cost-cutting measures implemented to align resources with current business needs.
- Insight into CEO Dr. Ford Tamer’s strategic direction and Lattice’s product expansions, particularly in AI and FPGA.
- Breakdown of Lattice’s geographic and end-market revenue distribution.
- Forecast for Q4 2024 and how Lattice is positioning itself for future growth.
The News: Lattice Semiconductor announced its Q3 2024 earnings, reporting revenue of $127.1 million, indicating resilience in a challenging semiconductor market. However, GAAP net income decreased to $7.2 million, primarily due to a one-time $6.5 million restructuring charge. This restructuring involved a 14% reduction in the workforce and a streamlined operating budget aimed at promoting annual earnings growth by 2025.
Lattice is concentrating on aligning resources with current market conditions while maintaining its long-term product roadmap. Notable developments in Q3 included increased design wins in AI-PC applications, particularly partnerships with Dell’s XPS and Latitude models, highlighting the company’s low-power AI solutions for consumer electronics. Additionally, Lattice announced improvements to its Nexus FPGA platform and an upcoming Developers Conference to showcase more than 75 Lattice-based applications, emphasizing its position in the programmable technology sector.
Lattice Semiconductor’s Q3 FY2024: Resilience Amid Industry Headwinds
Analyst Take: Lattice Semiconductor’s Q3 2024 earnings reveal a strategic pivot towards operational efficiency amidst challenging industry conditions. The 14% workforce reduction and restructuring efforts suggest a disciplined and evidently required approach to cost management, essential for sustaining profitability as revenue growth faces headwinds. CEO Ford Tamer’s focus on foundational stability and selective investment in AI-PC and FPGA technologies is well-suited to balance short-term pressures with long-term opportunities.
Lattice’s AI-PC wins with Dell highlight its strength in delivering low-power, high-performance solutions in a growing market for AI-enabled devices. Additionally, the Nexus FPGA platform’s expansion aligns with increasing demand for compact, reliable solutions across automotive, industrial, and communications sectors.
Financial Performance: Resilience Amid Declining Revenues
For Q3 2024, Lattice reported revenue of $127.1 million, marking a modest quarter-over-quarter increase of 2.4% from $124.1 million in Q2. However, this figure represents a significant year-over-year decline of 33.9%, emphasizing the challenging conditions within the semiconductor sector. Various factors contribute to this revenue contraction, including macroeconomic pressures, supply chain fluctuations, and changing demand across end markets.
Lattice’s gross margin remains robust at 69.0% on both a GAAP and non-GAAP basis, consistent with Q2 figures and slightly down from the 70.0% reported in Q3 2023. This stability highlights the resilience of Lattice’s business model, which is grounded in low-power, efficient programmable solutions that continue to attract demand despite broader market volatility.
However, the company’s net income was impacted by a one-time GAAP charge of $6.5 million, attributed to a restructuring initiative aimed at cost reduction and operational efficiency. This charge contributed to a notable decrease in GAAP net income, which was $7.2 million (or $0.05 per share) compared to $22.6 million in the previous quarter. On a non-GAAP basis, excluding restructuring costs and stock-based compensation, net income was $32.5 million, or $0.24 per diluted share, reflecting a healthier underlying profitability once adjusted for exceptional items.
Dell and Lattice Semiconductor’s Nexus FPGA Platform
Lattice’s hardware and software solutions now power AI-driven computer vision on Dell’s XPS models, in addition to previous design wins on select Dell Latitude models. This partnership with Dell expands Lattice’s reach in the consumer electronics market, showcasing the company’s expertise in delivering low-power, efficient AI solutions. With AI becoming increasingly central to consumer electronics, this partnership is expected to drive growth in Lattice’s computing and communications segments. Will Lattice be able to close similar deals with other PC manufacturers?
The company’s Nexus platform continues to be a cornerstone of its product strategy, with new offerings targeting applications across communications, industrial, computing, and automotive sectors. Built with a focus on power efficiency, compact design, and adaptability, Nexus FPGAs can offer a competitive advantage in sectors that demand high performance with low power consumption. Looking at the general semiconductor industry, combining greater performance with lower power usage is a requirement, especially as power-hungry AI-accelerators become resident in the systems.
Final Thoughts
The company continues to anticipate limited growth through early next year. Although Lattice plans to introduce new products and has a growing order backlog, the effectiveness of these strategies in reversing the current financial decline is uncertain. The recent transition in leadership to Ford Tamer brings experience in operational efficiency, though the impact of this change on the company’s performance remains to be seen.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discusses Lattice Semiconductor’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosures: During the preparation of this work the authors and analysts used ChatGPT to research the company and the market. After using this tool/service, the author reviewed and edited the content as needed and takes full responsibility for the content of the publication.
The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The analyst has no equity position in any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Lattice Semiconductor Appoints Ford Tamer as New Chief Executive Officer
Lattice Semiconductor Maintains Growth Trajectory in Q2 2024
Lattice Q1 2024: Outpacing FPGA Rivals While Battling Headwinds
Author Information
Dr. Bob Sutor has been a technical leader and executive in the IT industry for over 40 years. Bob’s industry role is to advance quantum and AI technologies by building strong business, partner, technical, and educational ecosystems. The singular goal is to evolve quantum and AI to help solve some of the critical computational problems facing society today. Bob is widely quoted in the press, delivers conference keynotes, and works with industry analysts and investors to accelerate understanding and adoption of quantum technologies. Bob is the Vice President and Practice Lead for Emerging Technologies at The Futurum Group. He helps clients understand sophisticated technologies in order to make the best use of them for success in their organizations and industries. He is also an Adjunct Professor in the Department of Computer Science and Engineering at the University at Buffalo, New York, USA. More than two decades of Bob’s career were spent in IBM Research in New York. During his time there, he worked on or led efforts in symbolic mathematical computation, optimization, AI, blockchain, and quantum computing. He was also an executive on the software side of the IBM business in areas including middleware, software on Linux, mobile, open source, and emerging industry standards. He was the Vice President of Corporate Development and, later, Chief Quantum Advocate, at Infleqtion, a quantum computing and quantum sensing company based in Boulder, Colorado USA. Bob is a theoretical mathematician by training, has a Ph.D. from Princeton University, and an undergraduate degree from Harvard College.
He’s the author of a book about quantum computing called Dancing with Qubits, which was published in 2019, with the Second Edition released in March 2024. He is also the author of the 2021 book Dancing with Python, an introduction to Python coding for classical and quantum computing. Areas in which he’s worked: quantum computing, AI, blockchain, mathematics and mathematical software, Linux, open source, standards management, product management and marketing, computer algebra, and web standards.
