Allegro MicroSystems Q3 2025: Contradictions on Inventory, Automotive Growth, and Margins Unveiled

These are the key contradictions discussed in Allegro MicroSystems' latest 2025 Q3 earnings call, specifically including: Inventory Levels and Demand, Automotive Production Growth Expectations, and Gross Margin Expectations:



Revenue and Earnings Performance:
- Allegro MicroSystems reported sales of $178 million for Q3, exceeding the midpoint of their guidance.
- Non-GAAP EPS was $0.07, also above the midpoint of their guidance.
- The strong performance was driven by increased quarterly orders and reduced cancellations, indicating lower channel inventory levels.

Automotive and E-mobility Sales:
- Sales to automotive customers were $130 million, down 8% sequentially but still made up 73% of total Q3 sales.
- E-mobility sales were $63 million, a decline of 12% sequentially, representing 48% of total auto sales.
- The decline was due to inventory management in North America and Europe, though content growth in xEVs and ADAS adoption is expected to drive future growth.

Industrial and Other Sales:
- Industrial and Other sales reached $48 million, increasing by 5% sequentially, primarily due to growth in datacenter and medical segments.
- Year-over-year, these sales declined 21%.
- Growth was driven by increased demand in datacenter applications and the expanding medical market.

Product Innovations and Market Expansion:
- Allegro introduced new Magnetic Sensing products and Current Sensor ICs, enhancing their product portfolio and technology leadership.
- These innovations are expected to increase market share in automotive and industrial applications, contributing to future revenue growth.
- The rapid pace of new product introductions is designed to capitalize on emerging market trends and customer needs.

Cost Management and Revenue Outlook:
- Gross margin was 49.1%, with anticipated headwinds of 200 basis points due to pricing reset, inventory charges, and production adjustments.
- Fourth-quarter sales guidance ranges from $180 million to $190 million, indicating a 4% sequential increase.
- Strategic adjustments, including fab optimization and inventory management, are aimed at improving profitability and cash flow.