Lattice Semiconductor's Q2 2025: Unpacking Key Contradictions in Inventory, Revenue Outlook, and AI Growth

Revenue and Segment Growth:
- Lattice Semiconductor Corporation reported revenue of $124 million for Q2 2025, flat year-over-year but up 3% from the previous quarter.
- The growth was driven by a 20% increase in the Communications and Compute segment, and a 26% year-over-year increase, particularly in server-related revenue.

Channel Inventory and Market Recovery:
- The company is on track to normalize channel inventory by year-end, with Comms and Compute inventory already at normal levels.
- This improvement is due to strong demand, record design wins, and continued recognition of revenue under channel point-of-sale outflows.

Gross Margin and Operating Profit:
- Lattice's non-GAAP gross margin remained strong at 69.3%, and non-GAAP operating margin expanded to 27.5%, with an EBITDA margin of 34.1%.
- The expansion in gross margin is attributed to growth in higher-margin new products and anticipated share gains at strategic customers.

Companion Chip Opportunity and AI Integration:
- Lattice expects AI-related revenue to reach mid-20% of total revenue in 2026, with 60% of AI revenue coming from Compute and Comms segments.
- The growth in companion chip opportunities is driven by Lattice's low-power, small-size FPGAs as a complement to AI accelerators in AI infrastructure.