Littelfuse's Q3 2025 Earnings Call: Contradictions Emerge in Data Center Strategy, Power Semiconductor Execution, and Tariff Guidance

Date of Call: October 29, 2025

Financials Results

• Revenue: $625M, up 10% YOY (7% organic; Dortmund acquisition +2 pts; FX +1 pt)
• EPS: $2.95 adjusted diluted EPS, up 9% YOY
• Operating Margin: Adjusted EBITDA margin 21.5%, down 20 bps YOY

Guidance:

• Q4 sales expected $570M–$590M (midpoint assumes ~5% organic growth; Dortmund contributes ~2 pts).
• Q4 adjusted EPS expected $2.40–$2.60 (midpoint assumes ~60% flow-through; includes $0.40 stock/variable comp headwind and $0.15 higher adjusted tax-rate headwind).
• Q4 assumes neutral tariff impact; typical seasonality across segments.
• Full-year FY2025 assumptions: $59M amortization, $34M interest, 23%–25% tax rate, $80M–$85M capex.
• Basler acquisition expected to close by end of Q4; net leverage to rise to ~1.4x; Basler accretive in 2026 with target double-digit returns by year 5.

Business Commentary:

* Revenue Growth and Strategic Acquisitions: - Littelfuse reported revenue growth of 10% relative to the prior year in Q3 2025, with Electronics segment growth being a key driver. - The growth was driven by strategic acquisitions, particularly the acquisition of Basler Electric, enhancing the company's focus on future growth opportunities in the safe and efficient transfer of electrical energy.

• Electronics Segment Performance:
• The Electronics Products segment saw sales increase by 18% year-over-year, with semiconductor products up 5%.

• The growth in this segment was supported by strong sales of passive products and protection solutions, although power semiconductor demand was soft, indicating a mixed market dynamic.

• Data Center and Industrial Segment Momentum:

• Data center revenue is up more than 50% year-to-date in design wins, contributing significantly to overall growth in the quarter.

• The Industrial Products segment showed 4% organic growth in the quarter, driven by solid energy storage and renewables growth despite softer HVAC demand and construction volumes.

• Power Semiconductor and Strategic Focus:

• The power semiconductor business saw sequential improvement despite year-over-year softness, with a focus on strategic prioritization and operational performance enhancement.
• The hiring of Dr. Karim Hamed to lead the semiconductor business aims to improve long-term growth and profitability by leveraging legacy strengths and customer relationships.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted 10% revenue growth, EPS above guidance, bookings up >20% vs Q3 2024, and strong cash generation (operating cash flow $147M, free cash flow $131M), and announced the accretive Basler acquisition to drive long-term growth.

Q&A:

• Question from Luke Junk (Robert W. Baird & Co. Incorporated): Maybe an apologies, I missed part of the prepared remarks. Maybe if we could start with power semi. I think, Abhi, you mentioned that it did see some growth sequentially despite still being soft year-over-year. Can maybe you just speak to book-to-bill there, kind of the outlook into the fourth quarter in power semi and some of the puts and takes from a demand standpoint and then how you'd expect any improvement to flow to margins as well?
  Response: Q3 showed sequential improvement in power semiconductors though still down YOY; management says power semis are strategically important and recovery depends on sharpened strategy, go-to-market and operational execution which will take time.

• Question from Luke Junk (Robert W. Baird & Co. Incorporated): Very helpful. Just a quick one on the $0.40 stock comp. Is that an outsized impact in the fourth quarter? I know typically, stock comp from a seasonal standpoint tends to be weighted. I think you said 2Q and 3Q this year? Just want to make sure I understand the impact.
  Response: The $0.40 headwind is primarily a reset to pay variable compensation to target (teams were not paid in 2024), with a smaller year-over-year stock-comp component.

• Question from Luke Junk (Robert W. Baird & Co. Incorporated): Got it. So if we -- just to put it in different words as we think into then into 2026 that especially the variable comp piece should kind of normalize. Is that the right way to think about it?
  Response: Yes — the variable compensation impact should normalize in 2026 versus 2025.

• Question from Luke Junk (Robert W. Baird & Co. Incorporated): Very helpful. And then lastly, and apologies if I missed any comments on this. But Greg, just be curious to get your kind of incremental update on your efforts in data center, both near-term opportunities hitting maybe things that can move quicker over the next quarter or 2 and then your progress getting designed into sockets on future architectures as well.
  Response: Data center is a meaningful, accelerating growth driver: design wins are up >2x YTD, contributed materially to Q3 revenue, and the market converts to revenue faster than automotive.

• Question from Christopher Glynn (Oppenheimer & Co. Inc.): Just want to build on the last question on the data center comment. I think I heard up over 50% and up maybe double just on the last question about the design wins. So I just want to clarify that. And is that like an account of the design win instances or a dollar value? Just trying to think of what that might imply for growth, what the design in to revenue kind of lead time is like? And maybe if we could clarify what the current scope of the data center business is for Littelfuse?
  Response: Design wins are >2x year‑to‑date; data center is a faster-to-revenue market and represents roughly high single-digit percentage of company revenue (reflected in Electronics segment strength).

• Question from Christopher Glynn (Oppenheimer & Co. Inc.): Okay. Great. Appreciate that. I'm sure we'll get a further deep dive in February. And then it sounds like the overall company is seeing some good momentum in new business opportunities. How is that funnel looking besides data center? I'm curious, at least especially for industrial, where first half, you had really outsized outgrowth and that moderated a bit. I don't know if there's some noise in any channels or just a real noisy quarter for resi HVAC, which is well known. But curious about the kind of scalability for industrial and NBO funnel there as it pertains to maybe extending the outgrowth that you saw year-to-date.
  Response: Industrial remains healthy YTD (up ~12% year-to-date) with strength in energy storage, renewables and data center infrastructure offset by softer residential HVAC and construction MRO; funnel remains active.

• Question from David Williams (The Benchmark Company, LLC): Congratulations on the continued progress here. You talked about realigning your sales force and breaking down some of the silos. And just kind of curious if you could provide a little more color there. I mean you talked about be able to engage more deeply with your customers and what that means. But is there a way to kind of quantify what your expectations are and how we can kind of gauge that success?
  Response: Hard to quantify today; sales realignment moves reps from product-centric to customer/market-centric selling, already showing early traction (notably in data center) and expected to improve cross-selling and inform R&D over time.

• Question from David Williams (The Benchmark Company, LLC): Fantastic color. And then maybe secondly, just on the tariff side, I know you mentioned it in the script. It seemed like it was a modest headwind, but are you seeing anything developing there in terms of do you think that the growth is being tempered by tariffs or any delays? Just any color maybe around the impact of that tariff.
  Response: Tariff timing created a ~$6M tailwind in Q2 then ~ $3M headwind in Q3 (mainly Transportation); Q4 guidance assumes neutral tariff impact and management views dynamics as largely stabilized given diversified manufacturing.

• Question from Christopher Glynn (Oppenheimer & Co. Inc.): Just on Transportation, I wanted to just ask about the difference between the passenger vehicle fuses up 4% and the sensors down 18% organic. Is the sensors side still engaged in attrition exits product pruning there?
  Response: Core passenger fuse products were stable/growing, while sensor products remain weak and are being de-emphasized/realigned as they are not a strategic focus.

• Question from Christopher Glynn (Oppenheimer & Co. Inc.): Okay. Great. And then just back to the power semis and Dr. Hamed joining. So it sounds like you think you can get a lot more juice out of the power semiconductor strategy there, I guess, relative to benchmarking some of the other areas of the business perhaps. But could you comment on that as well as go into what the focus markets are? Is it a middle market strategy and the scope of the -- what you visualize there to kind of bring that up to the standards you envision?
  Response: Power semis will focus on differentiated, high-energy-density, high-growth markets (data center, grid/utilities, medical), leveraging sales realignment and operational/footprint optimization to drive improved growth and profitability.

Contradiction Point 1

Data Center Growth and Strategy

It involves the company's strategic focus and growth expectations for the data center segment, which is a critical market for future growth.

Can you update on data center efforts, including near-term opportunities and design wins? - Luke Junk (Robert W. Baird & Co. Incorporated)

2025Q3: Data center continues to show momentum with design wins up more than twice year-to-date. The sales realignment is helping to engage deeper with customers. Growth in data center was a significant driver of overall growth, and the focus on go-to-market strategy is expected to continue this momentum. - Gregory Henderson(CEO)

What is the Electronics segment's data center exposure and recent growth potential? - Luke Junk (Robert W. Baird & Co. Incorporated)

2025Q2: Data center is materially important to Littelfuse, with exposure in our Electronics segment. We're scaling our go-to-market to align with technology capabilities. Data center is a key area for future growth as we align our portfolio to better serve customer needs. - Gregory Henderson(CEO)

Contradiction Point 2

Power Semiconductor Strategy and Execution

It involves differing statements about the strategic focus and execution challenges in the power semiconductor segment, which could affect operational planning and investor confidence.

What is the book-to-bill ratio in power semiconductors, the outlook for Q4, and how will improvements impact margins? - Luke Junk (Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: Littelfuse views power semiconductors as strategically important for safe and efficient energy transfer. The business has faced execution issues, but strategic priorities include improving strategy, execution, and operational performance. The semiconductor business is a microcosm of broader strategic priorities. - Gregory Henderson(CEO)

How do you see the power semiconductor market? - Christopher Glynn (Oppenheimer)

2025Q1: Our power semiconductor business is critical for high energy transfer applications like medical defibrillators. Customers value our differentiation in high-voltage applications. We see opportunities in strategy and execution for growth. - Gregory Henderson(CEO)

Contradiction Point 3

Power Semiconductor Performance and Strategic Focus

It reflects differing perspectives on the strategic importance and performance of the power semiconductor business, which could impact investor expectations and operational priorities.

Can you discuss the power semi book-to-bill ratio, Q4 outlook, and how improvements may impact margins? - Luke Junk (Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: Littelfuse views power semiconductors as strategically important for safe and efficient energy transfer. - Gregory Henderson(CEO)

What were the Electronics segment margins in Q4, and how do you expect them to look in 2025? - William Kerwin (Morningstar)

2024Q4: Power semiconductors have lower incremental margins, and as a result, we're placing less emphasis on trying to drive growth in that business. - Meenal Sethna(CFO)

Contradiction Point 4

Data Center Growth and Strategic Focus

It highlights differing assessments of the growth potential and strategic importance of the data center market, which could influence investment decisions and revenue expectations.

Can you update on data center efforts, near-term opportunities, and design wins? - Luke Junk (Robert W. Baird & Co. Incorporated, Research Division)

2025Q3: Data center continues to show momentum with design wins up more than twice year-to-date. - Gregory Henderson(CEO)

What structural changes have positioned Littelfuse well, and what are the key challenges and opportunities ahead? - David Silver (CL King)

2024Q4: Data center revenue was down 8% year over year. - Meenal Sethna(CFO)

Contradiction Point 5

Tariff Impact and Financial Guidance

It demonstrates differing approaches to accounting for tariff impacts, which could affect financial forecasts and investor confidence.

What is the impact of tariffs currently, and what do you foresee for Q4? - David Williams (The Benchmark Company, LLC, Research Division)

2025Q3: For Q4, guidance assumes a neutral tariff impact. - Abhishek Khandelwal(CFO)

Can you explain the factors affecting margin performance and the expected progression through the year? - Saree Boroditsky (Jefferies)

2024Q4: For the fourth quarter, we have included the negative $3 million impact of the tariff increases in our guidance. - Meenal Sethna(CFO)