Allegro MicroSystems (ALGM) 2027财年第二季度业绩电话会：销售额增长29%，数据中心营收突破4600万美元lg...

核心要点

• Allegro MicroSystems公布2027财年第二季度销售额为2.77亿美元，环比增长7%，同比增长29%。Non-GAAP每股收益（EPS）同比增长一倍，达到0.26美元。
• 汽车业务销售额达到1.73亿美元，环比增长4%，同比增长11%。汽车设计定点（design wins）创历史新高，其中超过75%与新能源汽车（xEV）和高级驾驶辅助系统（ADAS）相关。
• 工业及其他业务销售额同比增长79%，达到创纪录的1.04亿美元。数据中心业务销售额突破4600万美元，同比增长超过150%，管理层维持对2027财年数据中心收入增长一倍以上的预期。
• 总设计定点同比增长近40%，新签订单（bookings）增长45%。管理层表示，这些指标为其突破15%左右（mid-teens）的年度销售额增长目标提供了支撑。
• Non-GAAP毛利率提升至51.5%，同比增长190个基点。公司继续致力于通过运营杠杆、降低制造成本、定价以及优化产品组合，实现55%以上的毛利率目标。
• 对于2027财年第三季度，管理层指引销售额为2.78亿至2.88亿美元，Non-GAAP每股收益为0.25至0.29美元。

关键财务数据

业务与运营业绩

新能源汽车与ADAS支撑汽车业务增长势头

汽车业务连续第六个季度实现两位数的同比增长。新签订单环比增长33%，同比增长50%，管理层指出客户库存依然处于低位，本季度并未受益于补库存因素。

公司从北美一家领先的电动汽车制造商处拿下了下一代车载充电器（OBC）的设计定点，使用其5兆赫兹电流传感器。此外，公司还获得了该厂商汽车冷却系统的电机驱动插槽订单，预计首批出货将在12个月内完成。

在ADAS领域，Allegro获得了日本一家领先整车厂（OEM）的电动助力转向（EPS）设计定点。管理层还强调线控制动/机电制动（electromechanical braking）是一个提升单车价值量的机遇，并指出当汽车制造商采用该技术时，Allegro在每套制动系统中的单车价值量可增加约四倍。

数据中心业务增长超越电机驱动，实现多元化拓展

数据中心销售额创下4600万美元的历史新高。用于数据中心领域的电流传感器设计定点环比翻了一番以上，其中包括与台湾电源供应商达成的10多个定点合作，涵盖超大规模云厂商的电源供应单元（PSU）、电池后备单元（BBU）和UPS系统。

这些定点涵盖了5千瓦至30千瓦的电源系统，包括全新的800伏架构。Allegro的目标是通过电机驱动和电流传感器，将每个机架潜在的数据中心产品价值从150美元提升至425美元以上。管理层表示，随着时间推移，隔离栅极驱动器还可能在此基础上增加数百美元的价值。

公司还在本季度推出了具备更高隔离性能的电流传感器、更小体积的隔离栅极驱动器以及智能48伏风扇驱动器。

机器人与能源基础设施带来更长期机遇

Allegro获得了亚洲人形机器人开发商的电流传感器和位置传感器设计定点。其中一家中国人形机器人项目预计单台机器人将使用约60颗Allegro IC，并将在6个月内投产。

管理层表示，工厂自动化和机器人业务预计将占2027财年销售额的3%–4%。公司计划在第三财季出样用于人形机器人手部和手指的集成磁传感器与电机驱动IC。

在能源基础设施领域，Allegro的碳化硅高压栅极驱动器在一家光伏厂商的下一代逆变器项目中赢得了重大设计定点。管理层还透露，在能源基础设施、电动汽车牵引逆变器和数据中心电源系统领域的项目储备（pipeline）正在不断扩大。

管理层业绩指引

对于2027财年第三季度，Allegro提供了以下Non-GAAP业绩预期：

管理层预计第三财季的增长将由汽车业务领跑，同时数据中心业务保持强劲。公司还重申，2027财年数据中心销售额仍按计划实现翻倍以上增长。

风险与关注点

• 受产品组合影响，封测后道测试产能趋紧。Allegro计划在第三和第四财季增加产能，而晶圆供应依然充裕。
• 部分大型数据中心项目被推迟了一到两个季度，原因之一是超大规模云厂商800伏项目的具体进程安排。
• 投入成本通胀仍在持续。晶圆、能源和劳动力成本继续上升，不过大宗商品价格已开始企稳。
• 汽车客户继续保持低库存运营。关于增加安全库存的讨论已经展开，但管理层尚未看到实质性的补库存行为。
• 广义工业领域的销售额通常在12月所在的季度面临季节性压力，因为欧洲、美国和日本的分销商会在年底前后减少采购活动。

分析师问答环节亮点

• 新签订单与积压订单：订单已延伸至未来几个季度，部分需求已开始延伸至2028财年。管理层表示，正继续核实订单是否真实反映了潜在的基础需求。
• 设计定点转化：数据中心和机器人领域的定点通常在6到12个月内开始放量。汽车项目现在可以从获得设计定点到量产在一年内完成，不过部分项目仍需长达18个月。
• 毛利率提升路径：运营杠杆仍是实现55%以上毛利率目标的最大驱动力。从金线到铜线的过渡、选择性调价以及更丰富的技术组合也将带来贡献。
• 产品定价：第二财季的产品定价并非收入的显著驱动因素。预计广义工业领域的涨价将在第三财季产生更大影响，而汽车领域的大部分合同涨价将于1月1日起生效。
• 分销商库存：全球分销商库存保持在公司10至12周目标区间的中点附近，尽管部分领域的库存比预期更为偏紧。
• 数据中心散热：管理层预计，即使GPU系统对液冷技术的采用率有所增加，CPU散热和电源散热的需求仍将提振风扇驱动器的需求。

业绩电话会议完整文字实录

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完整财报电话会议逐字稿

管理层陈述

Operator

Good morning, and welcome to the Allegro MicroSystems Second Quarter Fiscal Year 2027 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Jalene Hoover, Vice President of Investor Relations and Corporate Communications.

Jalene Hoover

Thank you, Victor. Good morning, and thank you for joining us today to discuss Allegro's Second Quarter Fiscal Year 2027 results. I'm joined today by Allegro's President and Chief Executive Officer, Mike Doogue; and Allegro's Chief Financial Officer, Derek D'Antilio. They will provide highlights of our business, review our second quarter 2027 financial results and share our third quarter outlook. We will follow our prepared remarks with a Q&A session.

Today's call includes remarks about future expectations, plans and prospects, which are forward-looking statements. Such statements are based on current expectations and assumptions as of today's date and are subject to risks and uncertainties that could cause actual results and events to differ materially from those anticipated or projected on today's call. The company assumes no obligation to update these statements, except as required by law. For a discussion of these risks and uncertainties, please refer to today's press release and the risk factors contained in our periodic SEC filings.

Additionally, we will refer to non-GAAP financial measures during today's call. Today's earnings press release, which is available on the Investor Relations page of our website at www.allegromicro.com, contains important information about our non-GAAP financial presentation and also includes reconciliations of our non-GAAP financial measures to the most directly comparable GAAP measures. This call is also being webcast, and a replay will be available in the Events and Presentations section of our IR page shortly. It is now my pleasure to turn the call over to Allegro's President and CEO, Mike Doogue. Mike?

Michael Doogue

Thank you very much, Jalene, and good morning. Thank you all for joining our second quarter 2027 earnings call. We saw continued strong momentum in fiscal Q2, delivering our seventh consecutive quarter of sequential sales growth. Second quarter sales were $277 million, above the high end of our guidance range and representing a 29% increase year-over-year. Non-GAAP EPS was $0.26, doubling over the second quarter of fiscal 2026. I'm pleased to report that our forward demand signals are flashing green. In Q2, we delivered our highest quarterly design win performance since our 2020 IPO with total design wins increasing nearly 40% year-over-year.

This success is directly translating to our order book. Bookings increased for the eighth consecutive quarter, up 45% year-over-year, and our backlog continued to expand across our Automotive and Industrial end markets. At our Analyst Day earlier this year, we outlined our strategy to drive mid-teen sales growth through dollar content and share gains in secular growth markets. These design win, booking and backlog metrics that I just mentioned, combined with stronger Auto and Industrial sales growth indicate that our strategy is progressing ahead of schedule.

In Automotive, second quarter sales grew 4% sequentially and 11% year-over-year. This marks the sixth consecutive quarter of double-digit year-over-year growth within our automotive business, and we expect this momentum to continue. Our Auto sales growth is underpinned by the architectural shifts towards the electrification of the powertrain, the transition to advanced safety systems and the shift to electronic architectures in steering and braking. As a result, Automotive design wins hit a new record in the second quarter with more than 75% of these wins in xEV and ADAS systems.

For example, during the quarter, we secured an impactful highly strategic design win with a leading North American EV manufacturer, capturing direct market share from a competitor. We won this OEM's next-generation onboard charger platform utilizing our higher bandwidth 5 megahertz current sensors. In addition, again, with the same OEM, we secured a major motor driver win in their vehicle cooling system. These are large wins with initial products shipping in the next 12 months.

In ADAS, we recently secured a strategic electronic power steering design with a leading Japanese OEM, gaining market share with our safety-grade high-accuracy magnetic position sensors. This win illustrates a broader trend. Today, as automakers upgrade traditional steering and braking systems to support higher levels of autonomy, they require ICs that are more precise and that can deliver higher levels of automotive safety. This upgrade cycle is a significant growth multiplier for us, driving our dollar content per vehicle higher and fueling our ADAS design wins in the second quarter.

As a reminder, our dollar content per braking system can increase by roughly 4x when an automaker transitions to electromechanical braking, otherwise known as EMB. EMB is no longer just a future opportunity. This quarter, one of our customers is actively shipping multiple Allegro ICs into one of the world's first vehicles to deploy EMB systems. This powerful content over market dynamic supports Allegro's continued outgrowth of the broader automotive market.

Moving to our Industrial and Other business. Second quarter sales increased 11% sequentially and 79% year-over-year, establishing a new record. Data center also achieved record sales of $46 million in the second quarter, growing more than 150% year-over-year. Almost every time I talk to one of our marketing or product managers, I hear about fresh and highly positive customer feedback regarding our data center solutions or I hear about a new business win with both new and existing data center customers. Why? Just one example.

The escalating power and higher voltage demands of modern AI workloads serve as a direct catalyst for our current sensor portfolio. As rack power densities surge, the legacy resistant shunts and bulky transformers that have historically measured current in server power supplies, they generate too much heat and take up too much space. These thermal and spatial constraints in the data center, coupled with the critical need for high-voltage isolation are driving the rapid adoption of our advanced magnetic current sensors inside high-density power supplies.

During the quarter, our current sensors secured more than 10 design wins with top Taiwanese power supply providers for use in hyperscaler power supply units, battery backup units and UPS systems. These power systems range from 5 to 30 kilowatt and include wins across new 800-volt architectures. These were major high-value wins. And as a result, our current sensor design wins for data center applications more than doubled sequentially in the quarter. These wins underpin the rapid and near-term growth of our current sensors in the data center.

Wins like this with sticky and diversified new products also support our strategy to significantly grow Allegro's data center dollar content opportunity from $150 to more than $425 per rack. Of course, we continue to invest in R&D to fuel growth. In data center, earlier this week, we launched new higher isolation current sensors, footprint shrinking isolated gate drivers and intelligent 48-volt fan drivers to help developers deliver massive computing performance upgrades without increasing heat, power consumption or physical size.

Now automation and robotics, where we continue to innovate and secure highly strategic foundational sockets for the next generation of physical AI. During the quarter, we secured a strategic design win with a leading Asian robotics developer who selected our discrete high-precision current sensors to monitor the heavy power loads across their humanoids primary drive joints. Earlier this month, we also secured a major win with a leading Chinese humanoid supplier. This humanoid company selected our market-leading high-precision inductive position sensor ICs for their large joints. This program will use approximately 60 ICs per humanoid and ramps to production within 6 months.

While advanced robotics represents a multiyear revenue ramp, our design-in momentum today is establishing our foundational market share for the future. Humanoid robotic hands also present extreme spatial and thermal constraints, well aligned to our integration capabilities at Allegro. I'm excited to share that in fiscal Q3, we will begin sampling our newest robotics innovation, the industry's first fully integrated magnetic sensor and motor driver IC designed specifically for humanoid hands and fingers. By combining high-precision TMR magnetic sensors and intelligent power drivers into a single ultracompact chip, we are giving robotics designers the exact component they need to achieve near human dexterity.

Early customer interest is incredibly strong, which is a great proof point in our strategy to further increase our dollar content per humanoid through the release of highly differentiated integrated IC solutions for the hand. Sales to Other Industrial end markets, which include personal and industrial transport, broad-based industrial, medical, energy infrastructure and consumer, delivered a fourth sequential quarterly increase in sales. We are encouraged by the broad underlying adoption of our technologies across this highly diversified customer base.

Looking ahead, we view energy infrastructure as a particularly exciting future growth vector for our business. As the AI data center build-out accelerates, it is driving an urgent need for solid-state transformers, solid-state circuit breakers and battery energy storage systems. Within our energy infrastructure business in Q2, our silicon carbide high-voltage gate driver secured its first major design win with a leading solar provider for their next-generation inverters. This win serves as a fantastic initial validation of our new technology. We are seeing strong accelerating pipeline growth across the high-voltage gate driver portfolio in energy infrastructure, EV traction inverters and data center power infrastructure.

To wrap up, the leading indicators across our business give us high confidence in our path to exceed our target model of mid-teens annual sales growth. With record design wins, robust backlog and expanding content in our target markets, we are extremely well positioned at the intersection of the world's most critical megatrends. I'll now turn the call over to Derek to provide additional color on our financial performance as well as our third quarter outlook.

Derek D'Antilio

Thank you, Mike, and good morning, everyone. Starting with our second quarter results, sales were $277 million and non-GAAP earnings per share were $0.26. As a percentage of sales, gross margin was 51.5%, operating margin was 20.6% and adjusted EBITDA margin was 25%. Total Q2 sales increased by 7% sequentially and 29% year-over-year. Sales to our Automotive customers increased by 4% quarter-over-quarter to $173 million and by 11% year-over-year. I'd also like to mention that Auto inventories remain lean, and we do not see signs of restocking in the quarter.

In addition, our forward-looking metrics give us confidence in continued Automotive sales growth. As Mike mentioned, Auto design wins achieved a new record in the second quarter with demand strong across all regions, and bookings were up 33% sequentially and 50% year-over-year. Industrial and Other sales increased by 11% sequentially and 79% year-over-year to $104 million, surpassing $100 million in Industrial and Other sales is an Allegro first.

Data center sales in Q2 were a record $46 million, growing more than 150% year-over-year, and we remain on track to more than double our data center sales in fiscal '27. From a product perspective, magnetic sensor sales increased by 5% sequentially to $158 million and 21% year-over-year. Sales of our power products increased by 9% sequentially to $119 million and 42% year-over-year. Sales by geography on a ship-to basis were as follows: 33% of sales in what we term Rest of Asia, which includes Korea, Taiwan and India, 25% of sales in China, 16% in Japan, 14% of sales in the Americas and 12% in Europe. Sales to all geographies grew sequentially and year-over-year in fiscal Q2.

Now turning to Q2 profitability. Gross margin in the second quarter was 51.5%, an increase of another 40 basis points sequentially from 51.1% and 190 basis point improvement from Q2 of last year, driven largely by operating leverage. Beyond outgrowing our target markets, operational excellence and gross margin expansion remain top priorities. To help mitigate industry-wide input cost inflation, we are aggressively executing on many fronts. First, we are driving factory efficiencies in bill of material transitions. An example of this is converting parts from gold to copper wire where technically feasible. With shipments of these new copper products beginning in fiscal Q3, we are structurally lowering our manufacturing costs to directly offset raw material inflation.

Second, we are implementing strategic price increases. These are balanced and intended to protect gross margins. Pricing actions to date have largely been within our industrial and catalog businesses with the majority of Auto contract renewals and price increases effective January 1. As a result of these and other actions, we expect to continue to make meaningful progress towards our gross margin target of greater than 55%.

Moving down the P&L. Operating expenses were $86 million, within our expectations at this sales level. Operating margin was 20.6% of sales compared to 19.4% in Q1 and an increase of 670 basis points compared to 13.9% in Q2 of fiscal 2026. The effective tax rate for the quarter was 10.2%. Interest expense was $4 million. The second quarter diluted share count was 188 million shares and net income was $48 million. EPS was $0.26 and increased by 13% sequentially and 100% year-over-year on sales increases of 7% and 29%, respectively, demonstrating the significant operating leverage in our business model.

Moving to the balance sheet and cash flow. We ended Q2 with total cash of $201 million. Q2 cash flow from operations was $37 million, CapEx was $6 million and free cash flow was $31 million. We ended Q2 with term loan debt of $285 million and net debt of $84 million. From a working capital perspective, second quarter DSO was 36 days, consistent with 35 days in Q1 and inventory days were 117, down from 128 days in fiscal Q1.

Finally, I'll now turn to our Q3 fiscal 2027 outlook. We expect third quarter sales to be in the range of $278 million to $288 million. The midpoint of this range equates to a 23% year-over-year increase. Additionally, we expect the following, all on a non-GAAP basis. Gross margin to be between 51.5% and 52.5%. Operating expenses are expected to be $87 million, plus or minus $1 million. Interest expense is projected to be $4 million, and we also made another voluntary debt payment of $25 million on September 30, which falls within our fiscal Q3. We expect our tax rate to be 10%. We estimate that our weighted average diluted share count will be 188 million shares. And as a result, we expect non-GAAP EPS to be between $0.25 and $0.29 per share, with the midpoint of this range implying an 80% year-over-year increase.

Now I'll turn the call back over to Jalene for your questions.

Jalene Hoover

Thank you, Derek. This concludes management's prepared remarks. Before we open the call for your questions, I'd like to share our third fiscal quarter conference line up with you. We will attend RBC's Global Technology, Internet, Media and Telecommunications Conference on November 17 in New York City; the 30th Annual UBS Global Technology and AI Conference on December 1 and 2 in Scottsdale, Arizona; Wells Fargo's 10th Annual TMT Summit on December 8 in Rancho Palos Verdes, California; Barclays' 25th Annual Global Technology Conference on December 9 in San Francisco; and finally, the 55th Annual Nasdaq Investor Conference in association with Morgan Stanley on December 9 in London. We will now open the call to your questions. Victor, please review Q&A instructions.

Operator

[Operator Instructions] Our first question comes from the line of Joe Quatrochi from Wells Fargo.

分析师问答

Joseph Quatrochi

You talked about accelerating demand and seeing lights -- flashing green lights for demand and obviously solid design win activity. Can you help us understand, I think last quarter you talked about maybe some delinquencies increasing and just tight back-end capacity. Just how are you changing your capacity plans? Or are you changing your capacity plans? And how do we think about just chasing this accelerating demand you're seeing?

Michael Doogue

Absolutely. Thanks, Joe. This is Mike. And yes, we are participating in growth markets. We are in growth mode. So like all customers in that type of environment. We are seeing some capacity constraints. Let me add more color to that. At the wafer level, we are not seeing many constraints. What we're seeing is some constraint at back end, particularly in test. And when I look at FQ2, there were not any major constraints at test in FQ2. They start to show up a little bit more in FQ3, but through good use of capital, we were trying to get ahead of the growth market. We will be rolling on capacity in both FQ3 and FQ4 to stay ahead of the growth.

Derek D'Antilio

And Joe, I'll just add, this is Derek. The capacity constraints are really mix dependent within test. And in addition to having ample space in our Philippines facility, we began shipping from our Chinese back-end OSAT that's doing probe assembly and test, and we have OSATs that have capacity for the assembly side of things.

Joseph Quatrochi

That's helpful. And then maybe just as a follow-up, Industrial was strong. I think the Other Industrial was a bit stronger than we had anticipated. So just, kind of, curious if you could double-click on just what was the key driver of non-data center Industrial this quarter?

Michael Doogue

Yes, absolutely, Joe. So first and foremost, we have the luxury of having a set of broad Industrial applications that are generally tied to some of these high-growth megatrends. And part of what we're seeing that touches upon that is that we see data center having a bit of a halo effect on our energy infrastructure business. That's definitely something we're seeing somewhat broadly. And if we look at FQ2 in particular, we are benefiting from some sensor share gains for magnetic sensors and medical, and we've seen a boost for our sales into the personal mobility market. I think net-net, it all just says that we have a broad basket of growth applications in our Industrial sales, and they're starting to fire on more cylinders.

Operator

Our next question will come from the line of Tom O'Malley from Barclays.

Thomas O'Malley

So data center in the September quarter is up 2% sequentially, still growing really nicely year-over-year. But maybe you could call out why some more muted growth versus the last couple of quarters. And then traditionally, you give current sensors as a percentage of that data center bucket. If you could provide that, that would be great as well.

Michael Doogue

Sure. Thank you, Tom. So look, there's lots of good growth statistics in our data center business in FQ2. The one that I'm most focused on, we mentioned that our FQ2 data center business grew more than 150% year-over-year. And on top of that, what's encouraging for me, when we look at these design wins with our current sensors, current sensors are the next wave of growth in our data center business. And in the quarter, our design wins for current sensors and data center more than doubled. So we still are very bullish about our data center business. It's on track to more than double in FY '27, as we said before. And we're basically marching down this path.

We've talked about dollar content growing from $150 per rack to more than $425. And with all the good statistics we're sharing, the design wins, the momentum, I talked about all these positive hallway conversations with sales and marketing people. We feel like we're marching down that dollar content path for sure. In specific regard to current sensors, we did split out that number last quarter. We don't plan to share that every quarter. We gave that number just to show you the current sensor story is real and to give you a bit of a magnitude within our data center business. And because that is the bigger growth driver going forward than our motor drivers, and we're very happy about that being the case, we just wanted you to see that it's becoming a meaningful piece of our revenue.

Thomas O'Malley

Got you. Super helpful. And then as my follow-up, if I look at the Auto business as a whole, when you look at Focus Auto versus e-mobility, that percentage, when I look over, kind of, the last -- since June of, kind of, '25, has, kind of, trended in that 55% to 57% range in terms of, kind of, like, the mix of what you would call a faster-growing stuff to, like, core Auto. So maybe talk about like why that spread isn't widening. Like, all the data I see is, kind of, EV is doing a bit better more broadly. I know that you guys have some good content there. Would you expect, like, in a year's time from now to see more divergence amongst those 2 buckets?

Michael Doogue

Yes. So if the question is truly, do we expect to see divergence in the growth rate between xEV and ADAS and the rest of Auto? I would say we absolutely expect to see that and mostly because we have been seeing that over time. I think right now, there is a little bit of an impact of thin inventory levels in Auto, where we just find ourselves servicing customers that may need parts because they're a little under-inventoried and that can create some quarter-to-quarter shifts in the ADAS and xEV versus ICE and in-cabin revenues that you see within a quarter.

But there's no doubt in my mind that the divergence will continue when you look at xEV and ADAS in terms of it having a very healthy Automotive growth rate. When I look back to what we put forward at our Analyst Day and you look at the SAM for xEV and ADAS that we put out at the time, that had an 18% CAGR. And so that's obviously a segment in the automotive market that's going to outgrow the rest of the market, and it's a segment where we're doing very, very well. And as we've noted in the past, more than 50% of our Automotive revenue today is in those 2 growth segments.

Operator

Our next question will come from the line of Chris Caso from Wolfe Research.

Christopher Caso

The first question is on Auto. And I guess, the answer to your previous question, you talked about the Automotive customers being lean on inventory in the prepared remarks, you talked about that you hadn't seen restocking. We have seen some of the Tier 1s starting to express some desire to have some safety stock in place. Maybe you can comment more broadly on what you're seeing from those customers with regard to inventory. And do you expect them to start to begin restocking now? And if so, under what time frame?

Michael Doogue

Yes. Thanks, Chris. This is Mike. So we have a team of talented people that's close to our customers that goes out and they scan Tier 1 Automotive inventory level through direct conversations, and we review that in our monthly business review. And what we're seeing are still many customers with very low single-digit weeks of inventory. So your next question was, are people talking about building strategic inventory. What I would say is that people are now at least talking about trying to get out of the mode where they're trying to survive on very thin inventories, and we're having direct conversations about what would it look like to bump up that same level of inventory, but there has not been much activity. It's mostly been conversations at this point regarding that type of inventory discussion.

Christopher Caso

Okay. Great. The second question is with regard to pricing. And just a few questions in that. If you could talk about was pricing a significant factor in either the September quarter results and December quarter guide? And as you go forward with this, because you've already absorbed the cost, it sounds like the pricing -- there'd be a bigger impact as you went into next year as you have the annual pricing contracts, will that be accretive to gross margins when that occurs?

Derek D'Antilio

Yes, Chris, this is Derek. In Q2, pricing was not a meaningful impact to our results in the September quarter. It was largely volume, the increase both quarter-over-quarter and year-over-year. And the reason for that is twofold. One is we're still incurring the headwinds from pricing resets with Auto customers 10 months ago on January 1, 2026, that go through the full year of 2026. And the second reason is we're starting to increase prices with the long tail of the catalog business in Q2. There will be more meaningful price increases in Q3 in respect to the bigger, broader Industrial section of our business.

And then as I mentioned, we'll have price increases with our Auto customers on January 1. And what typically happens actually is the pricing impacts that quarter immediately. So in many years, when we have price downs in that quarter, we see the down in that quarter. And in the year 2023, we saw the up immediately. The cost increases actually roll in about a quarter or 2 later after they cycle out of inventory into the P&L.

Christopher Caso

Right. So that would imply some favorable impact on gross margins in the first quarter as a result of that impact if that occurs?

Derek D'Antilio

That's correct. We'll see favorable impact to gross margins in both the third quarter here, likely marginal in the fourth quarter with the combination of those 2 things and then in the first quarter of next year as well.

Operator

And our next question will come from the line of Blayne Curtis from Jefferies.

Blayne Curtis

I just wanted to go back to the data center. It's been -- it was growing spectacularly. I think one of the fastest-growing businesses out there. I just, kind of, wanted to understand the more flatter September. I don't know if you could point out what -- whether it's just customer lumpiness. But I'm just more importantly, I want to just talk about the reacceleration in that business. You talked about wins doubling. Maybe give us some context as to the timing of when those could layer in and the length of visibility.

Michael Doogue

Yes, Blayne, this is Mike. I'm actually glad you asked because there's some clear explanations there, and they're all good ones. So when you look at our June ending quarter, that was a monster growth quarter. I believe data center was up more than 30% that quarter. And what was happening there was customers responding to some of these big new programs that were getting ready to ramp. What's happened since then, and there's nothing bad about this. It's just the lumpiness or timing issue, as you noted. Those big programs were pushed out by a quarter or 2, and that's one of the reasons that we're just seeing a bit of more muted growth rates quarter-over-quarter.

This quarter, the data center growth was at 4%. So it did achieve a new record. But when we think about the roll-on of these big programs, there's the potential for much higher numbers. And nothing has changed in that regard. These big programs are on the come and they will happen in the very near future. For your awareness, the pushouts seem to be related to the delay of some 800-volt programs with the hyperscalers.

Blayne Curtis

And then maybe on the Auto side, you had a lot of good commentary on the design pipeline there as well. I don't know if you're still giving out the Focus Auto number, but I'd be curious if so. And then I just wanted to understand the drivers of the growth or the recovery, ADAS or xEV, if there was any difference?

Derek D'Antilio

Yes, Blayne, I'll start with just the numbers. So interestingly, both Focus Auto and, sort of, ICE/safety comfort and convenience, both grew 4% sequentially and 11% year-over-year. And as Mike said, some of that comes down to what we're shipping in the quarter. So the preponderance of our design wins, which Mike will elaborate on, continue to be in that, sort of, ADAS, xEV, a hybrid world, which is where we're really incentivizing the sales teams, and that's the part that's going to grow over time. In fact, it's grown from about 35% of our overall Auto business to now 55%. The good news is we continue to see strength in things like safety, comfort and convenience and even ICE here in the short term.

Michael Doogue

Yes. And maybe I can just add a little bit. When we think of the dollar content story in Auto, and I know you know it well, Blayne, but we go from this theoretical Allegro content of $40 in an ICE car, $60 in an EV, $100 in a BEV. When we see these wins coming through, the dollar content story is alive and well, and if anything, getting stronger. So we talked about meaningful big new wins in Auto in our prepared remarks. Auto bookings are up 50% year-over-year.

And when I see some of the results of our innovations, whether it's higher speed current sensors that are taking share, the high-voltage isolated gate drivers are gaining strong momentum with Automotive customers. So that dollar content evolution is alive and well. In our Analyst Day, we talked about growing Auto with a CAGR greater than 10%. And as we head into FY '28, we are very confident that we can deliver on those types of numbers going forward. There's just a lot of good momentum.

Operator

Our next question will come from the line of Gary Mobley from StoneX.

Gary Mobley

Let me extend my congrats to the strong start to the fiscal year. You guys have highlighted for several quarters, strong design win lifetime value, I think up 35% in the first half of this fiscal year, up 30% in fiscal year '26. So the question is, why only a long-term target of mid-teens percent revenue growth? Is that design win momentum diluted by some catalog business? Is it a function of a lag? If you can comment on that, that would be helpful.

Michael Doogue

Sure, Gary. This is Mike. And we made some remarks in the prepared remarks about how we feel like we're ahead of our Analyst Day ambitions. And one of those clear ambitions was to grow at a mid-teens level. And with all the positive signals we're seeing, we believe we have the potential to exceed that number. The formula was pretty simple. We said we would grow our Automotive business north of 10% and that we would grow our Industrial business closer to 20%. And we're seeing such strong momentum in the data center and across our Industrial markets. We talked about the dollar content story in Automotive. So we're feeling quite good about our potential to grow and to grow meaningfully going forward.

Gary Mobley

That's helpful, Mike. And you guys were clear that your Automotive distribution inventory and maybe direct inventory as well is just, kind of, bumping along the bottom. But what about overall distribution inventory? Are you still within the 10- to 12-week target range?

Derek D'Antilio

Yes, Gary, it's actually smack in the middle of that range on a global basis, and it's been there for the last 3 quarters. We had another record POS quarter. And in fact, pockets of our distribution channel probably have leaner inventories than we would like, and we'll continue to fill those spots, but it's right in the range we would like it to be on an aggregate basis.

Operator

And our next question will come from the line of Quinn Bolton from Needham & Company.

Quinn Bolton

I guess just looking to the December quarter, can you give us a sense, do you think you see fairly balanced growth between Auto and Industrial, just one lead growth in the December quarter? And then I've got a follow-up on isolated gate drivers.

Derek D'Antilio

Sure, Quinn. The December quarter historically, even pre our IPO has historically been down 5%, right? So we're guiding up at the midpoint, 2% sequentially and 23% year-over-year. So it's above seasonal. That long pocket of Industrial, Other Industrial, if you will, declines in the December quarter as distributors in Europe, United States, Japan, I think we will break at the end of the year. So I expect that December quarter to be led by Auto with continued strength in data center.

Quinn Bolton

Great. And then on the isolated gate driver, I think you talked about your first win for isolated gate driver in solar. I wasn't sure if that was the first design win for that product family in total or whether it was just in solar? And then in the quarter, I think you introduced a new isolated gate driver. I know in the past, you've talked about a second-generation isolated gate driver family. Wondering if this new product is part of that second-generation isolated gate driver family that I think, in the past, you've talked about drives even higher dollar content per rack opportunities in the data center business.

Michael Doogue

Yes. Thanks, Quinn. This is Mike. So we have had wins with the isolated gate drivers. I think what's exciting about this one we called out in the prepared remarks is that it's of a different magnitude. It's a larger win. And the energy infrastructure space looks and feels a lot like the same power electronics used in many of the data center areas. So we're quite excited about that. Maybe it doesn't directly address your question, but when we talk about momentum in the isolated gate drivers, we're also seeing perhaps stronger-than-expected momentum in solid-state circuit breakers in the data center.

So we continue to see new applications that are believing in the value proposition of our parts, and it gives us the feeling that we could accelerate the ramp of our isolated gate drivers going forward. As for these Gen 2 products you mentioned, they are sampling in this current quarter. There's a ton of customer interest and that, again, will just be a next wave of momentum within the product line.

Operator

And our next question will come from the line of Vijay Rakesh from Mizuho.

Vijay Rakesh

Just a quick question on the data center side. It looks like that $150 to $325 (sic) [ $425 ] per rack jump. Some of it is from the isolated gate drivers. When do you start to see the 800-volt isolated gate driver start to ship or start to ramp up, I guess? Is that second half '27? Or how should we think about it?

Michael Doogue

Yes. Thanks, Vijay. So yes, just to make sure we have the numbers straight. The numbers we're talking about are $150 per rack growing to $425. And I've said previously that of that $425, 2/3 of that comes from motor drivers and current sensors. So if you look a little further out in time, the isolated gate drivers will add hundreds of dollars on top of that $425. And your question is when could that begin? In prior calls, I talked about an 18- to 24-month horizon for the ramp in the data center for the isolated gate drivers. With some of the new programs we're seeing, some of the first ones are small, but still meaningful. I think we could beat that previously mentioned timing, but only time will tell.

Vijay Rakesh

Got it. And on the gross margin side, Derek, obviously, the long-term greater than 55% gross margin. How should we think about it, the puts and takes between pricing, mix and I guess, foundry?

Derek D'Antilio

Yes. So we had our Analyst Day about 7 months ago now, and in that quarter, we were still sub-50% on gross margins. We're guiding to a midpoint of 52% here in the third quarter. So I would say we're making very meaningful progress towards that mid-50s. And we don't intend to stop at that mid-50s. Once we get to that point, we'll keep going, of course, and update the model. The biggest drivers of that continue to be operating leverage. So year-over-year, the 290 basis point increase year-over-year and the increase quarter-over-quarter was operating leverage. And I talked about earlier in the question, we're still dealing with the headwinds of pricing resets from Auto customers 10 months ago. We will get that benefit as we roll that forward next year.

But going forward, the next couple of years to get to that mid-50s operating leverage is by far the #1 piece. Bill of material manufacturing cost reductions, we talked about is also very significant. I talked about on previous calls how the copper to gold transition or gold to copper transition, that's been a headwind of about 200 basis points over the last couple of years with the rapid increase in gold. And of course, pricing actions will play a part in the next couple of years, expected to at least be neutral to gross margins. And then as some of the questions came up around TMR and isolated gate drivers, as we have a more technology-rich portfolio, we get a better mix in that as well.

Operator

And our next question will come from the line of Vivek Arya from Bank of America.

Liam Pharr

This is Liam Pharr on for Vivek. Given the strong bookings, how should we think about that gap turning to revenue? Is it backlog building for just fiscal '28? Or are some customers ordering further out because of supply? And on design wins, what's that typical lag to revenue by market? And does this specific quarter's mix skew that in a direction?

Derek D'Antilio

So this is Derek. I'll start with the bookings side of the equation, which is obviously orders that are on the books, right? So we have orders on the books now going out a couple of quarters. We continue to probe to make sure that, that's real demand. So we feel really good about the next couple of quarters based upon those orders that are on the books. Some of it is now starting to go into FY '28, just given our lead times at this point in time.

Michael Doogue

And then on design wins, you have, sort of, a bifurcated market. I talked about some data center and robotics design wins. The most recent trends are that we will get to official design win stage and ramp those businesses typically within 6 to 12 months. Those are just very fast-moving markets. In Automotive, it's becoming more and more common in the world of EVs where the time from design win to program ramp can also be under a year, sometimes as long as 18 months. But I did mention in the prepared remarks, some of the wins that we secured within FQ2 would ramp within the next 12 months. So the automotive innovators are starting to go from design win to production ramp faster than what I would say we saw 3 or 4 years ago.

Liam Pharr

Got it. Very helpful. And then when it comes to data center, obviously, the entire data center supply chain is quite tight. Could you describe how you're seeing visibility into fiscal '28? And when we're thinking about fiscal '27 more than doubling, should we think about fiscal '27 as a, kind of, normalized basis off of which we can apply the 22% long-term growth? Or is that 22% off of the prior fiscal '25 base?

Michael Doogue

So let me, kind of answer those questions in reverse. When I think of the growth rate of our business, our data center business going forward, I'm always looking at the CapEx spending trends. And there are some pretty broad ranges for calendar year '27, but they tend to range from what I've seen, no expert, but somewhere between 30% to 80%. And that's what we, sort of, take to talk to our customers and say, "Hey, here is the data. Now how do you help us figure out the right look into the next 12, 15, 18 months to prepare our capacity?"

And as we become a more major data center player, we have very formalized QBRs with our data center customers. We all bring the statistics to the meetings, and we have pretty meaningful discussions about what's to come over the next 12 to 18 months.

Operator

Your next question will come from the line of Srini Pajjuri from RBC Capital Markets.

Srinivas Pajjuri

A couple of clarifications. First, on the balance sheet inventory, Derek, it's been coming down. And given your commentary about the bookings and the visibility out of that, you built some inventory. So if you can comment about whether supply is becoming an issue or if that is becoming a constraint? And then I have a follow-up.

Derek D'Antilio

Srini, first of all, welcome. So the decrease in inventory quarter-over-quarter was primarily finished goods as we shipped a couple of million dollars of finished goods to satisfy demand, particularly within distributors. Our wafer and our die bank inventory, which is something we watch very closely, is still healthy, and we feel like we have -- we're not wafer constrained at this point. As Mike talked about, to the extent that there are any capacity constraints, it's sort of mix dependent and really back-end and specifically test.

Srinivas Pajjuri

Got it. And Derek, on the -- I mean, I guess, the input cost inflation that you talked about, would you say most of that is behind us now? Or do you still anticipate as you, I guess, to the extent you have visibility from your suppliers? Is that an ongoing thing, I guess, for the next 6 to 12 months? Or are we mostly behind it?

Derek D'Antilio

Unfortunately, it's an ongoing thing, Srini, right? So just like many of our Auto contracts begin on January 1, wafer supply contracts also begin on January 1. There are some increases there. Many other contracts also begin around that January 1 time frame. Commodities have, I would say, started to level off, but are up significantly over the last 3 years. Energy costs are certainly continuing to increase and people costs are continuing to increase. So that's why we're driving very aggressively on multiple fronts to mitigate those and improve gross margin.

Srinivas Pajjuri

Got it. And then maybe one more for Mike, if I may. Mike, you mentioned the design win momentum on the humanoid side. Maybe talk about how much of your revenue today comes from that market? And where do you see that going in the next 12 to 18 months?

Michael Doogue

Thank you, Srini. Yes. So last quarter, we said that in FY '27, our factory Automation and robotics revenue would be in a range of 3% to 4% of overall sales. And we did that for one clear reason because when we look at the dollar content opportunity, humanoid robotics, relative to the types of robots we sell into today, there's a huge multiple there. I think on the low end of that range, the multiple is something like 3x more content. On the high end, you could say 10x. And we wanted to tell folks that, hey, when you're talking about a multiplier of 3x or 10x on top of a business that's already 3% to 4% of revenue, this is a meaningful driver for the future growth rate of the company.

And with each of these wins we talk about, it really is validating to us, and hence, we want to share the validation with you that when we say we have $150 of theoretical content in a humanoid and you see these wins where we get 60 ICs in a single robot in a single win, it's just validating that this should be a strong growth driver for Allegro in the coming years.

Operator

And our next question will come from the line of Joshua Buchalter from TD Cowen.

Joshua Buchalter

Congrats on the results. I wanted to follow up on some previous comments about the 800-volt pushout slowing your data center growth in the quarter. I mean I had always thought of your exposure primarily related to the motor drivers to air cooling. I guess how much of your data center business today or over the next couple of quarters, would you expect to be driven by that 800-volt transition? Like how big of a variable is that?

Michael Doogue

Yes. Thanks, Josh. It's Mike. So last quarter, again, we're not going to give this out every quarter, but we mentioned that of our total data center business, 22% was from current sensors. And we did that to point out that these current sensors, they're only being used more or less in power supplies or power systems within the data center. And that's why we believe it's such a big growth driver. These sensors are useful at 400 volts. They're even more useful at 800 volts.

So as we continue to take in more new wins into the business funnel, sure, some of them continue to be high-voltage AC platforms, but we're starting to see an increasing number of 800-volt DC platforms. And in those first 800-volt programs, we're quite pleased with the amount of content we have there. And we just believe in general, the more power consumed in the data center that's better both for our fan drivers, but particularly for our current sensors.

Joshua Buchalter

Okay. That's super helpful context. I guess on a similar topic, we've all seen the renewed optimism developed and, sort of, picked up even more recently on the server CPU side. Any help you can give us on how much of your data center business is tied to accelerated servers versus CPUs? Like have you seen a meaningful uptick in the underlying air cooling business? Or is that still on the come?

Michael Doogue

Yes. Thanks, Josh. So maybe just at a higher level, it's -- we actually like seeing more CPUs for our fan business because the trend is clearly that there will be some and maybe significant liquid cooling on the GPU side. So where is our fan growth going to come from? It's going to come from cooling CPUs. And then particularly, the big uptick we're seeing is the cooling opportunity in power supplies where they don't have any intention to liquid cool most of those power supplies. So we like seeing the resurgence in CPUs. It's good for the fan business. And that's why we've said so many times over that despite a world of liquid cooling, we believe that our fan business will grow over time.

Operator

At this time, I'm showing no further questions in the queue. I would now like to turn it back over to Jalene for closing remarks.

Jalene Hoover

Thank you, Victor. This concludes today's call. Thank you all for joining us and taking the time to join this call this morning. We look forward to seeing you at conferences over the coming weeks.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

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