Semtech Corporation SMTC shares have climbed 18.2% since the company reported overwhelming fourth-quarter fiscal 2025 results on March 13. After the fourth-quarter earnings release, Semtech shares have outperformed the Zacks Semiconductor - Analog and Mixed industry, Zacks Computer and Technology sector, the S&P 500 and the Technology Select Sector SPDR Fund’s XLK return of 3.9%, 0.7%, 1.5% and 2.2%, respectively.

Semtech’s Price Performance Return Since Q4 Earnings

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The company’s fourth-quarter performance gained from strength in the data center business, driven by robust adoption of fiber optics and other connectivity solutions

These factors contributed to both earnings and revenue beat in the reported quarter. In the fourth quarter of fiscal 2025, SMTC reported revenues of $251 million, which increased 30.1% year over year and beat the Zacks Consensus Estimate by 1.25%.

SMTC’s fourth-quarter fiscal 2025 non-GAAP earnings of 40 cents per share surpassed the Zacks Consensus Estimate by 25%.

Rising Demand for IoT and AI Drives SMTC’s Growth

Despite near-term challenges, SMTC's commitment to innovation is evident in its continued investment in advanced design solutions and next-generation technologies that position the company to capitalize on emerging trends, such as AI, cloud computing and smart infrastructure.

Furthermore, Semtech’s solid pipeline of products and strategic focus on high-demand markets like AI and IoT ensure a sustainable growth trajectory. Semtech’s IoT revenues also demonstrated resilience, growing 12.8% sequentially in the fourth quarter of fiscal 2025. Semtech is gaining from the growing adoption of its LoRa technology and LoRaWAN standards, which enable efficient, long-range and low-power wireless connectivity for a range of industrial applications.

Semtech is also experiencing strong bookings and backlog for IoT solutions, boosting its momentum across end markets, such as smart cities, agriculture and logistics. For Semtech, this segment remains a crucial growth driver as IoT adoption advances globally.

The Zacks Consensus Estimate for fiscal 2026 and 2027 reflects this optimism, with revenues expected to grow 15.9% and 10.6%, respectively. EPS is projected to increase 96.6% for fiscal 2026 and 27.4% for fiscal 2027.

Semtech has surpassed the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 14.44%.

Semtech Corporation Price, Consensus and EPS Surprise

Semtech Corporation price-consensus-eps-surprise-chart | Semtech Corporation Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Strong Partner Base Provides Stability to SMTC’s Business

To drive innovation, Semtech co-founded the LoRa Alliance in collaboration with IoT connectivity and infrastructure companies, such as Netmore, MultiTech and Acklio. Together, they actively promote and work toward standardizing LoRaWAN technology, ensuring its widespread adoption and interoperability across industries.

Semtech has also partnered with industry leaders, including Amazon’s AMZN Amazon Web Services (AWS) and Amdocs DOX. Semtech and AWS have collaborated to integrate the LoRaWAN protocol into AWS IoT Core, AWS's managed cloud service.

As AWS is one of the largest public cloud service providers, the integration of Semtech’s LoRaWAN technology with AWS will strengthen SMTC’s market position in the IoT space. Semtech’s collaboration with Amdocs has enabled SMTC to enter the private cellular networks market for enterprises.

Semtech Trades at Attractive Valuation Multiple

In terms of the Forward 12-month price/sales ratio, Semtech is trading at 2.68X, lower than the industry’s ratio of 7.12X, indicating its undervaluation at present.

Semtech Forward 12-Month P/S Ratio

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Semtech Grapples With Near-Term Headwinds

Despite strong fundamentals, Semtech is facing some headwinds in its CopperEdge business. The company had reported earlier that the net sales of its CopperEdge products are expected to fall below the prior floor estimate of $50 million for fiscal 2026.

The downward revision of sales forecast is attributed to a change in server rack architecture following unfavorable feedback from NVIDIA, which is SMTC’s key customer. In response to this unexpected forecast, several law firms filed lawsuits against SMTC suspecting a potential securities law breach by the company.

Despite these short-term factors, Semtech recovering on the back of strong data center business and expanding IoT market as demonstrated in its fourth-quarter fiscal 2025 results.

Conclusion: Hold SMTC Stock for Now

Although Semtech stock has declined significantly in the past three months due to a change in server rack architecture is concerning for investors, SMTC’s innovative products and growth across key segments like data centers and IoT make the stock worth retaining. Semtech’s recent earnings results further solidify the fact that this Zacks Rank #3 (Hold) stock might be on the path of recovery. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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