Semtech SMTC shares have plunged 47.3% in the past three months, underperforming the Zacks Semiconductor - Analog and Mixed industry, Zacks Computer and Technology sector and the S&P 500 index’s decline of 13%, 13.4% and 6.2%, respectively

Semtech Three-Month Performance Chart

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Semtech’s underperformance highlights challenges stemming from its CopperEdge business. SMTC’s CopperEdge signal integrity solutions are embedded in active copper cables, which are further used for connecting GPUs, CPUs, switches, storage units and other components within server racks, ensuring seamless transmission of data.

Per a regulatory filing released in February 2025, one of the major customers of its CopperEdge solutions is implementing architectural changes in its server racks, causing CopperEdge product sales to fall below the previously anticipated $50 million for fiscal 2026.

Following this disclosure, several lawsuits were filed against the company on suspicion of violating security laws, further undermining investors’ confidence in the stock. However, these short-term challenges are outweighed by SMTC’s strong financials due to the traction in its innovative products.

Semtech’s Latest Innovation Signals Integrity

To address thermal challenges, high costs and improved transmission speed for artificial intelligence and machine learning workloads, Semtech recently launched 1.6T Octal Small Form-factor Pluggable (OSFP) Active Copper Cable. The solution leverages Amphenol’s APH OSFP interconnects, offering design and integration flexibility to SMTC’s data center customers.

Semtech combined its CopperEdge 224G per lane linear equalizer integrated circuits with Amphenol’s leading cable technology to come up with this new interconnect solution. This solution, developed in collaboration with Amphenol, is reported to consume 90% less power than its digital signal processing counterparts while also ensuring significantly low latency.

The launch of 1.6T (OSFP) Active Copper Cable has the potential to aid in the recovery of SMTC’s CopperEdge business. Semtech’s other products, including LoRa technology and LoRaWAN standards, are already experiencing strong demand among its industrial customers. These factors have the potential to drive Semtech’s top and bottom lines.

The Zacks Consensus Estimate for Semtech’s fiscal 2026 and 2027 revenues 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.

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

Semtech Gains From Strong Partner Base

To further its efforts in driving innovation, SMTC has co-founded the LoRa Alliance in partnership with companies serving the IoT connectivity and infrastructure space. SMTC’s LoRa Alliance partners, including Netmore, MultiTech and Acklio, are working toward the standardization of LoRaWAN technology for its widespread adoption and interoperability across industries.

Semtech also collaborates with larger players like Amazon’s AMZN Amazon Web Services and Amdocs DOX. Amazon and SMTC collaborated to integrate the LoRaWAN protocol into Amazon Web Services’ IoT Core and managed cloud service.

As Amazon Web Services is one of the leading public cloud service vendors, its adoption of SMTC’s LoRaWAN technology will strengthen Semtech’s market position. SMTC’s partnership with Amdocs has enabled SMTC to enter the private cellular networks market for enterprises, hence diversifying its opportunities.

Conclusion: Hold Semtech for Now

Semtech is addressing the challenges in its CopperEdge business with the introduction of improved OSFP Active Copper Cables that will solve cost, latency and thermal issues, leading to the readoption of its products by key customers. Furthermore, traction in the demand for its LoRaWAN solutions from IoT and industrial customers is likely to aid in SMTC stock’s recovery in the future.

Considering all these factors, we suggest that it is wise for investors to retain this Zacks Rank #3 (Hold) stock at present. 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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