萊迪思半導體 (LSCC) 2026 年第三季法說會：AI 需求帶動營收創新高

重點摘要

• 萊迪思半導體 (Lattice Semiconductor) 公布 2026 財年第三季營收創下 2.91 億美元歷史新高，年增 118%，季增約 45%。
• 非 GAAP EPS 達 0.72 美元，年增約 160%，季增 36%。非 GAAP 營業利益率季增 280 個基點至 41.1%。
• FPGA 營收年增約 90% 至 2.52 億美元。受資料中心採用 AI、FPGA 附著率提升及新型安全應用驅動，「運算與通訊」領域營收成長 132%。
• 「工業與嵌入式」領域營收年增 35%、季增 7%。管理層預計該業務領域將在第四季加速成長，並持續擴展至 2027 年。
• 針對 2026 財年第四季，管理層指引營收為 3.25 億至 3.45 億美元，非 GAAP EPS 為 0.82 至 0.86 美元。以中位數計算，分別代表年增約 130% 與超過 160%。
• 管理層預計 2027 年營收成長至少 60%，未來五年營收年均複合成長率 (CAGR) 將超過 30%，理由包括積壓訂單已延伸至 2028 年、AI 相關含量增加、新案導入 (design-win) 加速量產以及 AMI 全年的營收貢獻。

核心財務數據

業務與營運表現

「運算與通訊」仍是萊迪思半導體成長最快的終端市場。在 AI 基礎設施投資支撐伺服器部署以及單台伺服器 FPGA 含量提升的推動下，營收年增 132%、季增 36%。管理層亦提及解耦架構、更高的安全性要求以及提升中的 FPGA 附著率。

「工業與嵌入式」營收年增 35%、季增 7%。成長涵蓋工廠自動化、機器人、航太與國防、醫療設備及自動化系統。公司表示通路庫存已恢復正常，出貨量日益與終端需求一致，同時新獲取的設計定案 (design wins) 正進入量產階段。

自 7 月 27 日完成收購後的兩個月內，AMI 貢獻了 3,900 萬美元營收。管理層表示該業務受益於較高毛利的產品組合，並預計在 2027 年實現顯著成長。公司在退除非核心業務後，繼續以將 AMI 毛利率提升至 70% 高段為目標。

萊迪思亦推出了 Lattice Prompt，這是一款 AI 輔助的 FPGA 開發工具，旨在透過自然語言提示詞生成並驗證應用程式。管理層表示，該工具可將開發週期從數週或數月縮短至數小時或數天，進而擴大潛在的 FPGA 開發者社群。

萊迪思與 AMI 聯合推出的四項解決方案，涵蓋串流機架開機、安全升級改裝、即插即用部署以及電源與散熱管理。其中安全升級改裝解決方案引發了最強烈的早期客戶興趣，首家客戶已於 2026 財年第四季進入量產。管理層預計 2027 年將展開更廣泛的量產，並於 2028 年帶來更為顯著的營收貢獻。

管理層財測指引

管理層表示 2027 年的營運計畫尚未最終定案。其初步展望假設近期強勁成長仍將持續，但對下半年的成長率採取較保守的態度。

風險與關注領域

• 管理層坦言，在制定 2027 年初步假設時，已考量整體宏觀環境的不確定性，特別是下半年。
• 供應瓶頸在第三季造成了限制。公司表示，逾期欠交量與交期此後已大幅下降，且多年期供應商協議可為進一步成長提供產能。
• 萊迪思打算將通路庫存維持在接近目前水準，而非依賴代理商補貨。然而，公司正刻意增加內部庫存，以支援預期需求。
• 管理層表示已檢查客戶與通路訂單是否存在重複，目前在「工業與嵌入式」領域未發現任何重複下單的跡象。
• 資本配置著重於成長投資、快速削減債務以及 AMI 的整合。擇機進行庫藏股回購仍屬於次要考量。

分析師問答亮點

管理層表示積壓訂單已延伸至 2027 全年及 2028 年上半年。管理層亦提及多年期客戶協議與持續的 AI 基礎設施支出是可見度的主要來源，不過並未透露營收覆蓋率或定價條款。

公司預計伺服器出貨量將從 2026 年的約 2,000 萬台增加到 2027 年的約 2,500 萬台。管理層亦預計 AI 伺服器占總伺服器出貨量的比重將從 2026 年的約 25% 上升至 2027 年的約 40%。

據管理層表示，單台伺服器的 FPGA 附著數量已從大約 1 顆增加到 2 顆、3 顆，目前開始達到 4 顆。此擴展反映了額外的連接、控制、安全、遙測與電源管理應用需求。

對於 2027 年，管理層將主要成長動力排序為：現有產品出貨量提升、包含 Nexus 與 Avant 在內的新產品成長，以及與 AMI 相關的 FPGA、韌體和解決方案營收。

在競爭方面，管理層表示萊迪思正在小型 FPGA 市場獲取市占率，並透過低功耗、小尺寸、高連接性、低延遲及快速開機速度保持差異化優勢。公司預期專注於小型以及未來的微中型 FPGA 將減少與大型 FPGA 競爭對手的重疊。

完整法說會逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Greetings, and welcome to the Lattice Semiconductor Third Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Rick Mucha, Vice President of Investor Relations. Thank you. You may begin.

Rick Muscha

Thank you, operator, and good afternoon, everyone. With me today are Ford Tamer, Lattice's CEO; and Lorenzo Flores, Lattice's CFO. We'll provide a financial and business review of the third quarter of 2026, and the outlook for the fourth quarter of 2026. If you have not obtained a copy of our earnings press release that can be found at our company website in the Investor Relations section at latticesemi.com. I would like to remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. .

We refer you to the documents that the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

This call includes and constitutes the company's official guidance for the fourth quarter of 2026. If at any time after this call, we communicate any material changes to this guidance, we intend that such updates will be done using a public forum, such as a press release or publicly announced conference call.

We will refer primarily to non-GAAP financial measures during this call. By disclosing certain non-GAAP information, management intends to provide investors with additional information to permit further analysis of the company's performance and underlying trends. For historical periods, we provided reconciliations of these non-GAAP financial measures to GAAP financial measures that can be found on the Investor Relations section of our website at latticesemi.com.

With that, I'll turn the call over to our CEO, Ford Tamer.

分析師問答

Tristan Gerra

Thank you, Rick, and welcome, everyone, to our third quarter earnings call. Net has delivered record third quarter revenue of $291 million, up 45% sequentially and up 118% year-over-year. Non-GAAP EPS was $0.72 and up more than 155% year-over-year and well above the high end of our guidance as we translated revenue growth into even stronger earnings growth. Our fourth quarter revenue guidance of $335 million at the midpoint represents approximately 130% year-over-year growth. which is an annualized revenue run rate above $1.3 billion. This exceeds the outlook we provided last quarter and reflects accelerating momentum and broad-based demand. .

On Q4, non-GAAP EPS outlook midpoint of $0.84 represents 160% year-over-year growth, reflecting our operating leverage differentiated customer value and disciplined execution. As we continue to scale, we expect EPS growth to remain meaningfully ahead of revenue growth over time. This outlook implies non-GAAP full year 2026 EPS of approximately $2.50, up 140% year-over-year, a clear reflection of the earnings power we are building across the business.

Our Q3 results and Q4 guidance are well above expectations. This is the result of our deliberate strategy of enabling the success of our customers and partners by offering them differentiated products, solutions, support and supply. Our commitment to you are valued shareholders is to tell you what we are going to do and then do what we said.

This earnings call marks my 2-year anniversary with Lattice. We have delivered on this commitment for 8 quarters in a row now and intend to continue to do so in the future. Now let me share with you the details of our FPGA business, where our actual performance and outlook are much stronger today than what was expected 2 years ago. Growth was broad-based across all our end markets. FPGA revenue reached $252 million, up 90% year-over-year. Compute & Communications segment delivered record revenue, up 132% year-over-year driven by rapid adoption in data center AI applications. This growing demand reflects AI infrastructure investment, more server deployments for agenetic inference and increasing AI content per server.

We also continue to benefit from higher FPGA attach rates and new applications driven by more complex, disaggregated architectures and growing security requirements. Demand for our industrial and embedded products continued to grow with revenue increasing 35% year-over-year. We see the worldwide and geographic-specific PMIs at near record levels since the trough of the latest downtime. We expect our latest industrial and embedded business to continue to grow faster than the overall industrial market and accelerate its growth in Q4 and into 2027. This growth is across all sectors, including factory automation, robotics, aerospace and defense, medical equipment and autonomy.

With channel inventory at healthy levels, customer engagement accelerating and multiple new design wins ramping into production. We expect our industrial and embedded business to become an increasingly important growth engine into 2027 and beyond. During the quarter, we extended our leadership in small- and mid-range FPGAs. We launched Lattice prompt an AI-assisted development tool for LaricFPGAs. It allows our developers to generate and validate their FPGA applications from natural language parts. To do so, it connects our customer preferred large language model and a genetic development environment was our largest region tools and generate tested and proven FPGA code. Madison provides significant FPGA developer productivity benefits and represent a significant step forward for our customer base.

We also introduced the MAC M2 family, our latest secure control, small FPGA platform, featuring integrated flash hardware root of trust, post-quantum cryptography and enhance connectivity with customer sampling already underway.

Now let me tell you about the continued expansion of Lattice into secure control and management leadership with the successful closing of the AMI acquisition on July 27. The AMI business also delivered better-than-expected results in Q3. We and we expect continued growth in Q4. In the 3 months since closing, we have engaged with hundreds of customers and partners globally. And the feedback has reinforced the strategic logic of the transaction and validated the highly complementary nature of our portfolios.

Following the AMI acquisition, we launched AMI Rec Manager to simplify deployment and operations across large-scale AI data centers. We also expanded ecosystem collaboration with SK Hynix to improve server reliability with our memory resilience technology. We held joint Navis and AMI Tech Summits in Taipei in Shenzhen, with over 700 attendees and over 20 customer and partner demos, reflecting our strong customer intimacy. Ecosystem keynotes included Advantech, Innovent, Intern, Mitsubishi Electric and WIDIA NXP, Panasonic, Qualcomm and Sony, showcasing the power of our companionship and firmware strategy.

During the lattice and AMI keynote at we introduced a secure control and management plan initiative, or Scampi with 7 industry leaders, AMD, ARM, a Speed, Intel, Gabon, Microsoft and NXP. And since then, 4 more industry leaders have notified us that they intend to join this exciting industry-wide effort. This shows the revenue of secure control and management for autonomous data center infrastructure and industrial and embedded applications.

Finally, let me update you on the recent launch of 4 joint Lattice AMI solutions for streaming rack boot, security retrofit, plug-and-play deployment and power and cooling management. The response to these pre-integrated and prevalidated FPGA and thermal offerings was very strong. Customers immediately recognized the benefits of rapid deployment reduce complexity and lower implementation risk, leading a significant number of them to advance to proof-of-concept engagements.

In summary, we entered the fourth quarter with record revenue, accelerated bookings and backlog extending well into 2027. This momentum is being fueled by normalized inventory in the channel, our leadership in small and midrange FPGAs in a role as companionships, firmware and solutions for both data center and physical AI. As a result, data center demand continues to grow. Investor and embedded is on a strong rebound, and the AMI acquisition expands the markets and applications we can serve. Together, these drivers support our confidence in sustained growth and expanding profitability.

Turning to the medium- to longer-term outlook. We expect revenue growth of at least 60% year-over-year in 2027. We also expect revenue to continue to grow at over 30% CAGR for the next 5 years. Our confidence is based on the multiple growth factors we have just outlined. We expect that this will create a sustainable secular growth company with diversified and broad customer base and market segments. In turn, we believe this will drive robust demand for the foreseeable future. And our focus is on converting that opportunity into long-term earnings growth for you, our valued shareholders for many years to come.

With that, I'll turn the call over to Lorenzo Flores to review our third quarter results and outlook. Lorenzo?

Lorenzo A. Flores

Thank you, Ford, and good afternoon, everyone. The bottom line is that Lattice is delivering exceptional financial performance. Last quarter, this quarter and based on our expectations next quarter, next year and beyond. Revenue was well above guidance, both the FPGA business and the AMI business exceeded expectations. Our overall revenue of $291 million was 118% over last year. FPGA revenue at $252 million is up approximately 90% year-over-year. Gross margin also exceeded guidance again in both the FPGA and AMI businesses.

We also managed operating expenses to our guide and delivered dramatic expansion of our profitability as Q3 non-GAAP EPS of $0.72 was 2.5x the prior year's EPS. The trajectory of our business indicates a remarkable 2026. We see our 2026 delivering almost $1 billion in revenue and $2.50 in EPS. This would be nearly double revenue from last year and about 2.4x more earnings. We have been driving this growth across the set of end markets we serve and see strong growth continuing.

Now for some key highlights. Again, Q3 revenue reached a record $291 million, up approximately 45% quarter-over-quarter. Within that, FPGA revenue was $252 million, up approximately 90% year-over-year and 25% quarter-over-quarter. This growth was driven by another record performance in Compute and Communications, up 132% year-over-year and 36% sequentially. Very importantly, we also saw industrial and embedded revenue growing 35% year-over-year and 7% sequentially. AMI for the 2 months after the acquisition, delivered $39 million of revenue, also above our expectations.

Q3 non-GAAP gross margin was above expectations at 70.9%. We exceeded expectations as we balanced our supply chain issues with our customer needs. Q3 non-GAAP operating expense was $86.7 million, in line with our guidance and up approximately 29% sequentially. The sequential increase primarily reflects the addition of AMI and continued investments in our product road map. Our Q3 non-GAAP operating margin expanded 280 basis points sequentially to 41.1%, while our EBITDA margin increased 200 basis points to 45%. Q3 non-GAAP EPS was $0.72, up approximately 160% year-over-year and 36% sequentially, easily exceeding the high end of our guidance and showing the significant leverage in our model.

Net cash flow from operating activities for the third quarter of 2026 was $95 million compared to $88.3 million in Q2. Free cash flow was $77.6 million in Q3. In the quarter, we had higher than run rate CapEx as we invested in test capacity and R&D capabilities aimed at driving operational efficiencies and future growth. Now a few comments on capital allocation. Our capital allocation priorities remain unchanged: invest in the business to support long-term growth maintain financial flexibility, reduce acquisition-related leverage rapidly and evaluate opportunistic share repurchases. To that end, we paid down $50 million of our debt in the quarter. We remain on track to reduce leverage faster than previously planned. We expect net leverage to be under 2x EBITDA by the end of 2026. We intend to reduce the debt aggressively in 2027, while continuing to invest in growth opportunities across our markets.

Now for guidance. As you heard earlier, we expect our strong growth to continue. We expect Q4 revenue of between $325 million and $345 million. At the midpoint of the range, this represents approximately 130% year-over-year growth and 15% sequential growth. We see continued growth across our primary FPGA end markets and AMI. We expect gross margin to remain strong at 72%, plus or minus 1% on a non-GAAP basis. We expect non-GAAP operating expense to be between $95 million and $101 million. Most of the increase in OpEx continues to support R&D investments in our product road map and long-term growth objectives as well as a full quarter contribution from AMI.

We estimate our income tax rate for Q4 to be between 4% and 6% on a non-GAAP basis. We expect non-GAAP EPS to be in the range of $0.82 to $0.86 per share. At the midpoint of this guidance, we anticipate that we would exceed 160% year-over-year earnings growth as we continue to demonstrate the leverage in our model. It is worth repeating that our Q4 outlook implies full year 2026 revenue of approximately $1 billion. roughly 90% growth over 2025. We expect FPGA revenue to surpass $900 million, representing greater than 70% year-over-year growth. Importantly, we anticipate full year earnings per share of approximately $2.50, up about 140% year-over-year. These results demonstrate the strength of our business model, the benefits of scale and the significant earnings potential we are unlocking as we execute our growth strategy.

Obviously, you are interested in our expectations for 2027. We have yet to finalize our 2027 annual operating plan, but we have enough visibility to provide some expectations. As Ford has just discussed, we see a clear path to 60% or better growth from our projected 2026 revenue base of approximately $1 billion. We expect Compute and Communications to remain our fastest-growing end market. We expect industrial and embedded to continue its strong growth trend, and we expect AMI to grow consistent with our previous expectations. While it is still early in the planning cycle, our confidence is rooted in our backlog, the ramp of design wins in I&E augmenting our demonstrated strength in CNC and the expected contribution from AMI.

In closing, Lattice enters the fourth quarter with strong momentum across all metrics. Together, Lattice and AMI have a broad market opportunity and position us to capture more value across all of our core markets. We are focused on translating that opportunity into above-market revenue and faster earnings growth, stronger free cash flow and debt reduction, all while investing to build long-term shareholder value.

Operator, that concludes my prepared remarks. We can now open the call for questions.

Operator

[Operator Instructions] Our first question comes from the line of Sebastian is with William Blair.

Sebastien Cyrus Naji

Yes. Congrats on the strong results here. My first question is on the guidance for next year. So you've outlined a path to approximately $1.6 billion or more revenue in 2027. Could you maybe just help us unpack and understand what gives you the confidence in that kind of outlook this early? .

Fouad Tamer

Thank you, Sebastian. Good question. We are creating a sustainable secular growth company for not only 2027 but beyond. We do expect to grow faster than market because of the multipergrowsh factor we have worked hard to develop over the past few years. What gives us the confidence in '27 is a few factors. I would say number one, our backlog visibility extends well past 2027 into 2028. And number two, we see strong continued CapEx from all players across all geographies with a multiyear long-term agreement being signed with our customers. Number three, we're seeing sustained AI-driven content expansion really around business fundamentals. So unit growth, new features like security driving higher value. And we're seeing an attached FPGA rates growing fast. .

Number four, our industrial embedded business is now shipping to natural demand. So we're out of this inventory situation and very excited about some of the new applications like factory automation driving our growth in '27. Number five, we've got a full year of AMI. And number six, we're seeing very strong growth in our new product revenue, such as Nexus, small and FPGA. Then beyond that, we've got quite a few new growth vector into '28 we could discuss as well.

Sebastien Cyrus Naji

Okay. Great. Well, maybe this will be 1 of those 2028 growth vectors. For my follow-up, I just wanted to ask about the 4 joint Lattice AMI solutions that you announced a few months back, the security retrofit Rackboot, plug-and-play and the power and cooling. Could you maybe give us a sense which of these is seeing the strongest customer engagement or traction so far? And when we can expect that to layer into the revenue?

Fouad Tamer

Yes, absolutely. So we're seeing strong growth across all of these with tens of customers already in proof-of-concept. The strongest 1 by far is the security retrofit that allows operators to upgrade the fleet without changing the hardware and that will allow them to upgrade the fleet to the latest security post-quantum cryptography right away. And so that's going to production with the first customer actually this quarter. And with many customers going to production in '27, and we expect the revenue to inflect meaningfully in '28.

Beyond that, we see the other 3, the streaming rack boot is fantastic because it allows our operators to upgrade the whole firmware at once across the hole, the hood saving substantial time and providing tremendous consistency. We see the power and cooling, who is 1 of our major hyperscaler going to market actually very soon. and contributing this solution to OCP, again, taking hold and becoming a big volume contributor. And then finally, the plug and play is going to be very critical to allow our operators to be able to mix and match x86 was armed to mix and match various board management controller in the same rack.

And so we're very excited about these solutions going to market starting this quarter, well into '27 and then meaningfully contributing to revenue in '28. Beyond that, we also see incremental industrial embedded inflection with humanoid physical aerospace defense application coming to market in 2028. At our mid-range FPGA is expected them to inflect meaningfully in '28. We also see some new AMI functionalities such as on silicon. We call it once that allows customers to emulate the firmware ahead of tape-out and memory resilience technology, which allows for extending the life of memory in the field. So very exciting growth vectors ahead, Sebastian.

Operator

Our next question comes from the line of Ruben Roy with Stifel.

Ruben Roy

Congrats on the momentum into the year-end, and thanks for the longer-term guidance. I guess to follow up on the question around 2027 forward. based on the run rate, it seems like you're going to need around $400 million on a quarter on average. I would love to understand how you're looking at the linearity of that revenue as you flow through the year? And how much of that 60% is already in backlog versus dependent on what you're hearing from customers around design wins ramping? Or maybe you could talk about the pricing environment given how much demand there is?

Fouad Tamer

Yes. Thank you, Ruben. Quite a few questions in there, and I'll start and then turn it over to Lorenzo. The first 1 on linearity, we have taken a more conservative view of the second half of the year. So you're really -- we're probably in our 60% guide, you're probably expecting growth in Q1 and Q2. And we haven't assumed that same rate of growth as the year develops, we do expect, as we see the Q2 number deliver to potentially be able to take those numbers up. So we feel confident that our 60% or higher growth rate. Number two, on the pricing question with suppliers as well as expedite fees because we've got a lot of demand from our customers, and we're passing those on to customers.

Really, the story is not a pricing. Pricing is a small piece of the equation. Really, the story here is a unit growth increase a value increase because we're going to these new applications such as security, as I mentioned. And finally, these new products that are commanding a higher price because there are a lot more functionality as we go from our older product to the Nexus and Avant families.

Lorenzo A. Flores

Loren Ron, just a little more color as we -- we're still in the planning cycle for our business. And what we have looked at, as Fort said, is near term, the growth rates will remain strong, and we'll still see growth as make sure you're clear. We still see growth meaningful growth year-over-year in the second half of next year. But to plan the business, we want to make sure we're factoring in the environmental concerns and base that -- I mean, compare that to what we see in our business directly, which is, as forsaid, quite strong. So we're going to manage the business through the year.

What gives us a great deal of confidence is the fundamental drivers of the business were articulated them in Sebastian's question remains strong, and we are expanding the growth rate across our end markets, including industrial embedded. And we see that reflected in a continued unit volume growth rate this year and next year.

Ruben Roy

Yes. Understood. That's very helpful. Of course, Lorenzo, I have to come back to C&C. And just ask Ford, in July, Ford, you had talked about potentially a 20 million unit -- server unit TAM for '26. I imagine, as you think about this early '27 outlook, there's been a lot of discussion and you mentioned on the prepared remarks around Agentic workloads on servers. Do you have an early look or read on server units and sort of if you could maybe give us a little bit of a high-level idea of how fast you think Compute and Com could grow around sort of the server opportunity, that would be helpful.

Fouad Tamer

Sure. Good question. We -- the numbers we told you at the last call in July were correct. We do expect server units to be about $20 million this year. we do expect them to grow to about 25 next year. So the growth rate in our mind is -- and based on the numbers we see from the market research and our customers will be growing faster next year versus this year. So we go from, call it, 22% growth rate year-on-year to about 25%.

Within that, we do see AI continue to grow to what maybe is 25% AI server share this year to about 40% server share next year. And then we see our tax rate and our content growing as well because as I said, we're going from older technology to newer products such as Nexus and Avant.

Operator

Our next question comes from the line of Gary Mobley with Stonex .

Unknown Analyst

Want to ask about the performance of AMI. You mentioned in your prepared remarks that it's performing in line with your expectations. But if I recall correctly, you were accounting this business being maybe a $200 million annual business seems like it might be performing a bit better than that. And on the gross margin level, it was, I think, supposed to be a bit of a headwind in the reported quarter, pending the sale of some noncore assets. Maybe you can update us on how that played out?

Fouad Tamer

Yes. Gary, thanks for the question. The margin for last overall this quarter was better than expected in both the FPGA business and the AMI business. And to the point of your question, on the AMI business, the revenue came in for Q3. Again, it's only a partial quarter for them. It came in slightly higher than we had expected, and it was a better mix meaning more high-margin business. So that helped the margins at AMI. We still, at the aggregate level, I think it's around the 200 plus or minus run rate business through the year. It's doing better. And then next year, we should grow meaningfully as part of our 2027 AOP. In that growth, this noncore business, as you discussed, will be gone, margins should expand into the high 70s like we have said before. So it's a good -- it's a very good revenue and profitability driver for us.

Richard Shannon

Got it. And then as far as OpEx goes in 2027, how should we model that relative to revenue growth, is it possible to see a 45% handle on the non-GAAP op margin in 2027? .

Fouad Tamer

Yes. Yes. So that's a great question. And we'll fill you in more detail as we get through our planning process. But our objective through the planning process will be to grow EPS, the bottom line faster than revenue in the scenario that Fortin talked about in terms of -- in our prepared remarks in terms of our expected revenue growth, so that requires us to do all the right planning steps in OpEx. But we think we can fund significant amount of growth opportunities and still maintain this very, very meaningful growth in EPS year-over-year. .

Operator

Our next question comes from the line of Tristan Gerra with Robert W. Baird.

Tristan Gerra

Question on the long-term agreements with customers that you mentioned. How does this change from about a year ago as you have much more visibility and customers clearly are eager to secure supply, maybe are you able to provide a percentage of your revenue coverage for next year from LTAs and is there a pricing embedded? Or is it purely volume based? And is that -- if there's pricing embedded in it? Is that a margin gross margin profile similar to what you report or guided into Q4?

Fouad Tamer

Tristan, you can expect the answer, right? So obviously, no, we're not going to provide all the details of our customer agreements on a call with gazillion people listening. But thanks for trying.

Tristan Gerra

Okay. Yes, thank you. I know sometimes in the past, the coverage was provided that I understand. And then my follow-up was to know if you expect any type of inventory replenishment, notably in industrial, you mentioned that inventory levels are lean. But is there an expectation that at some point, there is a rebuild or do you expect to ship next year in line with that demand. .

Fouad Tamer

Tristan, you're referring to channel inventory, right?

Tristan Gerra

Yes.

Fouad Tamer

Okay. Because I want to make make the distinction. Channel inventory, we're going to try to maintain close to the levels we're at, it provides us much, much better visibility into the end customer demand, and it mitigates overhang risk. So it will -- a specific quarter number may pop up and down, but what we're really doing is looking through the distributor to the end customer and matching up the demand. And that applies to both industrial and embedded and Compute and Comms. So no, we won't see that into any meaningful extent and certainly not strategically next year. I would say, just to clear up any confusion, we are building very deliberately internal inventory so that we can respond to what we expect to be the significant growth in Q4 and 2027 and beyond. So you'll see our inventory numbers go up. You will have seen them go up this past quarter.

Operator

Our next question comes from the line of Quinn Bolton with Needham & Company.

Unknown Analyst

Maybe just a quick clarification, when you're talking about sort of seeing growth rates moderate in the second half. Was that a year-on-year comment? Was that more of a sequential comment? And then I've got a follow-up.

Fouad Tamer

Well, I think yes to both actually because by math that would kind of work out that way. But the reality of it is there's still really strong growth numbers. It's just that, again, as we plan the business, we want to be prudent around that and not get overextended. So go ahead, then you said you have a follow-up, Quinn.

Unknown Analyst

Yes, the follow-up is, I think you guys and it sounds like the demand environment may have continued to be very strong. But I think last quarter, you guys saw a surge in demand late in the quarter that resulted in higher-than-normal delinquencies. Wondering if you could update us on your delinquencies are you starting to make progress getting back to more normal delinquency level or is the demand environment stays strong keeping those delinquency side, I guess, related -- just any comments on how you're feeling about being able to bring on additional capacity to support the demand environment?

Fouad Tamer

Yes. So I'm assuming you're talking supply. And if that's the question, supply, is that correct, Clint?

Unknown Analyst

Yes, exactly.

Fouad Tamer

Okay. Got it. So we are in good shape. We are putting multiyear supply agreements with our suppliers as well. We have secured what we believe is the right level of supply for, again, multiple years. And we feel good about being able to supply to numbers are much higher than what we discussed our growth rates to be next year. So we're ready to do a lot more than what we discussed. And -- so go ahead, Lauren.

Lorenzo A. Flores

And I think the evidence of that is like our Q3 and our Q4 where most of the upside in the business versus our prior guide was based on our ability to navigate through what I was calling a pinch point in supply in Q3 and deliver more units out to the customer this quarter, and we see the same thing in Q4. And as Ford said, we feel very comfortable about the supply side going forward. So our delinquencies are going down significantly and our lead time has gone down.

Operator

Our next question comes from the line of Melissa Weathers with Deutsche Bank.

Melissa Weathers

Congrats on the nice results. Please don't hate me for this question. But I think as semis analysts, we have to ask it. Any signs of double ordering, I guess, we've seen -- I know the channels are super lean and you're checking with the end customers, but any like actions you're taking to help scrub the demand and just make sure, especially on the industrial and embedded business that there are no double ordering activities here?

Fouad Tamer

Melissa, thank you for the question. Yes, we have spent a tremendous amount of time with our customers, with the channel, double checking, triple checking these numbers, making sure that we don't give parts to where a customer may have an issue ramping production because of other parts. So we are very close to our customers and our partners in this endeavor. Industrial embedded is just starting to ramp again. So there are no signs of any double ordering there. On the compute and comps, again, the demand is very strong. And what gives us the confidence, Melissa, is not that this booking is short term, it's extending well into 2028. So we've got bookings now for the foreseeable future. And so that's what gives us the confidence. These are being scheduled way out in time.

Melissa Weathers

And then on the comms and compute side, I might have missed it, but did you give an updated like FPGA per rack or per server, any metric like -- and can you just speak to the breadth of the design engagements that you have? Is your growth kind of bringing on new hyperscale customers? Is it more broad-based? How much is like the memory pooling story a part of it? Just any more color on the breadth of the momentum in DAS?

Fouad Tamer

Yes. I'm going to point you out to a new slide we've got in our deck, corporate deck that we just -- on the IR side of the website, Slide #30 shows all the various applications where we're serving the data center challenges. And you could see that we have applications all the way from compute to networking to storage across GPU, XPU DPU, CPU, Board management controller, storage, network switch, Nick cards, pulling power both the HPM card and the SCM cards. If you look at the application, we're detailing on Slide #30, it shows many applications in the server from connectivity to fan and power control to hardware abstraction to various securities such as Root of Trust, attestation post-quantum cryptography on the rack level trust at the station, low-level deterministic leak response, rack telemetry, manageability, power control, throttling and so you can see we've got many, many applications.

If you asked me a couple of years ago, we didn't have all these applications. Just on the trust and control, we now have all these new regulations for CNSA 2.0 and CRA compliance. And so these are regulations that have to be met by early next year. So a tremendous pressure on from the customer to deliver to these new applications. And so we're very excited about this. And I'll take you to Slide #32 and next slide, that was there before and shows the various applications that we have for industrial embedded, and we're quite excited about those.

And I'll point you to 1 more place in the deck. Actually, there's a couple -- if you were down the deck to Slide 35 and beyond, you're going to see quite a few other applications. So quite a few applications there. But I'm going to point you to a new product we just announced this quarter called prompt, Letisompt. And what that is, it allows customers to develop their application from an English language problem, integrates with their preferred language model, the preferred IDA and from a prompt, it would generate not only the core, but also validate the whole application.

And so you get to test a proven application in a matter of days versus weeks and months. So -- and then even more, it really expands the developer base well beyond what we had in the past. So we're very excited about the market expansion we're seeing because we do believe there's a tremendous number of application that are more deterministic, more closer to hardware, more closer to the sensor that need to be done in FPGA. In the past, they've been done in software just because we don't have enough programmers developer, they know how to program at yet.

And so this is going to open up a totally new developer base, and we're very excited about the new applications that this is creating. So all of this is driving our attach rate to numbers we've never seen before. and fantastic range of new applications. We haven't even started dreaming these applications that prompt can open up and this shows the -- really at the very early innings of this whole revolution. And so we're very excited about the future ahead.

Operator

Our next question comes from the line of Srini Pajjuri with RBC Capital Markets.

Unknown Analyst

Thank you that was a passionate answer. But I do want to ask another longer-term question. You talked about your 5-year growth potentially around 30%. Just curious, given the history of this industry, I mean, again, you answered that question to an extent already with the previous answer. But you must be seeing something out there in the market to talk about 5 years of growth at 30%, given that this industry has been cyclical in the past and didn't exactly grow at that rate. So just curious, I mean, is this a lattice comment? Or do you think the FPGA industry is in a structurally a better position going forward?

Fouad Tamer

This is coming from my past and from our past. Tien, you've been in the market as long as I have. And maybe I've been actually in the market longer than you have I wonder but look, I've seen this is the third time. I've seen it at Broadcom in the cloud where we're pushing networking and fine, we're starting the optical. And here, we're starting this whole secure control and management and the sky is the limit. So look, I mean, during the cloud revolution, there were many winters and ups and downs. But look where we are today, if you look at all the hyperscaler results, cloud is the absolute shining moment here and demand continues to grow 20 years after the cloud revolution.

Optical, if you remember, we started this in 2012 and look at the huge deal, $115 billion announced today by Marvell and Lumentum. And again, so this optical thing you and I can recount how many winters we had in the optical and but if you take a longer-term view, the market is up. I do believe that Lattice is a perfect industry barometer because we are exposed to all the various sectors here, all the various customers, 11,000 customers, very broad-based, very varied segments across compute and cons, industrial embedded, there's quite a few robotics, humanoid, factory automation, drones, self-driving car, the list goes on medical, aerospace, defense, we're in all the top aerospace defense, and we're just bringing up a red hard process here on the U.S. or in Austin.

So we're very excited about that as well. And so yes, I mean, we do believe this is early innings of this revolution. The market is very skittish right now, but I think we've got to take a look at the longer-term view. The numbers we're posting are not showing any slowdown. If anything, we're showing tremendous acceleration. We do believe that you're going to see some company-specific issues. We have no exposure to the PC market on the FPGA side, 0, okay? So that's gone. We've got very little exposure to the PC market on AMI, so that's fine. But the big business is server. So all the business we're in are up and to the right and accelerating.

So yes, we are very excited, and we see this as a multiyear expansion. And I think people have to go -- see beyond this little generate that we have right now, I mean -- and plan for the long term.

Unknown Analyst

My next question, Lorenzo. Lorenzo, you talked a little bit about your balance sheet inventory going up a little bit. And also your receivables went up, but you beat consensus by about $35 million. Just curious how the quarter -- was it fairly linear? Did you have an acceleration at the tail end of the quarter. I guess my other question is that given your balance sheet inventory to the extent that we see incremental demand to your guidance in the next couple of quarters, it looks like you're in a pretty good position also sites about the supply in case if you have more upside in the coming quarters.

Lorenzo A. Flores

Yes. I'm going to refer back how Ford set the stage for the longer-term supply. But in the near term, you're talking about the balance sheet elements that we saw in Q3, just for everybody, it was a different quarter because we included AMI for the first time. And so some of the account balances like AR would have gone up. But if you look at the days, it's actually down, and our cash conversion cycle looks really pretty good. The inventory piece is something that we are investing in and what you had seen as we went through the quarter aligns with your point, your question on linearity.

Because of the supply side, we got a we're getting a lot of stuff in toward the end of the quarter last quarter. We're shipping a lot of stuff out. And that's going to start to level off. in the next few quarters, and our linearity will look better. So overall, we think the cash generation engine in the company will remain really, really strong. And what we are doing very deliberately is putting in the supply, as you pointed out, to support upside in demand because given the potential demand scenarios we see, given our margin structure, and given the longevity of the products we build, we see risk is minimum on having a few extra parts, and we don't want to forgo the opportunity of capturing the upside when it's there.

Operator

Our next question comes from the line of Joshua tale with TD Cowen.

Joshua Buchalter

Congrats on the fantastic results and outlook. I think in the past, you've talked about FPGA per servers going from 1 to over 3x. Can you talk about where we are in that progression and as rack scale and heterogeneous architectures, you continue to become more widespread, is there any kind of cap on content or units we should be thinking about? I mean I think generally, that's been a large FPGA problem, not a small and midsized one. But I'd be curious, as we think about you doing well over $1 billion of FPA revenue next year, if there's any kind of cap on the TAM or content we should be thinking about? .

Fouad Tamer

No. Thank you very much, Josh. And yes, this will be well over $1 billion next year. So look, that attach rate number has been steadily growing from 1 to 2 to 3 to start 4 right now, okay? We're not going to give you more detail, but you could see it keeps growing and that's because of new applications we're finding, and we're pretty excited about it.

Lorenzo A. Flores

Yes. And I think the industrial and embedded space as well, as we start seeing physical AI go out, we'll see an attach rate phenomenon analogous to what we're seeing in the compute and data center. So the cap, we'd like to think it's uncapped, but we are looking at the growth rate based not only on the unit volume industry shifts but an attach rate that grows through time.

Fouad Tamer

Yes, Josh, I would point out that a humanoid has way many more potential sockets than in a server because you've got vision, you've got motor control, you've got connectivity. You've got quite a few more attach points in a humanoid than a server. So that humanoid industry, as an example, could be bigger than the server industry.

Lorenzo A. Flores

We will see competition, and we want to be prepared with not just the silicon side of it, but the software side, capabilities like prompt embedded firmware and managed building, where it adds to our advantage that we can out position out -- provide a higher value opportunity to our customers.

Unknown Analyst

I appreciate the color there. And then for my follow-up, you guys were very clear that this is not like-for-like ASPs or pricing that's driving the growth for this year or next year. But maybe you could talk about how much of the -- as we think about your outlook for the 60% growth next year, obviously, AMI helps. But how much of it is -- are you benefiting from new product growth as Nexus and Avatar more meaningfully with the higher associated ASPs? .

Fouad Tamer

Yes. Thank you, Josh. So the first order of magnitude that's really driving this is unit growth of existing products. The second 1 is going to be the growth of the new products. The third 1 is going to be AMI and associated solution on FPGA and firmware. So that's how I'd rank it.

Operator

Our next question comes from the line of Susan Dogra with Rosenblat Securities.

Unknown Analyst

Thank you for squeezing in actually, and fantastic results. It's great to be on the lattice call. I guess I had some longer-term questions, too. Cord, you discussed Lattice, and I wanted to dig deeper into that -- now Altera recently announced its Agilex tower portfolio, they're targeting robotics and physical AI. They also have this quarter's IQ, which is their new AISsted FPGA design tool. Now they seem to overlap with Lattice's positioning in low-power programmable logic and lattice from.

Now as AIS designs lowering the barriers to FPG adoption, and I know you said you expect this to expand the overall FPG market. But what do you think is Lattice's most durable differentiation in these emerging physical AI applications. And why do you think this Lattice form and quarters would work? We've tried these things in the past with HLX, Xilinx wides and Xylenesion stack.

Fouad Tamer

No, Sujal, thanks for the question. First, we were first to announce, right? So I had -- I point out that the announced after us. So I'm glad people are following us. But their tools are going to work for theirs. Our tools are going to work for ours. R2 is prone to work with our Radian tools that obviously work for RPJs. The reason I think these are assisted 2 are going to work now better than in the past is they're integrated with the idea that people are using already today. So whether it's cloud or open eye or a cursor or whatever you're using today, these 2s are going to seamlessly integrate with your preferred language model, it was a preferred ID.

And we're seeing the benefits. I mean, the benefits are just immense. I mean, we -- applications are being developed in hours and go production in days versus what used to take weeks and months. So it's a very profound change for everyone, not just us, but obviously, Altera as Annex everyone. The long-term differentiation we have is going to be focused on the smaller PGA and eventually mid-range. So we're very, very focused in our markets. And planning on the low power, small size best connectivity, very low latency, fast boot time, that our small and PGA customers are requiring from us. So we remain very focused on our markets, and we believe there's actually not that much overlap between us and Altera and Zane.

Unknown Analyst

Great. And then I guess as a follow-up, we are seeing supply challenges across some of your FPGA competitors. Are you seeing a change in the competitive dynamics for new designs, especially in servers and industrial control and is that translating into market share gains and higher win rates for Ares? .

Fouad Tamer

Yes. So there's 2 separate questions. You started with supply and then you went to market are gain. Supply, obviously, is an industry-wide issue. And we, as I said, have secured supply for our customers. So I'm not sure what our competitors are doing there, but we just can only comment on our side with secured supply. On the market share gain, absolutely. We're absolutely gaining share in the small FPGA. If you had walked around OCP and you look at every server board, every network switch board, you see Lattice everywhere.

Operator

We have time for 1 additional question coming from the line of Christopher Rollinson International Group.

Christopher Rolland

Thank you for the question and congrats on the results. I guess, perhaps for my first one, just a conservatism around the back half I am a little bit curious. Do you guys have backlog, good backlog coverage over that period? Like what is the data? Is it actual customer conversations that you guys are having that's driving that? Or is it just perhaps what we've seen in the stock market recently and worries about the back half. I'm just wondering, like is this -- is this data-driven? Is this feedback driven? Or is it more got.

Fouad Tamer

No, good question, Chris. No, this is -- we have backlog well into '28. So yes, Q1, Q2, Q3, Q4 of '27 and into 2028. It means Q1, Q2 '28. So we're into '28 right now. So we're confident based on backlog, but we are on November 2 of 2026. We make a difference. If I tell you we're going to grow at 70% or 80% next year versus 60%. So I mean, we said we're going to go over 60%. And so it could be 70%, it could be 80%, but it could be 60%. So I mean at this point, on November 2, we don't see a benefit or upside to go beyond over 60%.

Christopher Rolland

Okay. That makes a ton of sense for it. I appreciate that. For my second question, Ford, your cash is building again. You're the strategic vision guy over there at Lattice. And so you're probably looking at perhaps other acquisitions, tuck-ins or even larger, perhaps you can talk about kind of where your head's at, what you're thinking about? Are you thinking about software or hardware? Are you thinking about FPGAs or perhaps something outside of that, is it all AI data center driven or something else? Just any thoughts about where you the company...

Fouad Tamer

Just real quick, I have to make sure we're on the same. Our cash balance is not building. We are we are generating cash, and we are going to pay down the debt aggressively. And then I think there's nothing different about how we view the inorganic opportunities. We have a very wide lens and a very narrow aperture, and we're going to focus in the near term on paying down the debt and complete integration and successful integration of AMI. So that's where we are.

Christopher Rolland

And Loren, I did mean growing from here? .

Fouad Tamer

Okay. But no, that's fine. But we are out of time. Everybody, Rick, do you want to wrap up?

Rick Muscha

We'll play there. Yes. Thanks, everyone, for joining us on the call today. We'll be attending the following investor events this quarter. The RBC TMT Conference in New York City on the 17th of November, the UBS Global Technology Conference in Scottsdale on December 1 and then the Barclays 24th Annual Global Technology Conference in San Francisco on December 9. So thank you very much for your participation, and have a great evening.

Operator

Thank you. And this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.