Lattice Semiconductor (NASDAQ:LSCC) reported third-quarter financial results on Monday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Lattice Semiconductor reported record Q3 2026 revenue of $291 million, up 118% YoY, with a non-GAAP EPS of $0.72, reflecting a 155% increase YoY.
For Q4 2026, Lattice Semiconductor projects revenue of $335 million at the midpoint, representing 130% YoY growth, and a non-GAAP EPS of $0.84, indicating a 160% YoY increase.
The company’s FPGA revenue increased by 90% YoY, driven by strong performance in compute and communications, particularly in data center AI applications.
Lattice launched AI-assisted development tool Lattice Prompt and Mach N2 FPGA platform, contributing to their leadership in small and mid-range FPGAs.
The acquisition of AMI is performing above expectations, with the launch of new joint solutions like AMI Rack Manager and collaborations with industry leaders.
Lattice expects 2027 revenue to grow by at least 60% YoY, with a CAGR of over 30% for the next five years, driven by strong demand in industrial, embedded, and data center markets.
The company is focused on maintaining strong supply chain operations, reducing acquisition-related leverage, and exploring growth opportunities.
Management emphasized their confidence in sustainable growth due to backlog visibility into 2028 and expanding market applications.
Full Transcript
OPERATOR
Greetings and welcome to the Lattice Semiconductor third quarter 2026 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Moucha, Vice President of Investor Relations.
Thank you. You may begin.
Rick Moucha (Vice President of Investor Relations)
Thank you, operator, and good afternoon everyone. With me today are Ford Tamer, Lattice 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 4Q26. If you have not obtained a copy of our earnings press release, it 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.
Ford Tamer (Chief Executive Officer)
Thank you, Rick, and welcome everyone to our third quarter earnings call. Lattice delivered record third quarter revenue of $291 million, up 45% sequentially and up 118% year over year. Non-GAAP EPS was $0.72, 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. Our 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 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, our valued shareholders, is to tell you what we are going to do and then do what we said. This earnings call marks my two year anniversary with Lattice. We have delivered on this commitment for eight 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 two years ago. Growth was broad-based across all our end markets. FPGA revenue reached $252 million, up 90% year over year. Our compute and 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 agentic 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 troughs of the latest downtime. We expect our Lattice 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 Lattice FPGAs. It allows our developers to generate and validate their FPGA applications from natural language prompts. To do so, it connects our customer-preferred large language model agentic development environment with our Lattice Radiant tools and generates tested and proven FPGA code. Lattice Prompt provides significant FPGA developer productivity benefits and represents a significant step forward for our customer base.
We also introduced the Mach N2 family, our latest secure control small FPGA platform featuring integrated flash hardware root of trust, post-quantum cryptography, and enhanced connectivity, with customer sampling already on the way. 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, and we expect continued growth in Q4. In the three 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 Rack 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 Lattice and AMI Tech Summits in Taipei and Shenzhen with over 700 attendees and over 20 customer and partner demos, reflecting our strong customer intimacy. Ecosystem keynotes included Advantech, InnoVance, Intel, Mitsubishi Electric, Nvidia, NXP, Panasonic, Qualcomm, and Sony, showcasing the power of our companionship and firmware strategy.
During the Lattice and AMI keynote at OCP, we introduced the Secure Control and Management Plan Initiative, or SCAMPI, with seven industry leaders—AMD, Arm, ASPEED, Intel, Jabil, Microsoft, and NXP—and since then four more industry leaders have notified us that they intend to join this exciting industry-wide effort. This shows the relevance 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 four 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 pre-validated FPGA and firmware offerings was very strong. Customers immediately recognized the benefits of rapid deployment, reduced 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 mid-range FPGAs, and our role as companionships, firmware, and solutions for both data center and physical AI. As a result, data center demand continues to grow, industrial 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 five years. Our confidence is based on the multiple growth vectors 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.
OPERATOR
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from the line of Sebastian Najee with William Blair.
Please proceed with your question.
Sebastian Najee (Analyst at William Blair)
Yeah, good afternoon, and thank you for taking my questions. 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?
Ford Tamer (Chief Executive Officer)
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 multiple growth vectors 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. Number two, we see strong continued CapEx from all players across all geographies, with multi-year long-term agreements 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 attached FPGA rates growing fast. Number four, our industrial and embedded business is now shipping to natural demand, so we’re out of this inventory situation and very excited about some of these 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 Smart FPGA. Then beyond that, we’ve got quite a few new growth vectors into ’28 we could discuss as well.
Sebastian Najee (Analyst at William Blair)
Okay, great. Well, maybe this will be one of those 2028 growth vectors. For my follow-up, I just wanted to ask about the four joint Lattice–AMI solutions that you announced a few months back: the security retrofit, rack boot, 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?
Ford Tamer (Chief Executive Officer)
Yeah, absolutely. So we’re seeing strong growth across all of these with tens of customers already in proof of concept. The strongest one 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 three. The streaming rack boot is fantastic because it allows our operators to upgrade the whole firmware at once across the whole rack, the whole pod, saving substantial time and providing tremendous consistency. We see the power and cooling with one of our major hyperscalers 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 with Arm, to mix and match various port management controllers 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 and embedded inflection with humanoids, physically high aerospace and defense applications coming to market in 2028. Avant, our mid-range FPGA, is expected then to inflect meaningfully in ’28. We also see some new AMI functionalities such as on silicon—we call it OnSil—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.
Sebastian Najee (Analyst at William Blair)
Great. Thank you for the detail, Ford.
OPERATOR
Thank you. Our next question comes from the line of Ruben Roy with Stifel. You may proceed with your question.
Ruben Roy (Analyst at Stifel)
Yeah, hi, good afternoon. Hey guys. 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, Ford, based on the run rate it seems like you’re going to need around $400 million a quarter on average. 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, given how much demand there is. Thank you.
Ford Tamer (Chief Executive Officer)
Yeah, thank you, Ruben. Quite a few questions in there. I’ll start and then turn it over to Lorenzo. The first one on linearity, we have taken a more conservative view of the second half of the year. So 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 in Q3, Q4 as the year develops. We do expect, as we see the Q1, Q2 number deliver, to potentially be able to take those numbers up.
So we feel confident in our 60% or higher growth rate. Number two on the pricing question, we have some cost increases coming to us from our 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. But really the story is not pricing. Pricing is a small piece of the equation. Really the story here is 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 they’re a lot more functionality, as we go from our older product to the Nexus and Avant families.
Lorenzo Flores (Chief Financial Officer)
Yeah, just a little more color is we’re still in the planning cycle for our business. And what we have looked at, as Ford said, is near term the growth rates will remain strong and we’ll still see growth. Just make sure you’re clear. We still see growth, meaningful growth year over year in the second half of next year. But you know, 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 Ford said, 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. Ford articulated them in Sebastian’s question, remain 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 (Analyst at Stifel)
Yeah, understood. And that’s very helpful, of course. Lorenzo, I have to come back to CNC 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 it on the prepared remarks around agentic workloads on servers. Do you have an early look or read on server units and if you could maybe give us a little bit of a high level idea of how fast you think compute and comm could grow around the server opportunity, that’d be helpful.
Thank you.
Ford Tamer (Chief Executive Officer)
Sure. Good question. You know, 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 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 attach 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.
Ruben Roy (Analyst at Stifel)
Very helpful. Thank you.
OPERATOR
Thank you. Our next question comes from the line of Gary Mobley with Stornex. Your line is now live.
Gary Mobley (Analyst at Stornex)
Hey guys, thanks for taking my question. 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 counting 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 non-core assets.
Maybe you can update us on how that played out.
Lorenzo Flores (Chief Financial Officer)
Yeah. Hey, Gary, thanks for the question. The margin for Lattice Semiconductor 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 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 non-core business, as you discussed, will be gone. Margin should expand into the high 70s like we have said before. So it’s a very good revenue and profitability driver for us.
Gary Mobley (Analyst at Stornex)
Got it. 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 margin in 2027?
Lorenzo Flores (Chief Financial Officer)
Yeah, 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 Ford and I talked about in our prepared remarks in terms of our expected revenue growth. So that requires, you know, doing all the right planning steps in opex. But we think we can fund a significant amount of growth opportunities and still maintain this very, very meaningful growth in EPS year over year.
Gary Mobley (Analyst at Stornex)
Thank you very much,
OPERATOR
Thank you. Our next question comes from the line of Tristan Guerra with Robert W. Baird. You may proceed with your question.
Tristan Guerra (Analyst at Robert W. Baird)
Hi, guys. 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 webview coverage for next year from LTAs and is there pricing embedded or is it purely volume based? And if there’s pricing embedded in it, is that any margin, gross margin profile similar to what you report or guided into Q4?
Ford Tamer (Chief Executive Officer)
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 a gazillion people listening. But thanks for trying.
Tristan Guerra (Analyst at Robert W. Baird)
Okay. Yeah, thank you. I know sometimes in the past, you know, the coverage was provided, I understand. And then my follow-up was to know if you expect any type of inventory replenishment, notably in industrial. You’ve 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?
Lorenzo Flores (Chief Financial Officer)
Hey, Tristan, you’re referring to channel inventory, right? Yeah, yeah, yeah. Okay. Because I want to 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, you know, 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 to 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.
Tristan Guerra (Analyst at Robert W. Baird)
Great. Thank you very much.
OPERATOR
Thank you. Our next question comes from the line of Quinn Bolton with Needham and Company. Please proceed with your question.
Quinn Bolton (Analyst at Needham & Company)
Hey, guys, 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.
Lorenzo Flores (Chief Financial Officer)
Well, I think yes to both, actually, because by math that would kind of work out that way. But the reality of it is they’re 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 your follow-up, Quinn?
Quinn Bolton (Analyst at Needham & Company)
Yeah, 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 levels or has the demand environment stayed strong, keeping those delinquencies high?
And I guess related, just any comments on how you’re feeling about being able to bring on additional capacity to support the demand environment. Thanks.
Ford Tamer (Chief Executive Officer)
Yeah, so I’m assuming you’re talking supply, and if that’s the question, supply. Is that correct, Quinn?
Quinn Bolton (Analyst at Needham & Company)
Yeah, exactly.
Ford Tamer (Chief Executive Officer)
Okay, got it, got it. So we are in good shape. We are putting multi-year 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 that 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, Lawrence.
Lorenzo Flores (Chief Financial Officer)
Yeah, and I think the evidence of that is like this. 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.
Quinn Bolton (Analyst at Needham & Company)
Excellent. Thank you, guys.
OPERATOR
Thank you. Our next question comes from the line of Melissa Weathers with Deutsche Bank. Please proceed with your question.
Melissa Weathers (Analyst at Deutsche Bank)
Hi there. Thank you for the question. 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 actions you’re taking to help scrub the demand and just make sure, especially on that industrial and embedded business, that there are no double-ordering activities here.
Ford Tamer (Chief Executive Officer)
Melissa, thank you for the question. Yeah, 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 comms, 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 (Analyst at Deutsche Bank)
Thank you, that’s helpful. 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 that? 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 the memory pooling story a part of it? Just any more color on the breadth of the momentum in data center?
Ford Tamer (Chief Executive Officer)
Yeah, you know, I’m going to point you out to a new slide we’ve got in our corporate deck that we just put on the IR side of the website. Slide number 30 shows all the various applications where we’re solving the data center challenges. And you can 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, NIC cards, pooling power, both the HPM card and SCM cards.
If you look at the application we’re detailing on slide number 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, rack-level trust attestation, low-level, deterministic leak response, rack telemetry, manageability, fire 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 under 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 tremendous pressure from the customer to deliver to these new applications. And so we’re very excited about this. And I take you to slide number 32, and that’s a 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 one more place in the deck. Actually, there’s a couple. If you go 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 Lattice Prompt, and what that is: it allows customers to develop their application from an English-language prompt, integrates with their preferred language model, their preferred IDE, and from a prompt it would generate not only the code but also validate the whole application. And so you get to test a proven application in a matter of days versus weeks and months, 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 with Prompt because we do believe there’s a tremendous number of applications that are more deterministic, closer to hardware, 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 and developers that know how to program RTL. 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, you know, fantastic range of new applications. We haven’t even started dreaming the applications that Prompt can open up, and this shows that we’re really at the very early innings of this whole AI revolution. And so we’re very excited about the future ahead.
OPERATOR
Thanks so much, Ford. Thank you. Our next question comes from the line of Srini Pajjuri with RBC Capital Markets. You may proceed with your question.
Srini Pajjuri (Analyst at RBC Capital Markets)
Thank you, Ford. That was a passionate answer. But I do want to ask another longer-term question. You talked about your five-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 five 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, is this a Lattice comment or do you think the FPGA industry is in a structurally better position going forward?
Ford Tamer (Chief Executive Officer)
This is coming from my past and from our past. Trini, 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’m older, so. But look, I’ve seen this—the third time I’ve seen it at Broadcom, in the cloud, where we’re pushing networking in fine, we’re starting the optical, and here we’re starting this whole secure control and management, and the sky is the limit. 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, 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, 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 into all the top aerospace, defense, and we’re just bringing up a rad-hard process here on U.S. soil 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. Zero. 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 multi-year expansion, and I think people have to go see beyond this little jitter that we have right now and plan for the long term.
Srini Pajjuri (Analyst at RBC Capital Markets)
Makes sense. Ford, my next question is for 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. Certainly also speak to us about the supply in case we have more upside in the coming quarters. Thank you.
Lorenzo Flores (Chief Financial Officer)
Yeah, I’m going to refer back to 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—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 would have seen as we went through the quarter aligns with your point, your question on linearity.
Because of the supply side, we’re getting a lot of stuff in toward the end of the quarter. Last quarter, we were 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 of 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 as minimum on having a few extra parts, and we don’t want to forego the opportunity of capturing the upside when it’s there.
Srini Pajjuri (Analyst at RBC Capital Markets)
Got it. Thanks.
OPERATOR
Thank you. Our next question comes from the line of Joshua of TD Cowen. Please proceed with your question.
Joshua (Analyst at TD Cowen)
Hey, guys, thank you for taking my question and 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. Could you talk about where we are in that progression? And as rack-scale and heterogeneous architectures 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 mid-sized one.
But I’d be curious as we think about you doing well over a billion of FPGA revenue next year if there’s any kind of cap on the TAM or content we should be thinking about. Thank you.
Ford Tamer (Chief Executive Officer)
No, thank you very much, Joshua. And yes, it’ll be well over a billion next year. So look, that attach rate number has been steadily growing from one to two to three. It starts at four right now. Okay. We’re not going to give you more detail, but you can see it keeps growing, and that’s because of new applications we’re finding, and we’re pretty excited about it. Yeah. 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 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. Yeah, Joshua, 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. Right. But we know 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, manageability, where it adds to our advantage that we can out-position, providing a higher value opportunity to our customers.
Joshua (Analyst at TD Cowen)
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, as we think about your outlook for the 60% growth next year—obviously AMI helps—but how much of it are you benefiting from new product growth as Nexus and Avant layer in more meaningfully with the higher associated ASPs? Thank you.
Ford Tamer (Chief Executive Officer)
Yeah, thank you, Joshua. So the first order of magnitude that’s really driving this is unit growth of existing product. The second one is going to be the growth of the new product. The third one is going to be AMI and associated solution on FPGA and firmware. So that’s how I’d rank it.
OPERATOR
Thank you. Thank you. Our next question comes from the line of [UNKNOWN] with Rosenblatt Securities. Please proceed with your question.
Sajad (Analyst)
Hey, thank you for squeezing me in, actually. And fantastic results. It’s great to be on the Lattice call, I guess. I had some longer-term questions too. Ford, you discussed Lattice Prompt and I wanted to dig deeper into that now. Altera recently announced its AgileX2X portfolio. They’re targeting robotics and physical AI. They also have this Quartus IQ, which is their new AI-assisted FPGA design tool. Now these seem to overlap with Lattice’s positioning in low-power programmable logic and Lattice Prompt now as AI-assisted designs, lowering the barriers to FPGA adoption.
And I know you said you expect this to expand the overall FPGA, but what do you think is Lattice’s most durable differentiation in these emerging physical AI applications? And why do you think this Lattice Prompt and Quartus IQ would work? We’ve tried these things in the past with HLX, Xilinx YT S, and Xilinx ReVision Stack. Thank you.
Ford Tamer (Chief Executive Officer)
Yeah, no, Sajad, thanks for the question. You know, first, we were first to announce. Right. So I’ll point out that Altera 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. Our Prompt tools work with our Radiant tools that obviously work for FPGAs. The reason I think these AI-assisted tools are going to work now better than in the past is they’re integrated with the IDE that people are using already today.
So whether it’s Claude or OpenAI or Cursor or whatever you’re using today, these tools are going to seamlessly integrate with your preferred language model, with your preferred IDE. And we’re seeing the benefits. I mean, the benefits are just immense. 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, Xilinx, everyone.
The long-term differentiation we have is going to be focused on the small FPGA and eventually mid-range. 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 FPGA 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 Xilinx.
Sajad (Analyst)
Great. And then I guess as a follow-up. So 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 Lattice? Thank you.
Ford Tamer (Chief Executive Officer)
Yes, there’s two separate questions. You started with supply and then you went to market share gain. You know, 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
Okay, thank you. Thank you. And we have time for one additional question coming from the line of Christopher Rollin with Susquehanna International Group. You may proceed with your question.
Christopher Rollin (Analyst at Susquehanna International Group)
Thank you for the question and congrats on the results. I guess perhaps for my first one, just the 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, is this data-driven, is this feedback-driven or is it more gut?
Ford Tamer (Chief Executive Officer)
No, good question, Chris. No, this is, we have backlog well into 28. So yes, Q1, Q2, Q3, Q4 of 27 and into 2028 means Q1, Q2, 28. So we’re into 28 right now. So with confidence based on backlog, but we are on November 2nd of 2026. Will it 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, could be 80, but it could be 60. So I mean at this point, on November 2nd, we don’t see a benefit or upside to go beyond over 60%.
Christopher Rollin (Analyst at Susquehanna International Group)
Okay, that makes a ton of sense, Ford. I appreciate that. For my second question, Ford, your cash is building again. You’re the strategic vision guy over there at Lattice. 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.
Lorenzo Flores (Chief Financial Officer)
Just real quick, real quick, I have to make sure we’re on the same line. Our cash balance is not building. 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. Thanks.
Christopher Rollin (Analyst at Susquehanna International Group)
And Lorenzo, I did mean growing from here.
OPERATOR
Okay. But hey, no, that’s fine. But anyway, we are out of time, everybody. Rick, you want to wrap up?
Rick Moucha (Vice President of Investor Relations)
Yeah. Well played there. Yeah. 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 1st, and then the Barclays 24th annual Global Technology Conference in San Francisco on December 9th. So thank you very much for your participation and have a great evening.
OPERATOR
Thank you. And this concludes today’s conference. Goodbye. You may disconnect your lines at this time. We thank you for your participation.
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