Allegro MicroSystems, Inc.

What they do

Allegro designs, develops and markets sensor integrated circuits for motion, position, speed and electrical current sensing, and application-specific power ICs that control motors and manage power conversion and regulation. The company embeds system-level intelligence into its products to reduce component counts and improve efficiency, safety and reliability in customer designs. It serves automotive and industrial markets, including AI data centers, robotics and energy infrastructure, from 27 locations across four continents, shipping roughly 2.1 billion units annually to more than 15,000 customers.

Revenue drivers

• Automotive — Automotive net sales were $165.3 million in the quarter ended June 26, 2026, about 64% of total net sales, driven by sensor and power IC content in xEV and ADAS applications.
• Industrial and Other — Industrial and Other net sales were $93.9 million in the quarter ended June 26, 2026, about 36% of total, up from $59.1 million a year earlier on strength in advanced industrial markets.
• Data center — Data center reached a record 17% of total sales in the first quarter of fiscal 2027, per management, making it a fast-growing slice of the industrial business.
• Sensor and power IC portfolio — The company sells more than 1,500 products spanning current sensing, position and speed sensing, motor control and power conversion, with design wins typically converting to sales over two to four years.

Recent performance

For the first quarter of fiscal 2027 ended June 26, 2026, net sales were $259.2 million, up 27% from $203.4 million a year earlier and the sixth consecutive quarter of sales growth. GAAP gross margin was 48.5%, GAAP operating margin was 9.8%, and GAAP diluted EPS was $0.08 versus a $0.07 loss per share a year earlier. On a non-GAAP basis, gross margin was 51.1%, operating margin was 19.4%, and diluted EPS was $0.23, up more than 2.5x year over year. Fiscal 2026 full-year net sales were $890.1 million with a net loss of $14.7 million, compared with fiscal 2025 net sales of $725.0 million and a net loss of $72.8 million. Total assets were $1.41 billion and shareholder equity was $964.3 million at June 26, 2026, with cash of $162.0 million and long-term debt of $285.7 million.

Strategy

Management is focused on leveraging fixed costs and improving operating margin through cost structure improvements, streamlining manufacturing and support processes, and better utilization of existing capacity. The company targets design wins with OEMs in automotive and industrial markets, where the sales cycle from design initiation to revenue is typically two to four years. Allegro positions its sensor and power ICs at the intersection of AI, electrification and automation, citing data center, xEV and ADAS as leading growth areas. In fiscal 2025 the company repurchased 38,767,315 shares from Sanken and refinanced its 2023 term loan facility, with Sanken paying a $35.0 million facilitation fee.

Risks

• Economic and demand volatility — Weakness in the global economy, recession, or changes in trade policy such as export restrictions and tariffs could lower demand for products incorporating Allegro's solutions, particularly in automotive and industrial markets.
• Inflation and cost recovery — Elevated inflation has raised labor, wafer and material, transportation and energy costs, and competitive dynamics may prevent Allegro from raising prices enough to preserve gross margin.
• Customer order deferral or cancellation — An overall decline in end-user demand can increase the likelihood that customers cancel or defer existing orders, affecting net sales and results of operations.
• Design win dependence — Because sales for new products typically begin two to four years after design initiation, future revenue depends heavily on continuing to win design mandates from OEM customers.

Outlook

For the second quarter of fiscal 2027 ending September 25, 2026, management expects total net sales of $265 million to $275 million, implying 26% year-over-year growth at the midpoint. The company estimates non-GAAP gross margin of 50.75% to 51.75%, non-GAAP operating expenses of $84.5 million plus or minus $1 million, and non-GAAP diluted EPS of $0.23 to $0.26, with the midpoint implying an 88% year-over-year increase. Allegro did not provide a reconciliation of forward-looking non-GAAP gross margin, operating expenses and diluted EPS to GAAP because it says estimates of the reconciling items cannot be provided without unreasonable efforts.