Synaptics Incorporated (SYNA) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong revenue expectations, optimistic guidance for Core IoT growth, and a focus on high-margin enterprise markets. While the Q&A section indicated some uncertainties, particularly in the automotive segment and Astra product timelines, the overall sentiment remains positive due to robust pipeline growth, lean inventory levels, and strategic focus on high-margin segments. Given the company's market cap and positive outlook, a stock price increase of 2% to 8% is likely.
Key Financial Performance
Total company revenue $302.5 million, increased 13% year-over-year. This growth was driven by strength in Core IoT products, which saw a 53% year-over-year increase.
Core IoT product revenues Increased 53% year-over-year, primarily due to continued strength in wireless connectivity products.
Enterprise and automotive product revenues Increased modestly year-over-year, slightly ahead of expectations.
Mobile touch product revenues Increased 3% year-over-year, with improvements in supply constraints.
Non-GAAP gross margin 53.6%, slightly ahead of the midpoint of guidance.
Non-GAAP operating expenses $104.2 million, better than the midpoint of guidance.
Non-GAAP operating margin 19.2%, up approximately 160 basis points sequentially and 190 basis points year-over-year.
Non-GAAP net income $48.4 million.
Non-GAAP EPS per diluted share $1.21, an increase of 32% year-over-year.
Cash and cash equivalents $437.4 million, down $22.5 million from the prior quarter due to $36.4 million in share repurchases.
Cash flow from operations $30 million in the second fiscal quarter.
Capital expenditures $11.6 million in the second fiscal quarter.
Depreciation $7.6 million in the second fiscal quarter.
Receivables $132.7 million, with days of sales outstanding at 39 days, up slightly from 37 days last quarter.
Inventory balance $158 million, increased by $15 million from the previous quarter, reflecting a strategic decision to purchase inventory slightly ahead of demand.
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Operating Highlights
Core IoT Products: Revenue increased 53% year-over-year, driven by wireless connectivity products. New products like Astra multimodal microprocessors and Astra MCU with connectivity were introduced, featuring advanced AI capabilities and support for Wi-Fi 7, Bluetooth 6.0, and Thread.
Edge AI Portfolio: Expanded with two new products: Astra MCU with connectivity and a stand-alone connectivity SoC. These products target home appliances, security cameras, drones, robotics, and IoT module makers, with revenue expected in 2027.
Robotics: Engaged with industry leaders in humanoids and robotics, leveraging touch controllers and interface bridge products for tactile sensing and high-bandwidth data transport.
Market Expansion in Robotics: Engaging with new customers and entering new markets, including humanoids and industrial applications. Collaborating with partners like Toradex for industrial automation, healthcare, and aerospace.
Smart Home and Security: Strong interest from smart home appliance manufacturers and security companies for Astra processors and connectivity solutions.
Revenue Growth: Total revenue increased 13% year-over-year, marking the fifth consecutive quarter of double-digit growth.
Operational Efficiency: Non-GAAP operating margin improved by 190 basis points year-over-year to 19.2%. Non-GAAP EPS increased 32% year-over-year to $1.21.
Inventory Management: Inventory increased by $15 million, reflecting a strategic decision to purchase ahead of demand.
Focus on Edge AI: Combined processors and connectivity teams into a single organization to accelerate roadmap and deliver integrated solutions.
Physical AI: Positioned to capitalize on the shift towards physical and edge AI, with a focus on power-efficient intelligent systems at the edge.
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Risk or Challenges
Supply Constraints: While supply constraints are improving, challenges remain in certain areas, which could impact the company's ability to meet demand.
Inventory Management: The company has strategically increased inventory ahead of demand, which could lead to higher holding costs or risks of obsolescence if demand does not materialize as expected.
Macroeconomic and Global Trade Uncertainty: The company's guidance for Q3 is subject to ongoing macroeconomic and global trade and tariff-related uncertainties, which could adversely impact revenue and operations.
Revenue Mix Shift: A shift in revenue mix, with a higher reliance on Core IoT products, may expose the company to risks if demand in this segment fluctuates.
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Guidance & Outlook
Revenue Guidance for Q3 FY2026: Expected revenues to be approximately $290 million at the midpoint, plus or minus $10 million. Revenue mix is anticipated to be 32% Core IoT, 54% enterprise and automotive, and 14% mobile touch products.
Non-GAAP Gross Margin Guidance for Q3 FY2026: Expected to be 53.5% at the midpoint, plus or minus 1%.
Non-GAAP Operating Expenses for Q3 FY2026: Expected to be approximately $106 million at the midpoint, plus or minus $2 million.
Non-GAAP Net Income Per Diluted Share for Q3 FY2026: Anticipated to be $1 per share at the midpoint, plus or minus $0.15 on an estimated 40.6 million fully diluted shares.
Future Revenue Contribution from New Products: Strong interest for new products, including Astra MCU with connectivity and Synaptics connectivity SoC, is expected to contribute to revenue beginning in calendar 2027.
Market Trends and Strategic Focus: The company is focusing on physical and edge AI solutions, with expectations of sustained long-term growth driven by innovations in robotics, smart home appliances, and industrial applications.
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Shareholder Return Plan
Share Repurchase: We ended the fiscal second quarter with approximately $437.4 million in cash and cash equivalents, down $22.5 million from the prior quarter as we repurchased $36.4 million of our shares in Q2. Through fiscal Q2, we have bought a total of $43.6 million of our shares.
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Key Q&A
Q:Do you see any issues with supply challenges in your mobile touch and PC businesses, and are these two segments still roughly 30%-35% of total revenues?
A:The majority of the mobile business is in the premium to high tier, which seems immune to supply challenges, especially memory-related ones. For the PC market, the company plays in the high-end enterprise market, which is more inelastic and less affected by supply pressures.
Q:When will Astra products start contributing meaningfully to Core IoT business revenues and gross margins?
A:Astra products are expected to contribute meaningfully to revenues in calendar 2027 and will also be accretive to gross margins.
Q:What are the factors affecting gross margins into the March quarter?
A:Gross margins are guided to be in the mid-53% range, primarily influenced by the current product mix and portfolio.
Q:What is the status of the sampling process for new chips, including the Astra microprocessor?
A:The Astra microprocessor started sampling in late Q3/early Q4 of the calendar year and is ahead of plans. Production is expected by the end of this quarter or early next quarter. Two new products are also in early sampling phases, including an MCU with integrated Wi-Fi 7, BLE, and Bluetooth 6.0.
Q:How did the automotive segment perform during the quarter, and what is the long-term outlook?
A:The automotive segment remains a small portion of the business and has been range-bound in recent quarters. The company is focusing more on the enterprise market and Core IoT and Edge AI.
Q:What is the typical seasonality for the June quarter?
A:Historically, the June quarter is expected to be up slightly from the March quarter, supported by a stronger starting backlog for Q4 compared to Q3.
Q:What is the pipeline split for Astra products by end market?
A:The Astra pipeline is growing rapidly, with a larger share in consumer applications initially, followed by industrial applications due to longer design cycles in the industrial market.
Q:What is the opportunity for Synaptics in humanoid platforms?
A:Synaptics is sampling silicon for pilot builds of humanoids with a major customer. The opportunity extends to the broader robotics market, with Synaptics' portfolio scaling from MCU-class AI native processing to high-end humanoid sensory capabilities.
Q:Are there any channel effects or inventory issues in the PC and mobile markets that could affect Synaptics?
A:Channel inventories remain lean, and the company is not seeing significant issues in the PC and mobile markets. The focus remains on the high-end enterprise and mobile markets.
Q:What is the focus for wireless connectivity in mobile and IoT markets?
A:The company is focusing on IoT markets while remaining opportunistic in mobile. Synaptics is advancing its wireless connectivity roadmap, including Wi-Fi 7 and Wi-Fi 8, and plans to sample Wi-Fi 8 by the end of the year.
Q:What is the outlook for the enterprise PC market and wireless connectivity in PCs?
A:The enterprise PC market is seeing a gradual refresh and market share gains. Synaptics does not plan to enter the wireless connectivity market for PCs due to platform constraints and low margins.
Q:Who are Synaptics' competitors in the wireless connectivity IoT market, and how does Synaptics differentiate itself?
A:Synaptics sees no direct competitors offering Wi-Fi 7 integrated into MCUs or processors. The company differentiates itself with a broad SKU map and advanced wireless connectivity solutions.
Q:What is the mix of demand for Astra processors between industrial and consumer applications?
A:Initial demand is expected to come from consumer applications, with industrial applications following later due to longer design cycles.
Q:What is the current state of channel inventory levels?
A:Channel inventory levels are lean and aligned with end-market demand, with no significant headwinds expected.
Q:How does Synaptics view the broad market for edge IoT solutions in light of recent acquisitions in the space?
A:Synaptics believes its portfolio in wireless connectivity and edge IoT solutions is strong and differentiated. The company does not see significant overlap with the recently acquired competitor.
Q:What are the criteria for engaging in semi-custom projects?
A:Semi-custom projects are anchored to large customers' roadmaps and visions, focusing on hybrid compute for AI and long-term opportunities that extend beyond point solutions.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical details or timelines for certain questions, such as the exact split of Astra pipeline by end market and the number of processing, connectivity, and sensing nodes in humanoid platforms. Additionally, responses about the June quarter seasonality and the automotive segment's long-term outlook were somewhat vague.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI portfolio
Astra MCU
Astra microprocessor
Bluetooth
Munjal
OEM
Shah Vice
Wi Fi
appliance manufacturer
application
architecture
connectivity sensing
connectivity technology
digit
edge AI
engagement
example
force
home appliance
humanoid Synaptics
industry
intelligence device
interface
microcontroller
momentum
object
platform
processing
processor connectivity
roadmap
robotics
security
technology solution
touch
SYNA Transcript
Synaptics Incorporated (SYNA) Presents at J.P. Morgan 54th Annual Global Technology, Media and Communications Conference Transcript
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Synaptics Incorporated (SYNA) Q3 2026 Earnings Call Transcript
Unknown5-8
The earnings call revealed a 15% YoY revenue decline and an 8% EPS drop, indicating weaker financial performance. Despite margin improvements, the IoT demand weakness and reduced net income overshadow positives. The absence of strategic updates or guidance further adds uncertainty. Given the company's market cap, these factors suggest a negative stock price movement of -2% to -8% over the next two weeks.
Synaptics Incorporated (SYNA) Q2 2026 Earnings Call Transcript
Positive2-6
The earnings call highlights strong revenue expectations, optimistic guidance for Core IoT growth, and a focus on high-margin enterprise markets. While the Q&A section indicated some uncertainties, particularly in the automotive segment and Astra product timelines, the overall sentiment remains positive due to robust pipeline growth, lean inventory levels, and strategic focus on high-margin segments. Given the company's market cap and positive outlook, a stock price increase of 2% to 8% is likely.
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SYNA Slides
Synaptics Q2 2026 slides: Core IoT drives 13% revenue growth, stock dips2026-02-05
Synaptics Q1 2026 slides: Core IoT surges 74%, driving 14% overall revenue growth2025-11-06
Synaptics Q4 2025 slides reveal 14% revenue growth, 55% surge in Core IoT segment2025-08-07
Synaptics Q3 2025 slides: Core IoT drives 12% revenue growth, EPS jumps 70%2025-05-08
SYNA Report
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