Allegro MicroSystems Reports First Quarter 2026 Results
'We delivered strong first quarter results, with sales of over $203 million, up 22% year-over-year, and led by growth in both e-Mobility and Industrial and Other, increasing 31% and 50% year-over-year, respectively. Non-GAAP EPS was $0.09, increasing nearly 3x year-over-year, demonstrating the significant operating leverage in our business model,' said Mike Doogue, President and CEO of Allegro. 'In addition to this strong financial performance, we are encouraged by the positive momentum we are seeing across the business, including continued strong bookings, increasing backlog, a return to growth in automotive and industrial end markets, and strong design win activity in our strategic focus areas.'
'We also continue to focus on cash flow, improving our gross margin and return on invested capital," said Derek D'Antilio, Executive Vice President and CFO of Allegro. "During the first quarter, our free cash flow was $51 million, or 25% of sales. In the first quarter, we made voluntary debt repayments of $35 million in addition to $105 million in voluntary debt repayments in the prior fiscal year.'
In thousands, except per share data Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Unaudited) (Unaudited) (Unaudited)
Net Sales*
Automotive $ 144,264 $ 139,494 $ 127,394
Industrial and other 59,141 53,330 39,525
Total net sales $ 203,405 $ 192,824 $ 166,919
GAAP Financial Measures
Gross margin % 44.9 % 41.4 % 44.8 %
Operating margin % (1.3)% (6.8)% (6.4)%
Diluted EPS $ (0.07) $ (0.08) $ (0.09)
Non-GAAP Financial Measures
Gross margin % 48.2 % 45.6 % 48.8 %
Operating margin % 11.1 % 9.0 % 6.0 %
Diluted EPS $ 0.09 $ 0.06 $ 0.03
* During the preparation of the fourth quarter fiscal year 2025 interim condensed consolidated financial statements, the Company identified an immaterial misclassification of net sales by application in the table above, whereby customer returns and sales allowances were incorrectly classified by application between Automotive and Industrial and Other in the prior periods presented above. There was no impact to previously reported total net sales or net income in any of the periods noted above. Net sales by application in the prior periods presented in the table above have been corrected and are presented on the same basis as the first quarter of fiscal year 2026.
Business Outlook
For the second quarter of fiscal year 2026 ending September 26, 2025, the Company expects total net sales to be in the range of
$205 million to $215 million. At the midpoint of this range, it implies a net sales growth of 12% year-over-year.
The Company also estimates the following results on a non-GAAP basis:
Gross Margin is expected to be between 48% and 50%,
Operating expenses are expected to be approximately $73 million,
Interest expense of approximately $5 million inclusive of an expected additional voluntary debt repayment of $25 million today, and
Diluted Earnings per Share is expected to be between $0.10 and $0.14, up 50% year-over-year at the midpoint.
Allegro has not provided a reconciliation of its second fiscal quarter outlook for non-GAAP Gross Margin, non-GAAP Operating Expenses, non-GAAP Interest Expense, and non-GAAP Diluted Earnings per Share because estimates of all of the reconciling items cannot be provided without unreasonable efforts. It is difficult to reasonably provide a forward-looking estimate between such forward-looking non-GAAP measures and the comparable forward-looking U.S. generally accepted accounting principles ('GAAP') measures. Certain factors that are materially significant to Allegro's ability to estimate these items are out of its control and/or cannot be reasonably predicted.
Earnings Webcast
A webcast will be held on Thursday, July 31, 2025 at 8:30 a.m., Eastern Time. Michael C. Doogue, President and Chief Executive Officer, and Derek P. D'Antilio, Executive Vice President and Chief Financial Officer, will discuss Allegro's business and financial results.
The webcast will be available on the Investor Relations section of the Company's website at investors.allegromicro.com. A recording of the webcast will be posted in the same location shortly after the call concludes and will be available for at least 90 days.
About Allegro MicroSystems
Allegro MicroSystems, Inc. is leveraging more than three decades of expertise in magnetic sensing and power ICs, to propel automotive, clean energy and industrial automation forward with solutions that enhance efficiency, performance and sustainability. Allegro's commitment to quality drives transformation across industries, reinforcing our status as a pioneer in 'automotive grade' technology and a partner in our customers' success. For additional information, please visit https://www.allegromicro.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, contained in this press release including statements regarding our future results of operations and financial position, business strategy, prospective products and the plans and objectives of management for future operations, including, among others, statements regarding the liquidity, growth and profitability strategies and factors affecting our business are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Without limiting the foregoing, in some cases, you can identify forward-looking statements by terms such as 'aim,' 'may,' 'will,' 'should,' 'expect,' 'exploring,' 'plan,' 'anticipate,' 'could,' 'intend,' 'target,' 'project,' 'would,' 'contemplate,' 'believe,' 'estimate,' 'predict,' 'potential,' 'seek,' or 'continue' or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. No forward-looking statement is a guarantee of future results, performance or achievements, and one should avoid placing undue reliance on such statements.
Forward-looking statements are based on our management's current expectations, beliefs and assumptions and on information currently available to us. Such beliefs and assumptions may or may not prove to be correct. Additionally, such forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part II, Item 7. 'Management's Discussion and Analysis of Financial Condition and Results of Operations,' and Part I, Item 1A. 'Risk Factors' in our Annual Report on Form 10-K for the year ended March 28, 2025, as any such factors may be updated from time to time in our Quarterly Reports on Form 10-Q and our other filings with the Securities and Exchange Commission (the 'SEC'). These risks and uncertainties include, but are not limited to: downturns or volatility in general economic conditions; our ability to compete effectively, expand our market share and increase our net sales and profitability; our reliance on a limited number of third-party semiconductor wafer fabrication facilities and suppliers of other materials; any failure to adjust purchase commitments and inventory management based on changing market conditions or customer demand; shifts in our product mix, customer mix or channel mix, which could negatively impact our gross margin; the cyclical nature of the semiconductor industry, including the analog segment in which we compete; any downturn or disruption in the automotive market or industry; our ability to successfully integrate the acquisition of other companies or technologies and products into our business; our ability to compensate for decreases in average selling prices of our products and increases in input costs; our ability to manage any sustained yield problems or other delays at our third-party wafer fabrication facilities or in the final assembly and test of our products; our ability to accurately predict our quarterly net sales and operating results and meet the expectations of investors; our dependence on manufacturing operations in the Philippines; our reliance on distributors to generate sales; events beyond our control impacting us, our key suppliers or our manufacturing partners; our ability to develop new product features or new products in a timely and cost-effective manner; our dependence on growth in the end markets that use our products and the impact that slowdowns in such growth could have on our financial results; the loss of one or more significant customers; our ability to identify, enter and expand in new markets, and to generate returns on such investments; uncertainties related to the design win process and our ability to recover design and development expenses and to generate timely or sufficient net sales or margins; changes in government trade policies, including the imposition of export restrictions and tariffs; our exposures to warranty claims, product liability claims and product recalls; our dependence on international customers and operations; the availability of rebates, tax credits and other financial incentives on end-user demands for certain products; risks, liabilities, costs and obligations related to governmental regulations and other legal obligations, including export/trade control, privacy, data protection, information security, cybersecurity, consumer protection, environmental and occupational health and safety, antitrust, anti-corruption and anti-bribery, product safety, environmental protection, employment matters and tax; the risk of unsolicited acquisition proposals; the volatility of currency exchange rates; our ability to raise capital to support our growth strategy; our indebtedness may limit our flexibility to operate our business; our ability to retain key and highly skilled personnel; the impact of restructuring activities on our business and operating results; our ability to protect our proprietary technology and inventions through patents or trade secrets; our ability to commercialize our products without infringing third-party intellectual property rights; disruptions or breaches of our information technology systems or confidential information or those of our third-party service providers; any failure to maintain effective internal control over financial reporting; changes in tax rates or the adoption of new tax legislation; the negative impacts of sustained inflation on our business; the risks presented by climate change; the risks related to ESG matters; and other events beyond our control. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this press release and the documents that we reference completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. All forward-looking statements speak only as of the date of this press release, and except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements, whether as a result of any new information, future events, changed circumstances or otherwise.
This press release includes certain non-GAAP financial measures as defined by the SEC rules. These non-GAAP financial measures are provided in addition to, and not as a substitute for or superior to measures of, financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their most directly comparable GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of the presented non-GAAP financial measures as tools for comparison.
This press release may not be reproduced, forwarded to any person or published, in whole or in part.
Supplemental Schedule of Total Net Sales
The following table summarizes total net sales by market within the Company's unaudited condensed consolidated statements of operations:
June 27, March 28,
2025
(Unaudited) 2025
Assets
Current assets:
Cash and cash equivalents $ 129,106 $ 121,334
Restricted cash 10,273 9,773
Trade accounts receivable, net 89,379 84,598
Inventories 173,796 183,914
Prepaid income taxes 968 36,662
Prepaid expenses and other current assets 27,054 30,247
Assets held for sale 16,508 16,508
Total current assets 447,084 483,036
Property, plant and equipment, net 305,195 302,919
Deferred income tax assets 73,839 68,528
Goodwill 203,328 202,475
Intangible assets, net 256,414 262,115
Equity investment in related party 30,874 31,695
Other assets 72,474 70,193
Total assets $ 1,389,208 $ 1,420,961
Liabilities, Non-Controlling Interest and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 45,609 $ 38,733
Amounts due to related party 2,902 6,535
Accrued expenses and other current liabilities 70,639 65,570
Current portion of long-term debt 1,535 1,423
Total current liabilities 120,685 112,261
Long-term debt 310,790 344,703
Other long-term liabilities 33,476 32,897
Total liabilities 464,951 489,861
Commitments and contingencies
Stockholders' Equity:
Preferred stock — —
Common stock 1,849 1,843
Additional paid-in capital 1,013,795 1,012,055
Accumulated deficit (66,818) (53,591)
Accumulated other comprehensive loss (26,173) (30,752)
Equity attributable to Allegro MicroSystems, Inc. 922,653 929,555
Non-controlling interest 1,604 1,545
Total stockholders' equity 924,257 931,100
Total liabilities, non-controlling interest and stockholders' equity $ 1,389,208 $ 1,420,961
Non-GAAP Financial Measures
In addition to the measures presented in our condensed consolidated financial statements, we regularly review other measures, defined as non-GAAP financial measures by the SEC, to evaluate our business, measure our performance, identify trends, prepare financial forecasts and make strategic decisions. The key measures we consider are non-GAAP Gross Profit, non-GAAP Gross Margin, non-GAAP Operating Expenses, non-GAAP Operating Income, non-GAAP Operating Margin, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, non-GAAP Profit before Tax, non-GAAP Income Tax Provision, non-GAAP Effective Tax Rate, non-GAAP Net Income Attributable to Allegro MicroSystems, Inc, non-GAAP Basic and Diluted Earnings per Share, non-GAAP Free Cash Flow, and non-GAAP Free Cash Flow as a percentage of net sales (collectively, the 'Non-GAAP Financial Measures'). These Non-GAAP Financial Measures provide supplemental information regarding our operating performance on a non-GAAP basis that excludes certain gains, losses and charges of a non-cash nature or that occur relatively infrequently and/or that management considers to be unrelated to our core operations, and in the case of non-GAAP Income Tax Provision, management believes that this non-GAAP measure of income taxes provides it with the ability to evaluate the non-GAAP Income Tax Provision across different reporting periods on a consistent basis, independent of special items and discrete items, which may vary in size and frequency. These Non-GAAP Financial Measures are used by both management and our board of directors, together with the comparable GAAP information, in evaluating our current performance and planning our future business activities.
The Non-GAAP Financial Measures are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. These Non-GAAP Financial Measures should not be considered as substitutes for GAAP financial measures, such as gross profit, gross margin, net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges, such as those being adjusted in the calculation of these Non-GAAP Financial Measures. Our presentation of these Non-GAAP Financial Measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. These Non-GAAP Financial Measures exclude costs related to acquisition and related integration expenses, amortization of acquired intangible assets, stock-based compensation, restructuring actions, related-party activities and other non-operational costs.
Tax effect of adjustments to GAAP results—Represents the estimated income tax effect of the adjustments to non-GAAP Profit before Tax described below and elimination of discrete tax adjustments.
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Gross Profit $ 91,302 $ 79,879 $ 74,771
GAAP Gross Margin (% of net sales) 44.9 % 41.4 % 44.8 %
Non-GAAP adjustments
Transaction-related costs — — (1)
Purchased intangible amortization 5,089 4,957 4,875
Restructuring costs 705 2,350 1,200
Stock-based compensation 888 697 561
Total Non-GAAP Adjustments $ 6,682 $ 8,004 $ 6,635
Non-GAAP Gross Profit $ 97,984 $ 87,883 $ 81,406
Non-GAAP Gross Margin (% of net sales) 48.2 % 45.6 % 48.8 %
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Operating Expenses $ 94,042 $ 93,077 $ 85,401
Research and Development Expenses
GAAP Research and Development Expenses 46,500 47,618 45,204
Non-GAAP adjustments
Transaction-related costs — 3 1,029
Purchased intangible amortization 3 — —
Restructuring costs 1,131 4,429 169
Stock-based compensation 2,911 3,406 3,735
Other costs (1) 35 — —
Non-GAAP Research and Development Expenses 42,420 39,780 40,271
Selling, General and Administrative Expenses
GAAP Selling, General and Administrative Expenses 47,542 45,459 40,197
Non-GAAP adjustments
Transaction-related costs 130 116 814
Purchased intangible amortization 535 535 535
Restructuring costs 1,184 1,656 1,045
Stock-based compensation 6,963 5,513 5,822
Other costs (1) 5,838 6,921 811
Non-GAAP Selling, General and Administrative Expenses 32,892 30,718 31,170
Total Non-GAAP Adjustments 18,730 22,579 13,960
Non-GAAP Operating Expenses $ 75,312 $ 70,498 $ 71,441
(1) Included in non-GAAP other costs are non-recurring charges that are individually immaterial for separate disclosure, such as project evaluation costs, which consist of costs and estimated costs incurred in connection with debt and equity financings or other non-recurring transactions.
Reconciliation of Non-GAAP Operating Income and Non-GAAP Operating Margin
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Operating Loss $ (2,740) $ (13,198) $ (10,630)
GAAP Operating Margin (% of net sales) (1.3)% (6.8)% (6.4)%
Transaction-related costs 130 119 1,842
Purchased intangible amortization 5,627 5,492 5,410
Restructuring costs 3,020 8,435 2,414
Stock-based compensation 10,762 9,616 10,118
Other costs (1) 5,873 6,921 811
Total Non-GAAP Adjustments $ 25,412 $ 30,583 $ 20,595
Non-GAAP Operating Income $ 22,672 $ 17,385 $ 9,965
Non-GAAP Operating Margin (% of net sales) 11.1 % 9.0 % 6.0 %
(1) Included in non-GAAP other costs are non-recurring charges that are individually immaterial for separate disclosure such as project evaluation costs, which consist of costs and estimated costs incurred in connection with debt and equity financings or other non-recurring transactions.
Reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Net Loss $ (13,162) $ (14,738) $ (17,613)
GAAP Net Loss Margin (% of net sales) (6.5)% (7.6)% (10.6)%
Interest expense 6,359 6,874 5,377
Interest income (234) (222) (494)
Income tax provision (benefit) 3,169 (3,700) 1,040
Depreciation & amortization 16,216 15,924 16,458
EBITDA $ 12,348 $ 4,138 $ 4,768
Transaction-related costs 130 119 1,842
Restructuring costs 2,824 8,277 2,414
Stock-based compensation 10,762 9,616 10,118
Other costs (1) 7,304 6,301 2,807
Adjusted EBITDA $ 33,368 $ 28,451 $ 21,949
Adjusted EBITDA Margin (% of net sales) 16.4 % 14.8 % 13.1 %
(1) Included in non-GAAP other costs are non-recurring charges that are individually immaterial for separate disclosure such as project evaluation costs, which consist of costs and estimated costs incurred in connection with debt and equity financings or other non-recurring transactions and income (loss) in earnings of equity investments.
Reconciliation of Non-GAAP Profit before Tax
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Loss before Income Taxes $ (9,993) $ (18,438) $ (16,573)
Transaction-related costs 130 119 1,842
Transaction-related interest 860 272 709
Purchased intangible amortization 5,627 5,492 5,410
Restructuring costs 3,020 8,482 2,414
Stock-based compensation 10,762 9,616 10,118
Other costs (1) 7,304 6,689 2,807
Total Non-GAAP Adjustments $ 27,703 $ 30,670 $ 23,300
Non-GAAP Profit before Tax $ 17,710 $ 12,232 $ 6,727
(1) Included in non-GAAP other costs are non-recurring charges that are individually immaterial for separate disclosure such as project evaluation costs, which consist of costs and estimated costs incurred in connection with debt and equity financings or other non-recurring transactions and income (loss) in earnings of equity investments.
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Income Tax Provision (Benefit) $ 3,169 $ (3,700) $ 1,040
GAAP effective tax rate (31.7)% 20.1 % (6.3)%
Tax effect of adjustments to GAAP results (1,483) 4,126 (395)
Non-GAAP Income Tax Provision $ 1,686 $ 426 $ 645
Non-GAAP effective tax rate 9.5 % 3.5 % 9.6 %
Reconciliation of Non-GAAP Net Income Attributable to Allegro MicroSystems, Inc. and Non-GAAP Earnings per Share
Three-Month Period Ended
June 27, 2025 March 28, 2025 June 28, 2024
(Dollars in thousands)
GAAP Net Loss Attributable to Allegro MicroSystems, Inc. (1) $ (13,227) $ (14,800) $ (17,675)
GAAP Basic weighted average common shares 184,587,027 184,169,928 193,465,708
GAAP Diluted weighted average common shares 184,587,027 184,169,928 193,465,708
GAAP Basic Loss per Share $ (0.07) $ (0.08) $ (0.09)
GAAP Diluted Loss per Share $ (0.07) $ (0.08) $ (0.09)
Transaction-related costs 130 119 1,842
Transaction-related interest 860 272 709
Purchased intangible amortization 5,627 5,492 5,410
Restructuring costs 3,020 8,482 2,414
Stock-based compensation 10,762 9,616 10,118
Other costs (2) 7,304 6,689 2,807
Total Non-GAAP Adjustments 27,703 30,670 23,300
Tax effect of adjustments to GAAP results (3) 1,483 (4,126) 395
Non-GAAP Net Income Attributable to Allegro MicroSystems, Inc. $ 15,959 $ 11,744 $ 6,020
Basic weighted average common shares 184,587,027 184,169,928 193,465,708
Diluted weighted average common shares 185,416,258 185,247,919 194,705,716
Non-GAAP Basic Earnings per Share $ 0.09 $ 0.06 $ 0.03
Non-GAAP Diluted Earnings per Share $ 0.09 $ 0.06 $ 0.03
(1) GAAP Net Loss Attributable to Allegro MicroSystems, Inc. represents GAAP Net Loss adjusted for Net Income Attributable to non-controlling interests.
(2) Included in non-GAAP other costs are non-recurring charges that are individually immaterial for separate disclosure, such as project evaluation costs, which consists of costs and estimated costs incurred in connection with debt and equity financings or other non-recurring transactions, income (loss) in earnings of equity investments, and unrealized losses (gains) on investments.
(3) To calculate the tax effect of adjustments to GAAP results, the Company considers each Non-GAAP adjustment by tax jurisdiction and reverses all discrete items to calculate an annual non-GAAP effective tax rate ('NG ETR'). This NG ETR is then applied to Non-GAAP Profit Before Tax to arrive at the tax effect of adjustments to GAAP results.
Investor Contact:
Jalene Hoover
VP of Investor Relations & Corporate Communications
+1 (512) 751-6526
jhoover@allegromicro.com
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Originally, GPUs were intended for gaming graphics (thus the name), but they eventually found use cases beyond gaming, including engineering simulations, drug discovery, mining cryptocurrencies, and ultimately, processing AI workloads. The biggest reason Nvidia has been such a successful investment is that it's one of the primary companies that is profiting from the massive AI arms race. While many of the big tech companies are investing billions of dollars in data centers to offer AI tools that may eventually generate revenue, Nvidia is a primary recipient of this investment. While 2025 is shaping up to be a record year for data center spend, next year could be even bigger. Just look at what Meta Platforms said about 2026 capital expenditures: While the infrastructure planning process remains highly dynamic, we currently expect another year of similarly significant capital expenditures dollar growth in 2026 as we continue aggressively pursuing opportunities to bring additional capacity online to meet the needs of our artificial intelligence efforts and business operations. This quote clearly indicates that Meta is going to significantly exceed the $66 billion to $72 billion range it gave investors for 2025 capital expenditures in 2026. Many of the AI hyperscalers will likely deliver similar language as we approach 2026, and this bodes well for several companies, including Nvidia. This data center growth backs up a projection that Nvidia gave during its 2025 GTC event. In 2024, a third party estimated that global data center capital expenditures were $400 billion. By 2028, it's expected to rise to $1 trillion. If that comes true, what can shareholders expect Nvidia's stock price to be in three years? Nvidia's growth would take it to nearly $250 per share In FY 2025 (which encompasses most of 2024), Nvidia's revenue totaled $115 billion. That indicates nearly 30% of the estimated data center spend went to Nvidia. To bake a little conservatism into our projection, let's estimate that Nvidia can capture 25% of the forecasted $1 trillion. This conservatism allows the overall data center buildout figure to be smaller and allows other technologies coming to market to eat into Nvidia's data center share. That would indicate that Nvidia would generate $250 billion in data center revenue alone, but Nvidia also has other parts of its business that it can benefit from. In FY 2025, Nvidia generated $131 billion in revenue, so there is still a sizable percentage of revenue that comes from non-data center sources. If we estimate that this remaining revenue grows at a 10% pace, its non-data center revenue would rise to $23 billion by 2028. So, using these projections, Nvidia's revenue would total around $273 billion, up 84% from today's level. Depending on whether you think Nvidia's valuation is reasonable or not, its revenue growth could directly correlate to stock price growth. However, I think it's a tad expensive. Currently, Nvidia's stock trades at nearly 60 times earnings. If that were to fall to 40 times earnings and if Nvidia can maintain a 55% profit margin (it only fell in Q1 due to the sizable write-off of its H20 chips), then Nvidia would produce $150 billion in profits. At 40 times earnings, that would give Nvidia a $6 trillion market cap, pricing the stock at just shy of $250 per share. That's strong growth, and would make Nvidia a market-beating stock at that price. As a result, I'm still confident that Nvidia is a top stock to buy now. Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025
Globe and Mail
an hour ago
- Globe and Mail
Should You Buy Sirius XM Stock After Earnings?
Key Points Sirius XM's self-pay subscriber base shrank, leading to a revenue decline in Q2. This business generates lots of free cash flow, which should get a boost as capital expenditures come down. The stock is cheap, leading to a high dividend yield that income investors might find appealing. 10 stocks we like better than Sirius XM › Sirius XM (NASDAQ: SIRI) has received a lot of attention among the investment community. That's because Warren Buffett-led Berkshire Hathaway is a large shareholder, owning 35.4% of the satellite radio operator. Nonetheless, this stock has tanked 64% just in the past five years (as of July 31). Sirius XM just gave investors a fresh financial update. Given that the share price fell 8% the day the news was reported, the market clearly isn't happy with the numbers. Maybe there's an opportunity here for contrarian investors. Should you buy Sirius XM stock after earnings? Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Growth is hard to come by During the second quarter (ended June 30), Sirius XM's revenue dipped 2% from Q2 2024 to $2.1 billion. That was driven by a declining user base. As of June 30, there were 32.8 million paid Sirius XM subscribers, down by 460,000 over the past year. For what it's worth, Sirius XM doesn't face direct competition from any other satellite radio providers, as this is the only one that's legally allowed in the U.S. And to its benefit, the company generated 76.2% of its revenue from subscriptions in Q2, compared to a 20.2% share from advertising. This is advantageous because the sales coming from subscriptions are recurring in nature and likely more durable, whereas ad revenue can exhibit cyclicality that's influenced by macro forces. There is no denying that Sirius XM will have a hard time registering growth going forward. Consensus analyst estimates call for revenue to decline at a 0.7% annualized rate between 2024 and 2027. The key factor that has had a huge negative impact on the company is the rise of internet-enabled streaming services. Apple, Spotify, and Alphabet 's YouTube all give consumers compelling options for audio entertainment. Free cash flow remains robust Even though the company will undoubtedly struggle to grow its subscriber base and revenue going forward, Sirius XM doesn't have any issue when it comes to profitability. Although diluted earnings per share did drop 23% in Q2, the business had a net profit margin of 9.6% for the quarter. Management is focused on cost-cutting efforts. The goal is to get to $200 million in annual run-rate expense reductions. That could help with the bottom line. Sirius XM generated $402 million in free cash flow (FCF) during the second quarter, up 27%. Capital expenditures will continue decreasing in the years ahead. So, management's outlook has FCF totaling $1.5 billion in 2027. That would represent a 30.4% gain from the forecast $1.15 billion for this year. The leadership team has allocated this excess cash to the benefit of investors. Sirius XM repurchased $45 million worth of shares in Q2. Compared to the same period last year, the diluted outstanding share count has shrunk by a notable 5.6%. Appealing to dividend investors Another key part of Sirius XM's capital allocation plan is to pay a dividend, which totaled $92 million in Q2. Because the stock's valuation is dirt cheap, at a price-to-earnings (P/E) ratio of 8.1, the dividend yield sits at a hefty 5.11%. Investors can find comfort knowing that legendary investor Warren Buffett is a big shareholder in this company. He knows how to pick winning investments, so maybe the Oracle of Omaha sees something in Sirius XM. However, I think individual investors are better off avoiding this stock. Yes, the business is consistently profitable. The low P/E ratio is compelling, and the dividend yield can provide a nice income stream. But with there being intense competition from powerful streaming services, Sirius XM is facing a headwind when it comes to driving any growth. It wouldn't be surprising to see the company shrink over time. Should you invest $1,000 in Sirius XM right now? Before you buy stock in Sirius XM, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sirius XM wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025
