Allegro MicroSystems rallies on strong earnings, analyst upgrades
Semiconductor maker beats expectations with 29% revenue growth, robust guidance for Q4
Allegro MicroSystems surged on Thursday after the semiconductor maker reported quarterly results that topped Wall Street expectations, prompting a wave of analyst upgrades as investors bet on the company's exposure to the electric vehicle and data center markets.
The Manchester, New Hampshire-based company posted fiscal third quarter revenue of $229.2 million, representing a 29% increase from the same period last year and comfortably ahead of analyst estimates of $220.9 million. Non-GAAP diluted earnings per share reached $0.15, exceeding the consensus forecast of $0.14 and more than doubling the previous year's figure.
"Our strong third quarter performance demonstrates Allegro's continued momentum in high-growth end markets, particularly automotive and industrial," said the company in its earnings announcement. "The 29% year-over-year revenue growth reflects the strength of our product portfolio and our ability to capture share in key applications."
The results were driven by robust performance across Allegro's core segments. Automotive sales jumped 28% year-over-year to $164.5 million, while industrial sales surged 31% to $64.7 million. The strength in automotive comes as traditional automakers accelerate their transition to electric vehicles, which require significantly more sophisticated power management and sensing solutions than internal combustion engine vehicles.
Looking ahead, Allegro provided fourth quarter revenue guidance of $230 million to $240 million, which at the midpoint implies approximately 22% year-over-year growth. The company expects non-GAAP gross margin to range between 49% and 51% for the quarter.
The impressive performance triggered a flurry of analyst upgrades. Bank of America raised its price target to $39 from $36 while maintaining a buy rating, citing anticipated outperformance in the fourth quarter and upward revisions across the diversified analog semiconductor sector.
UBS increased its price target to $40 from $38, also keeping a buy rating on the stock. Wells Fargo was even more bullish, with analyst Joseph Quatrochi maintaining a buy rating and raising the target price to $42 from $33.
The consensus among Wall Street analysts remains strongly positive. Of 14 analysts covering the stock, 11 rate it a buy or strong buy, while three recommend hold, according to recent data. The average one-year price target stands at approximately $39.6, suggesting upside of more than 15% from current levels.
Allegro's rally comes amid broader strength in semiconductor stocks as the industry begins to rebalance following a period of oversupply in 2024 and 2025. However, the company's focus on specialized analog and sensor applications for automotive and industrial end markets has positioned it to benefit from secular trends that are less cyclical than the broader semiconductor industry.
Earlier this month, Allegro announced new power-sensing and gate-driver solutions specifically designed for electric vehicles and AI data centers, including gate drivers for high-density 800V EV systems and an ultra-low-loss isolated current sensor. Those announcements helped drive an 11% stock surge earlier in January.
The company's shares have been on an upward trajectory in recent sessions, climbing 6.2% on Wednesday to close at $34.55, outperforming the broader semiconductor sector. The stock is now trading well above its 50-day moving average of $28.07 but remains below its 52-week high of $38.45.
As the automotive industry pushes toward software-defined vehicle architectures that increasingly integrate artificial intelligence and machine learning, companies like Allegro MicroSystems are well-positioned to capture growing demand for the sophisticated power management and sensing technologies required by next-generation vehicles.
With Thursday's earnings report demonstrating the company's ability to execute in this challenging environment, investors appear increasingly confident that Allegro can maintain its growth trajectory through the remainder of fiscal 2026 and beyond.