Allegro MicroSystems, Inc. (ALGM) FY2026 Earnings: Revenue $890M (+22.8%)
ALGM — FY2026 Annual Financial Report Analysis
Full Year · Fiscal year 2026 · Published by Pham Hop
Allegro MicroSystems' FY2026 sales rose 22.8% to $890.1M on ADAS, xEV and data center demand, returning it to an operating profit with $124.9M of free cash flow, though a GAAP net loss of $0.08 per share remained.
Revenue
$890M
+22.8% YoY
Net income
-$15M
Diluted EPS
$-0.08
Operating margin
2.1%
This period vs a year ago
Same period last year
This period
Revenue▲+22.8%
≈$725M
$890M
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Allegro MicroSystems' fiscal year 2026 (the 52 weeks ended March 27, 2026) was a recovery year: net sales rose 22.8% to $890.1 million after the prior year's chip-inventory downturn, and the company swung from a $19.8 million operating loss to an $18.5 million operating profit. On the bottom line it still reported a small GAAP net loss of $14.9 million ($0.08 per share), narrowed from $73.0 million ($0.39) a year earlier. The growth came from two places the 10-K names directly: automotive "Focus Auto" products (chips for driver-assistance systems, or ADAS, and for electric and hybrid vehicles, or xEV) and data center applications, which reached a record 14% of sales in the fourth quarter.
At a glance
$890.1 million in sales, up 22.8%. Both end markets grew, but industrial and other sales (+37.8%) grew more than twice as fast as automotive (+17.4%), so Allegro now depends a little less on carmakers.
$163.1 million of operating cash flow against a $14.7 million net loss. The business made far more cash than its accounting loss suggests, mostly because large non-cash costs such as depreciation ($67.6 million) and stock-based pay ($47.9 million) are subtracted from profit without any cash going out.
Gross margin of 46.3%, up from 44.3%. Gross margin is the share of each sales dollar left after paying to make the chips. Higher volumes spread the factory's fixed costs over more units, and the product mix shifted toward higher-margin parts.
Key figures
Metric
FY2026
FY2025
YoY Change
Net sales
$890.1M
$725.0M
+22.8%
Automotive sales
$628.6M
$535.2M
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+17.4%
Industrial and other sales
$261.5M
$189.8M
+37.8%
Gross margin (GAAP)
46.3%
44.3%
+2.0 pts
Operating margin (GAAP)
2.1%
-2.7%
+4.8 pts
Net loss attributable to Allegro
-$14.9M
-$73.0M
Loss narrowed by $58.1M
Diluted EPS (GAAP)
-$0.08
-$0.39
Loss narrowed by $0.31
Non-GAAP diluted EPS (company-defined)
$0.54
$0.24
+125%
Operating cash flow
$163.1M
$61.9M
+163%
Free cash flow (operating cash flow minus capex)
$124.9M
$22.0M
+469%
Operating margin is the share of sales left after running the business (making the product, R&D, sales and administration) but before interest and tax. The year-over-year percentage change is not shown for net loss or EPS because a percentage change between two losses is easy to misread; the dollar change is given instead.
Takeaway: On a cash basis Allegro is already a solidly profitable business again: free cash flow of $124.9 million was 14.0% of sales, up from 3.0%. The GAAP loss comes from items below the gross profit line: $47.9 million of stock-based pay, $22.5 million of amortization on past acquisitions, $9.4 million of losses from its stake in the Polar Semiconductor foundry and a $13.7 million fourth-quarter tax charge. What to watch is whether sales growth keeps outrunning those costs. The fourth quarter showed it hasn't happened yet: a GAAP net loss of $0.09 per share on record sales.
Where the growth came from
By end market. Automotive is still about 71% of sales ($628.6 million). The 10-K attributes its 17.4% growth to "an increase in demand for Focus Auto products, which include ADAS and xEV components, as well as our internal combustion engine products and safety, comfort and convenience applications". Even sales to traditional gasoline-engine programs grew, so the recovery was not only about electric vehicles. Industrial and other sales rose 37.8% to $261.5 million (29.4% of the total, up from 26.2%) on demand for "data center applications, industrial automation and robotics products, medical applications and clean energy applications". Consumer products, broad-based industrial products and personal and industrial transport products declined.
By product. Power ICs (chips that drive motors and convert or regulate power) grew 40.4% to $351.6 million, driven by "motor and high performance power products". Magnetic sensors, Allegro's historical core (chips that measure current, speed and position), grew a slower 13.5% to $538.5 million. Power ICs are now about 39% of sales, up from 35%.
By region. The biggest dollar gains came from Other Asia (+$67.6 million, +74.8%, mainly data center, medical and comfort/convenience applications) and Greater China (+$66.4 million, +36.3%, mainly ADAS, xEV, robotics and data center). Japan (-1.9%) and the United States (-1.1%) were roughly flat. Sales are counted by where products ship, often an Asian assembly site, so these figures tell you less about where the end customer sits.
Quarterly momentum. Fourth-quarter sales were $243.2 million, up 26% from $192.8 million a year earlier and the fifth quarter of sequential growth in a row. Industrial and other jumped to $79.3 million from $64.7 million in the third quarter, while automotive was flat ($163.9 million vs $164.5 million). By the end of the year, the extra growth was coming from industrial and data center rather than from cars.
Margins and costs
Gross profit rose 28.1% to $412.0 million. The 10-K credits the 2-point gross-margin gain to "the increase in net sales and a change in product mix", partly offset by higher materials and commodity costs. Operating expenses grew more slowly than sales: R&D rose 14.6% to $205.8 million (from 24.8% of sales to 23.1%) and SG&A rose 12.0% to $181.1 million (from 22.3% to 20.3%). In both cases the 10-K says higher personnel costs, "including the funding of the annual incentive program", drove the increase. Bonuses were funded again in a good year, which suggests part of the cost growth was cyclical.
Below the operating line, interest expense fell 27.1% to $22.1 million after Allegro paid its term loan down from $345.0 million to $285.0 million and refinanced it in January 2026 at a lower spread (SOFR + 1.75%, down from + 2.00%). Cash rose to $168.8 million from $121.3 million.
What the headline numbers hide
Cash conversion is strong, but helped by one-offs. Operating cash flow of $163.1 million included a $54.7 million release from working capital (cash freed up from day-to-day operating items). Most of it came from a $49.4 million fall in prepaid expenses and other assets, which the 10-K attributes to "the receipt of a tax refund and the additional planning related to" the 2025 US tax law (the One Big Beautiful Bill Act, which let companies deduct R&D costs faster). Without that refund, cash flow would still be well above the prior year's $61.9 million, but $163 million is not a clean recurring figure.
The gap between GAAP and adjusted figures is large. Non-GAAP operating income was $125.6 million (14.1% margin) against GAAP's $18.5 million (2.1%). The $107.1 million difference is mostly stock-based pay ($47.9 million), amortization of acquired intangibles ($22.5 million), "restructuring costs" ($16.9 million), an asset-held-for-sale impairment ($6.6 million) and $12.4 million of "other costs". Stock-based pay is a real, recurring cost to shareholders (5.4% of sales). The restructuring line is also recurring: $15.5 million the year before and $16.9 million this year, even though the 10-K's restructuring note puts charges under the January 2025 plan at only $3.1 million for FY2026.
The fourth quarter's GAAP loss came from tax. Q4 operating income was $5.4 million, but a $13.7 million income tax provision on a $2.7 million pre-tax loss turned it into a $16.5 million net loss. This was a single-quarter tax charge, not a sign of weaker operations.
The stake in the foundry that makes its chips cost money. Allegro owns about 10.2% of Polar Semiconductor (PSL), the foundry that supplies part of its wafers. Its share of PSL's results swung from a $1.2 million gain to a $9.4 million loss.
Inventory and receivables look clean. Inventory slipped to $181.8 million from $183.9 million while sales grew 22.8%, and finished goods fell from $48.9 million to $37.8 million. Trade receivables (money customers owe) grew 10.2% to $93.2 million, slower than sales. Neither suggests that sales were pulled forward or that unsold product is piling up, which is the usual worry in a recovery year.
Prior-year one-offs flatter the comparison. FY2025's loss included a $34.8 million non-deductible loss on the share-repurchase contract with Sanken, Allegro's former majority owner. Excluding it, last year's pre-tax loss would have been about $50.9 million, so the true improvement in pre-tax result is about $36 million, not $70.8 million.
Outlook and our read
When it reported the year on May 7, 2026, management guided first-quarter fiscal 2027 sales to $245–255 million (about 23% growth at the midpoint), with a non-GAAP gross margin of 50–51% and non-GAAP EPS of $0.19–0.23. That quarter has since been reported (July 30, 2026): sales of $259.2 million beat the top of the range, the non-GAAP gross margin was 51.1%, GAAP EPS turned positive at $0.08, and data center reached 17% of sales. Management then guided the second quarter (ending September 25, 2026) to $265–275 million in sales and non-GAAP EPS of $0.23–0.26.
The fiscal 2026 numbers show the cyclical recovery is real and is spreading beyond cars. Industrial and data center are now growing faster than the core automotive business, and power ICs are taking a bigger share of sales. The 10-K itself says investment in AI and data centers "may increase the magnitude and volatility" of chip cycles, and data center has quickly become a meaningful share of sales, so a pause in data center spending would now show up in Allegro's results. On the cost side, the step down in interest expense and the end of the January 2025 restructuring should let more of the operating improvement reach GAAP earnings in fiscal 2027, as the first quarter's positive GAAP EPS already suggests. The open question is how much of the gap between adjusted and GAAP profit (mostly stock-based pay and recurring restructuring charges) will close.