Allegro reports $277M in Q2 sales as AI data centers and cars lift chip demand

Allegro MicroSystems, a Nasdaq-listed maker of magnetic sensors and power integrated circuits, has posted its strongest quarter in years. This performance marks the seventh consecutive quarter of sequential sales growth and the highest quarterly level of design wins since its IPO.

The company’s growth is being fueled by two distinct and powerful trends. Its automotive business, which remains the largest segment, saw revenue climb 11% to approximately $172.5 million, supported by vehicle electrification and advanced driver-assistance systems like lane-keeping and automatic emergency braking. Simultaneously, its data center business more than doubled year over year, reaching a record $46 million.

This data center surge is directly linked to the increasing power densities of artificial intelligence infrastructure. As AI servers draw more power in tighter spaces, the demand for components that can efficiently manage and monitor that electricity has risen sharply. The company’s industrial and other segment also overachieved, reaching a record $104.4 million, up 79% from the previous year.

The company’s profitability improved alongside its revenue. Non-GAAP diluted earnings per share landed at $0.26, double the year-ago figure, while GAAP EPS came in at $0.12, roughly four times last year’s level. This indicates strong operating leverage as the company scales.

The Motley Fool’s analysis of the results highlights that gains in AI data centers and automotive safety are increasing the amount of chip content per unit. This trend is helping sales grow faster than the overall market. The company’s design wins rose nearly 40% year over year, reaching their highest quarterly level since the IPO.

For the third quarter of fiscal 2027, Allegro has guided to net sales between $278 million and $288 million. At the midpoint, this implies year-over-year growth of approximately 23%. Management attributes this outlook to strong demand in AI-related power management and automotive safety.

Investors will be watching whether the company can maintain its momentum. Key things to watch in the coming quarters include whether data center revenue keeps compounding at a steep rate, and whether automotive growth holds as electrification trends evolve. The company’s ability to land within its guidance range and maintain its high margins will also be closely scrutinized.