Which metrics beat expectations, and which businesses weighed on results in the third quarter?

  • SiTime’s third-quarter revenue was 299 million dollars, 3.8% above market consensus but 1.0% below Goldman Sachs’ estimate; non-GAAP gross margin was 70.7%, above the 68.0% expected by Goldman Sachs and market consensus, and non-GAAP EPS was 4.01 dollars, also above Goldman Sachs’ estimate of 3.86 dollars and market consensus of 3.55 dollars.
  • Business performance was uneven: revenue from communications, enterprise and data center was 127 million dollars, below market consensus of 146 million dollars; revenue from IoT, consumer and mobile was 50 million dollars, above consensus of 44 million dollars. Overall strength in margins and EPS does not mask the revenue shortfall in the data center-related segment.

Why did fourth-quarter guidance lead Goldman Sachs to raise its earnings estimates?

  • The company’s midpoint for fourth-quarter revenue was 336 million dollars, 8.4% above market consensus of 310 million dollars; the midpoint for non-GAAP EPS was 4.76 dollars, 29.8% above consensus of 3.67 dollars. Gross margin guidance was 70%, also above consensus of 67.5%.
  • Gross margin improvement came from a higher share of high-value products and better manufacturing capacity utilization; the company expects gross margin to remain around 70% (±1 percentage points). Based on this and stronger revenue trends, Goldman Sachs raised its EPS estimates for 2026–2028, by an average of about 9%.

Can long-term growth opportunities offset segment pressures and supply constraints?

  • Management said the third-quarter book-to-bill ratio rose and cited order pipelines of approximately 1.4 billion dollars, close to 1 billion dollars and 900 million dollars, respectively, across the industrial, automotive, aerospace and defense markets; there is also an approximately 4 billion-dollar semiconductor co-packaging opportunity, expected to ramp mainly in 2028–2029. These are demand opportunities and order pipelines, not revenue already realized.
  • As a counterpoint, Goldman Sachs lowered its revenue estimates for the communications, enterprise and data center segment: its estimate for 2027 fell from 690 million dollars to 674 million dollars, and its estimate for 2028 fell from 840 million dollars to 788 million dollars. Management also said wafer supply constraints are expected to continue through 2027, with the more severe issues concentrated in the acquired TPD business; constraints on the core business are manageable overall, and supply conditions are expected to improve from early in the first quarter of 2027.
  • Near-term growth support also includes higher data center product content and the shipment trend for Apple’s in-house modem components; management believes these two factors could ease the usual seasonal pressure in the first quarter of 2027.

Why was the price target lowered at the same time as earnings estimates were raised?

  • Goldman Sachs lowered its 12-month price target from 900 dollars to 800 dollars, while raising the normalized EPS estimate used for valuation from 15 dollars to 16.75 dollars. The price target’s P/E multiple was reduced from 60 times to 48 times due to lower valuation multiples among peers; therefore, improved earnings estimates did not offset the contraction in the valuation benchmark.
  • Goldman Sachs maintained its Buy rating and believes the market continues to undervalue SiTime’s long-term growth opportunities; this view depends on continued growth in data center- and Apple-related business, a richer product mix from higher-value products, and a gradual easing of supply constraints.