Susquehanna sees modest upside for semiconductor earnings

Investing.com -- Susquehanna analysts said they expect modest upside for third-quarter results and fourth-quarter guidance as semiconductor companies prepare to report earnings. The firm noted that while much of the upside is expected to be linked to artificial intelligence, the broader semiconductor upcycle continues.

Lead times expanded by about two weeks for the second consecutive quarter in the firm's SemiSIGnals data. Pricing actions showed the largest sequential increase of 12% quarter-over-quarter in the third quarter of 2025, with checks suggesting further price increases in the fourth quarter of 2026 and into 2027.

Third-quarter original design manufacturer builds for the PC market are tracking lower than prior expectations. The firm expects below-seasonal second-half client results for both AMD (NASDAQ: AMD) and Intel (NASDAQ: INTC). Both companies are transitioning wafers from PC to server to better serve demand in agentic applications.

ARM hyperscale CPUs continue to gain market share as they serve as host CPUs for custom AI accelerators. Revenue expectations for Arm's AGI CPU increased, with potential upside toward $2 billion versus the original $1 billion target.

The handset market faces headwinds from ongoing memory supply constraints. The high end appears relatively insulated from these shortages, but conditions in the China smartphone market continue to deteriorate.

Hyperscale capital expenditure plans continue to expand for data centers, though low-power silicon constraints raise questions around planned gigawatt capacity support. Microsoft recently unveiled Maia 300 as the custom ASIC ecosystem continues to grow.

For optical and AI networking, the firm expects continued upside driven by an expanding 800G cycle and accelerating 1.6T cycle. The industrial recovery appears to be broadening as global PMIs trended up in the third quarter, with all six regions recording a reading above 50.

Auto checks were positive as Tesla third-quarter deliveries exceeded expectations. Auto customers are returning to the market as inventory buffers have been depleted, potentially driving upside for auto-exposed analog suppliers.

Susquehanna is selectively changing estimates and price targets for numerous covered companies, most notably LSCC, LITE, and FN.

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