TipRanks Smart Growth Portfolio #36: The Song of Chips and Circuits
Dear Investors,
Welcome to the 36th edition of the Smart Growth Portfolio and Newsletter.
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Portfolio News
❖ EverQuote (EVER) delivered record Q3 2025 results, with total revenue up 20% year-over-year to $173.9 million – well above the consensus – driven by strong enterprise carrier spend and growth in both the auto and home/renters insurance verticals. The company achieved record profitability, with adjusted EBITDA of $25.1 million (up 33% YoY), and an adjusted EBITDA margin expanding to 14.4%. Adjusted EPS surged more than 61% YoY to $0.50, versus $0.38 expected. The company ended the quarter with $146 million in cash and cash equivalents and repurchased $21 million worth of stock during the period.
Guidance for Q4 was equally strong, penciling in revenue of $174-180 million (20% YoY growth at midpoint) and adjusted EBITDA of $21-23 million (up 16% YoY). Full-year 2025 guidance implies ~35% revenue growth and over 55% adjusted EBITDA growth, and indicates continued growth and strategic investments in AI and new traffic channels. EVER reiterated its goal to reach $1 billion in annual revenue organically within 2–3 years, maintaining a long-term target of 20% average annual revenue growth and 20% adjusted EBITDA margins. Shares spiked by about 20% following the release.
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❖ ACM Research (ACMR) released a mixed Q3 report, with stronger-than-expected revenue growth accompanied by an earnings miss. Revenue jumped 32% year-over-year to $269 million, setting a new quarterly record for the company, driven by strong sales across product categories like single-wafer cleaning and advanced packaging equipment. Despite the revenue growth, gross margins compressed to 42%, down from 51.4% a year earlier, largely due to higher R&D expenses and investments in new technologies such as the horizontal plating and KrF Track systems. Operating expenses rose substantially, causing a decline in operating income, but net income showed growth of 20% YoY. Still, adjusted EPS missed, arriving at $0.36 versus the $0.53 expected. ACMR highlighted its robust cash position with net cash of $811 million and detailed plans to invest in expanding R&D and production capacities to support future growth.
Meanwhile, the company narrowed its full-year 2025 revenue outlook to $875-925 million, implying 15% year-over-year growth at the midpoint, and expects higher growth rates for cleaning products and new platforms (SPM, Tahoe, panel-level plating) in 2026 and beyond. Shipments for Q4 and full-year 2025 are expected to be down year-over-year due to customer order pushouts and parts shortages, but management anticipates a rebound in shipments and revenue in the first half of 2026 as new products ramp.
Aggressive innovation investments, while necessary to maintain or even accelerate growth momentum, are cutting into the bottom line and compressing margins – which, along with cost challenges in scaling operations, has spooked investors. ACMR’s stock tumbled post-release but signaled a rebound the next day as longer-horizon dip-buyers stepped in, encouraged by a favorable outlook and analyst support.
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❖ MKS (MKSI) stock jumped by over 11% on Thursday following the “beat and raise” report. The semiconductor equipment maker posted revenue of $988 million, up 10% year-over-year, and non-GAAP EPS of $1.93 (up 12%), with both figures easily outpacing consensus. GAAP net income was $74 million, and GAAP EPS was $1.10, both in the upper half of guidance. Adjusted EBITDA came in at $240 million with a margin of 24.3%. MKS’s three segments – Semiconductor, Electronics & Packaging, and Specialty Industrial – all contributed positively to the Q3 results, with double-digit revenue growth expected for Semiconductor and Electronics & Packaging in 2025.
Over the quarter, MKSI generated free cash flow of $147 million, over 100% of net earnings and 15% of revenue, supporting debt reduction and long-term capital investments. Net leverage ratio was reduced to 3.9x following voluntary prepayments totaling $400 million in 2025, including $100 million made in October.
The company emphasized its strong position in enabling advanced AI-era semiconductor manufacturing technologies, allowing it to raise its guidance yet again. Q4 revenue is now expected to arrive at $990 million at the midpoint, up from the previously guided $900 million, while non-GAAP EPS guidance has also been set at $1.93-2.61, well above previous estimates and consensus expectations.
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❖ Clear Secure (YOU) also delivered a triple beat in Q3. Total revenue was $229.2 million (up 15.5% year-over-year) and total bookings came in at $260.1 million (up 14.3%), both exceeding guidance. Adjusted EPS rose 16% YoY to $0.29 versus $0.26 expected. YOU posted net income of $45.1 million (19.7% margin), operating income of $52.6 million (23.0% margin), and adjusted EBITDA of $70.1 million (30.6% margin).
Despite reporting net cash used in operating activities of $47.3 million and free cash flow of negative $53.5 million (due to an annual $229 million payment to its credit card partner), CLEAR raised its full-year free cash flow guidance to at least $320 million. The company guided for Q4 revenue of $234-237 million and bookings of $265-270 million (midpoint growth of 14.2% and 16.8%, respectively), reflecting strong ongoing momentum. Management expects continued margin expansion and accelerating bookings growth, driven by both Clear Plus and Clear One.
Following these strong results, we are removing CLEAR from our “Under Review” bracket and returning it to the Portfolio lines.
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❖ Backblaze (BLZE) saw its shares tumble about 33% on Thursday, with trading even halted for a while due to excess volatility, as investors reacted negatively to its restructuring plan and reduced guidance.
Total revenue rose 14% year-over-year to $37.2 million and non-GAAP EPS surged to $0.03, a new record, from a loss of $0.10 a year ago – with both handily beating estimates. Top-line growth was led by a 28% YoY surge in the B2 Cloud Storage segment, while Computer Backup revenue was $16.5 million, flat YoY. Adjusted EBITDA was $8.4 million, or 23% of revenue.
Despite the strong Q3 results, BLZE cut its fourth-quarter revenue forecast to $37.3-37.9 million from analyst expectations of about $38.2 million and narrowed its full-year outlook to $145.4-146 million, compared to the prior $145-147 million range. Backblaze explained that a large AI customer – which had driven strong growth earlier in the year – is trimming spending more than expected for Q4. Larger enterprise deals are also taking longer to close as BLZE moves upmarket with bigger, more complex contracts. The company is now focusing on a “phase 2” go-to-market transformation aimed at strengthening its outbound sales execution. This shift is behind the decision to embark on the restructuring program, slated to cost up to $6 million, and aimed at reallocating sales and marketing resources to deepen enterprise capabilities and target AI-driven segments.
Backblaze’s Q3 results showed strong operational progress and improving financial metrics, but also revealed several challenges. The restructuring may serve as a future growth catalyst if executed well, though it introduces short-term uncertainty. Given these factors, the stock is likely to remain volatile, and we will monitor whether BLZE can regain lost ground – as it has in the past.
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❖ Arlo Technologies (ARLO) delivered another outstanding quarter fueled by its services business, with both sales and earnings above expectations. The company added 281,000 paid accounts (well above its target range), bringing total paid accounts to 5.4 million and driving total ARR to $323 million, up 34% year-over-year. Adjusted EBITDA stood at $17.1 million – also above forecasts – up 50.3% YoY, with an adjusted EBITDA margin of 12.2%. ARLO also posted record GAAP EPS of $0.07 and non-GAAP EPS of $0.16 (up over 45% YoY).
This strong performance was driven largely by 29% year-over-year growth in subscription services, which rose to 57.3% of total revenue, up from 45% the prior year. GAAP and non-GAAP subscription and services gross margins surged to record levels of 84.5% and 85.1%, up 780 and 770 basis points YoY, respectively. Arlo ended the quarter with $165.5 million in cash and short-term investments, strong free cash flow generation, and an improving operating margin.
For Q4, Arlo projects revenue around $136 million at the midpoint, in line with consensus, and expects adjusted EPS of $0.16, slightly above analyst estimates.
Despite these strong results and a solid outlook, the stock has declined pre-market as investors appear to take profits amid broad tech-sector anxiety following a strong rally that lifted valuations to elevated levels.
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❖ Innodata (INOD) spiked pre-market after releasing a set of better-than-expected results and reaffirming ambitious guidance. Q3 revenue rose 20% year-over-year to a quarterly record of $62.6 million. For the nine months ending September 30, 2025, revenue surged 61% to $179.3 million. Adjusted EBITDA rose 17% YoY for the quarter and 106% over the first three quarters of 2025. Net income for Q3 was $8.3 million, or $0.24 per share, down from $17.4 million the previous year, which had benefited from large tax-related gains. The company ended the quarter with $73.9 million in cash and short-term investments.
Innodata reiterated its forecast of 45%+ revenue growth in 2025 and anticipates potentially transformative growth in 2026, driven by strong momentum and expanding investment areas. The company confirmed significant contract wins and a $68 million pre-training data pipeline across five customers, a $25 million initial federal project (with more expected), and a $6.5 million potential expansion with a Big Tech client – most revenue expected to flow through 2026. Moreover, six new initiatives are underway, including pre-training data, federal AI, sovereign AI, enterprise AI, Agentic AI, and model safety, with $9.5 million in capability-building investments planned for 2025 to support future growth.
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❖ Atlanticus Holdings (ATLC) is expected to release its earnings results later today.
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Under Review
❖ We are keeping Monday.com (MNDY) under review following a strong decline over the past three months and persistent weakness across the software sector, despite strong fundamentals and analyst support.
The stock has dropped roughly 15% year-to-date, reflecting investor rotation out of SaaS names rather than any deterioration in company performance.
MNDY’s Q2 results were solid, with revenue and non-GAAP EPS surging past analyst estimates, while enterprise customer additions remained robust. Guidance for Q3 and full-year 2025 points to ~26% annual growth with a 13% operating margin and 26-27% FCF margin. Yet the stock sold off sharply after management’s cautious tone on growth and margin trajectory, with R&D spending rising and GAAP operating profit slipping into negative territory.
The market reaction reflects broader fears that “AI is eating software,” compressing multiples for even high-quality SaaS firms. Monday.com’s high forward P/E (~47) leaves little margin for error, and investors remain sensitive to any hint of slowing ARR or margin compression. While the company’s new AI tools – Monday Magic, Agents, and expanded automations – could meaningfully boost enterprise adoption, monetization is not yet visible in forecasts.
Analysts remain overwhelmingly bullish, with consensus price targets averaging $276 (45%+ upside) and revenue growth expectations of 22-30% through 2028. Institutions like JPMorgan have doubled their stakes this year, signaling confidence in the long-term story. But sentiment in the software space remains fragile, and MNDY continues to trade near $190 – a level that could either prove to be a base or a breakdown zone if momentum fails to stabilize.
Monday.com remains a fundamentally strong, cash-rich growth company with world-class products and execution. However, given the sharp technical deterioration and continued sector pressure, we’ll keep MNDY under review until its November 10 earnings report. A confirmed recovery or improving guidance could justify retaining it in the Smart Growth Portfolio – but if the stock fails to regain traction, we’ll likely exit rather than try to “catch a falling knife.”
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This Week’s Top Growth Pick: Allegro MicroSystems (ALGM)
Allegro MicroSystems designs precision sensors and power chips that make motion, energy, and data flow with greater efficiency and control – from electric vehicles and factory robots to data-center power systems. Its silicon sits deep inside the technologies redefining how people move, build, and connect. At its core, Allegro turns physics into intelligence: converting magnetic fields, current, and position into digital signals that drive safer, smarter machines. As industries race toward electrification and automation, ALGM stands at a rare intersection of semiconductor design and real-world transformation – shaping the hardware backbone of the next industrial era.
Source: Allegro MicroSystems, Q2 FY26 Investor Presentation
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A Capella Risoluto
Allegro MicroSystems’ story began in the early 1990s in Manchester, New Hampshire, where a small team of engineers began developing magnetic sensing and power-control chips that could make machines think and move with greater precision. Backed by Japan’s Sanken Electric, the young company blended American innovation with Japanese manufacturing discipline – building its reputation quietly through automotive and industrial components that made systems more efficient, reliable, and responsive. For years, Allegro operated largely under the radar, known inside the semiconductor industry for its dependable “sense-drive-power” expertise rather than headline-grabbing products.
That low-profile era started to change in the 2020s. As industries raced toward electrification and automation, ALGM recognized an opening to reinvent itself – not just as a dependable chipmaker, but as a core enabler of next-generation energy and motion systems. In 2022, it took a decisive step by acquiring Heyday Integrated Circuits, gaining advanced high-voltage gate-driver technology built for the emerging world of GaN and SiC power systems. A year later, the company made its largest strategic move yet – the $420 million acquisition of Crocus Technology, bringing in world-class tunnel-magnetoresistance (TMR) sensor IP and more than 200 patents. Together, these deals built the technical foundation for Allegro’s modern growth strategy across automotive, industrial, and clean energy markets.
In 2024, Allegro took another decisive step toward autonomy when it repurchased roughly 39 million shares from long-time parent Sanken Electric. The transaction reduced Sanken’s ownership from a controlling majority to about one-third, expanded Allegro’s public float by nearly 30%, and marked the company’s first real break from its legacy corporate structure. The move gave Allegro greater flexibility in strategy, capital allocation, and governance – symbolizing its evolution from a subsidiary supplier into an independent semiconductor innovator poised for scale.
At the same time, the company has been strengthening its U.S. manufacturing base through its long-standing stake in Polar Semiconductor, the Minnesota wafer-fabrication facility that produces many of its power and sensor chips. ALGM has been reinvesting there to expand domestic 200 mm wafer capacity and secure its supply chain in alignment with U.S. semiconductor-resilience initiatives. It also increased R&D spending to push sensing and power-management boundaries and began collaborating with engineering and design partners worldwide to co-develop next-generation automotive systems, particularly in EV powertrains and safety applications.
In less than a decade, Allegro has transformed from a niche analog supplier into a growth-driven semiconductor innovator. Its evolution mirrors the broader industrial shift toward electrification, automation, and intelligence – positioning the company at the center of how machines, vehicles, and energy systems are built for the future.
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Sempre Avanti
Allegro MicroSystems sits at the heart of the global shift toward smarter, electrified machines. Its semiconductors don’t just measure or regulate power – they make movement itself intelligent. The company builds its business around two tightly connected pillars: magnetic sensors and power integrated circuits, technologies that translate physical motion and current into digital precision. Together they form the hidden control layer behind electric vehicles, industrial automation, and data-center infrastructure – three of the fastest-growing markets in modern electronics.
Revenue may fluctuate quarter to quarter, but ALGM’s model carries built-in recurrence. Once a chip design is qualified in an automotive or industrial platform, production typically runs for several years, ensuring predictable demand and follow-on volume.
Automotive applications generate about 73% of revenue, led by Allegro’s expanding role in electric mobility and advanced driver assistance. Its chips help power steering systems, traction inverters, and safety sensors that interpret motion and torque in real time. As vehicles adopt more ADAS features and electrified components, Allegro’s content per vehicle rises sharply. That dynamic is key: even if global car production stays flat, the silicon content inside each vehicle is increasing, and Allegro is winning those incremental design slots. Analysts estimate the company’s automotive opportunity at roughly $8 billion by 2030, growing in the high single digits – with Allegro steadily broadening its share through platform wins across leading EV and hybrid programs.
The industrial segment, roughly 27% of sales, has become Allegro’s most dynamic growth engine. Its current-sensing and motor-driver ICs are used in robotics, renewable energy systems, and automated manufacturing. Recently, ALGM extended that reach into AI data centers, where its isolated gate drivers and high-bandwidth current sensors help manage the immense power and heat loads of AI servers. These racks consume nearly three times more energy than traditional ones – and Allegro’s technology sits directly in the path of that electrification trend.
Much of its differentiation stems from tunnel magnetoresistance (TMR), a proprietary sensing technology acquired with Crocus Technology in 2023. TMR enables faster, more efficient magnetic sensing than legacy Hall-effect designs, giving customers tighter control, smaller footprints, and lower losses. The 2025 launch of Allegro’s 10 MHz TMR current sensor – the first of its kind – underscored that edge and opened new doors in EVs, robotics, and high-performance computing.
The company now serves more than 10,000 customers worldwide, supporting this global expansion with a balanced manufacturing strategy. It maintains a long-standing stake in Polar Semiconductor in Minnesota, which produces many of its power and sensor wafers in the U.S., while also operating a localized “China-for-China” model to serve Asian customers closer to end demand. This dual setup reduces supply-chain risk and ensures continuity across regions even as trade and policy environments shift. At the same time, Allegro benefits from the One Big Beautiful Bill (OBBB) fiscal package, which extends R&D tax expensing and bonus depreciation for domestic investment. Those provisions strengthen its cash flexibility and directly support the ongoing expansion of U.S. engineering capacity and future wafer-fabrication upgrades.
Across its core verticals – automotive electrification, ADAS, robotics, clean energy, and data centers – Allegro’s serviceable addressable market is estimated near $12 billion, expanding roughly 9% a year. With only a modest share today and technology that directly maps to the most powerful secular trends in electronics, ALGM’s runway for growth remains long, and the engines powering it are still just revving up.
Source: Allegro MicroSystems, Q2 FY26 Investor Presentation
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Allegro Accelerando
Allegro has moved firmly into an upcycle, posting its fourth straight quarter of beating both revenue and non-GAAP EPS expectations. In fiscal Q2 2026, reported on October 30, 2025, the company delivered net sales of $214.29 million, up 14.4% year-over-year, near the top of its guidance range and modestly above analyst estimates. Growth was fueled by both the industrial segment, up 23% year-over-year to $58.45 million, and the automotive segment, which rose 12% to $155.84 million, with e-mobility sales up 21%.
Within industrial, data-center revenue climbed above 7% of total sales to about $15 million – a record contribution – driven by AI-server power-architecture upgrades, surging demand for high-speed TMR current sensors, and rising shipments of fan-driver ICs. These components now underpin cooling and energy-management systems in next-generation AI data centers, where ALGM estimates per-rack content rising from roughly $150 in traditional servers to $425 in GenAI systems.
After a brief inventory-driven correction in early FY 2025 – when revenue and EPS dropped sharply as customers worked through excess stock that had been hoarded post-Covid – the company’s fundamentals are now strongly rebounding. Non-GAAP EPS reached $0.13, versus consensus of $0.12 and up 62.5% year-over-year. GAAP EPS turned positive at $0.03, a clean reversal from a $0.18 loss in the prior year and Allegro’s first GAAP-profitable quarter in six.
Profitability expanded in tandem. Gross margin improved to 49.6%, up more than two points year-over-year, while non-GAAP operating margin rose to 13.9% from 11.7%. Operating expenses were $76 million – slightly above guidance due to variable compensation and currency effects – but higher efficiency and richer product mix offset the cost pressure. EBITDA strengthened to $22.85 million, reflecting gains from the company’s shift toward higher-margin sensing and gate-driver solutions.
Cash generation remains healthy. Operating cash flow and free cash flow stayed positive for the quarter, aided by tighter inventory management and moderated capital spending. Allegro ended the quarter with $117 million in cash and equivalents and $309 million in total debt, keeping net leverage below 2x trailing EBITDA. Management continues to prioritize deleveraging and U.S. manufacturing investment, including ongoing reinvestment in its Polar Semiconductor joint facility.
ALGM issued another guidance increase – its fourth consecutive quarter of upward revisions – confirming a broad-based resurgence. For Q3 FY 2026, the company projects revenue of $215-225 million (up about 24% year-over-year), gross margin of 49-51%, and non-GAAP EPS of $0.12-0.16. With strength across automotive e-mobility, industrial automation, and data centers, Allegro is powering forward with the financial engine of a company built for the next growth cycle.
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Con Forza Crescendo
Allegro’s closest peers span the analog and power semiconductor landscape with exposure to automotive and industrial end markets. Its most comparable U.S.-listed names include Diodes Incorporated and Alpha & Omega Semiconductor – both mid-cap power and mixed-signal chipmakers serving similar applications in electrification and automation – as well as Sensata Technologies, a major player in sensors and electrical protection for vehicles and industrial systems. For scale comparison, Monolithic Power Systems serves as a benchmark – a larger, best-in-class analog provider whose premium valuation reflects the operating and growth trajectory that Allegro aims to replicate as it expands.
Among these peers, ALGM has posted the second-strongest share gains after Monolithic Power Systems, rising more than 24% year-to-date. Despite returning over twice the Nasdaq Composite’s gain this year, the stock still has room to run, with analysts projecting about 40% upside over the next 12 months.
Although Allegro’s earnings rebound is relatively recent, expectations continue to climb as it gains altitude. Analysts see growth accelerating on robust automotive and data-center cycles, underpinned by solid execution and expanding design wins. The company’s push into data centers is becoming a major earnings driver, fueled by AI-server power-architecture upgrades that are increasing demand for advanced ICs and high-voltage gate drivers. Income from other end markets is also accelerating, supported by strong traction in e-mobility, ADAS, and robotics. As a result, forecasts point to high-double- or even low-triple-digit earnings growth over the next two years.
Given this outlook, Allegro’s valuations look reasonable. While its multiples stand above the broader technology median – typical for a high-growth analog firm – the stock trades at or below peer averages on non-GAAP trailing and forward P/E, EV/Sales, and forward EV/EBITDA. Moreover, with a forward PEG of about 1.26, ALGM is valued in line with mid-cap analog peers – a level that prices in healthy expansion but not yet the full potential of its rising margins and growing addressable markets.
Allegro is emerging from its cyclical trough with the wind at its back – faster earnings growth, expanding design wins, and valuation multiples still in the mid-range of its peers. If execution keeps pace with opportunity, the stock’s recent rally may prove less a peak than the overture to a much longer run-up.
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To Sum It All Up
Allegro MicroSystems is a growth story wired for the age of electrification and intelligence. Once a dependable niche supplier, it has emerged as a key enabler of smarter, more efficient machines – from electric vehicles and industrial robots to AI-powered data centers. Its transformation is both technological and strategic, pairing next-generation magnetic sensing with power-management innovation to capture rising silicon content in every moving system. Recent execution shows the shift is real – stronger margins, sharper focus, and accelerating design wins across high-growth end markets. Yet the market still values Allegro like a cyclical analog player rather than a scaling semiconductor platform. With expanding R&D, deep customer stickiness, and global reach, Allegro is entering its next movement – composed for both durable growth and high-voltage returns.
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Smart Growth Portfolio
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Disclaimer
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