Dialog Semiconductor beats internal Q3 forecast by 7 percent

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Dialog Semiconductor acquires IIoT firm Adesto Technology for $500 million.
Image: Dialog Semiconductor

Dialog Semiconductor’s recently published third-quarter earnings report revealed it topped its internal revenue forecast by 7.3 percent. However, the firm ended the period with an operating loss related to its acquisition of Adesto Technology.

Looking forward, the company anticipates growing its business in the fourth quarter due to increased demand from its consumer electronics clients.

Dialog’s Mixed Q3 Financial Results

Last period, Dialog generated $386.4 million in revenue, which moderately exceeded the midpoint of the guidance it issued in August. The firm also grew its quarterly gross income by 28.71 percent sequentially. But on an annual basis, its intake declined by 5 percent.

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The chipmaker reported an operating loss of -$7 million last period versus an $83.9 million profit in Q3 2019.

Multiple factors contributed to Dialog’s negative results, including a sharp increase in operating costs. From last year, the firm’s capital expenditures rose by 24.48 percent. It also incurred a $44.9 million impairment loss connected to its purchase of Adesto.

In February, the chipmaker announced it would acquire the Industrial Internet of Things (IIoT) technology firm for $500 million. As analysts predict the IIoT market will reach $607.3 billion by 2025, Dialog’s investment will likely pay off over time. But because Adesto’s forecast took a COVID-19 related hit, its parent company also felt the impact.

Personal Electronics Demand to Fuel Growth

For the current period, Dialog offered a revenue range of $380 million to $430 million. Based on its Q4 2019 results, the midpoint of the company’s guidance estimates annual growth of 6.41 percent.

CEO of Dialog, Dr. Jalal Bagherli, said his firm had observed a holistic increase in demand for products in Q4.

The company noted a spike in interest for its custom mixed-signal products from its largest customer, Apple. In an earnings call, Dr. Bagherli noted the electronics giant’s orders have remained strong in Q4. As the corporation recently refreshed its handset, smartwatch, and tablet computer lines, it makes sense that its suppliers are still reaping the benefits.

Dialog also noted demand for its power management integrated circuit (PMIC) and Bluetooth low energy (BLE) products ramped up recently. The company attributes that increase to mounting end-market demand for new notebooks, headphones, and fitness trackers. It named fitness tracker market stratification, meaning products targeting different generational demographics, as a growth driver.

In May, MarketsandMarkets published a forecast that indicated the healthcare wearables market would expand from $18.4 billion in value this year to $46.6 billion by 2025. The research group explained technological advancement and mounting awareness of the importance of fitness are fueling the trend.

In addition, a recent study suggesting fitness trackers played a part in enhancing COVID-19 infection prediction. As one market leader worked to bolster the visibility of those findings, early health problem detection will likely become a key in wearables marketing talking points going forward.

Dialog should see a return to growth in the short-term because of its client relationships and valuable catalog. And in the long-term, its recent acquisitions and keen market observation could push its revenue intake to new heights.

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