Xilinx outperforms analyst FQ4 revenue, profit expectations

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Xilinx’s fiscal fourth-quarter earnings beat Wall Street expectations in both revenue and profits despite the deleterious impact of COVID-19. However, it still experienced an overall year-over-year decline.

Despite the decline, the semiconductor maker is well-positioned to return to growth soon thanks to its hearty finances, robust portfolio, and a recent corporate partnership.

Bright Spots in a Dark Quarter

In the March period, Xilinx recorded $756 million in revenue and adjusted earnings per share (EPS) of $.78, which Zacks Equity Research notes exceeded consensus market analyst estimates. However, the company’s sales and EPS tumbled by 9 and 17 percent, respectively, from the same quarter last year. Also, the firm’s FQ4 adjusted net income of $193 million represented a 20 percent annual shortfall.

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That said, Xilinx saw quarter-over-quarter growth in revenue, adjusted EPS, as well as net and operating income. Indeed, the firm grew its aerospace and defense, industrial, and transitional memory extension business by 15 percent from 2019. The company also experienced a 77 percent year-over-year jump in data center revenue due to COVID-19 causing increased bandwidth consumption.

The component company also managed to end the 2020 fiscal year with a record $3.16 billion in sales. In a statement, CEO Victor Peng said his firm persevered despite challenges like the Sino-American trade war and COVID-19 because of “the strength and diversity of our business.”

Looking Forward

Xilinx offered guidance that it would generate $660 million to $720 million in revenue in the fiscal first quarter of 2021. Last year, the company reported sales of $849.6 million, which indicates it expects a year-over-year decline of 22.3 or 15.2 percent. The firm’s outlook is consistent with recent negative annual forecasts of IDC and Gartner regarding the global semiconductor industry.

The component maker also declined to offer full-year earnings expectations due to COVID-19 related uncertainty.

That said, Xilinx has the capacity to affect a meaningful mid-term recovery. It exited the previous fiscal year with $2.27 billion in cash on hand and operating cash flow of $345 million, up 9 percent from 2019. Xilinx’s sizable war chest will enable it to endure a proactive downturn in sales of its core products.

In addition, the explosive double digital growth of its data center business and the predicted continued demand for server components could mitigate its losses.

Lastly, the San Jose-based semiconductor maker recently entered into a partnership with Samsung to produce optimized 5G networking gear. As providers in China and the United States are accelerating their fifth-generation mobile data networks rollouts, the two corporations’ joint venture should prove quite lucrative.

Given its ample resources, product variety, and strategic alliance, Xilinx should return to expansion by this time next year.

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