Xilinx (XLNX) Up 2% as Q2 Earnings and Revenues Top Estimates

Shares of Xilinx Inc. XLNX gained 2.2% during Wednesday’s extended trading session after the company reported overwhelming second-quarter fiscal 2022 results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate and marked significant year-over-year improvements as well.

The programmable logic device supplier delivered fiscal second-quarter adjusted earnings of $1.06 per share, beating the Zacks Consensus Estimate by 19.1%. Moreover, the bottom line registered an increase of 29%, year over year, and 12%, sequentially.

Revenues of $936 million surpassed the Zacks Consensus Estimate of $887.7 million and climbed 22%, year on year, and 7%, sequentially, despite the prevalent industry-wide supply-chain challenges. This double-digit year-over-year growth in the top line was mainly driven by strength in the Automotive, Broadcast and Consumer (“ABC”), Wired and Wireless Group (“WWG”) and Aerospace & Defense, Industrial and Test, Measurement & Emulation (AIT) end markets.

However, decline in the Data Center Group sales was a headwind during the fiscal second quarter.

The company noted that pursuant to its pending acquisition by Advanced Micro Devices (AMD), it will not hold an earnings conference call or issue any outlook. Notably, the two companies entered into an agreement in October 2020, under which Advanced Micro Devices had agreed to acquire Xilinx in an all-stock transaction worth $35 billion.

Xilinx, Inc. Price, Consensus and EPS Surprise

Xilinx, Inc. price-consensus-eps-surprise-chart | Xilinx, Inc. Quote

Quarter in Detail

Product wise, the advanced product revenues climbed 28% year over year, contributing 74% to the total revenues. Moreover, revenues from core products (26% of total revenues) were up 8% from the year-ago quarter.

On the basis of end markets, ABC revenues (22% of total revenues) surged 70%, year over year, and 19%, quarter on quarter. This year-over-year uptick mainly resulted from the robust performance in the automotive end market.

WWG revenues (31% of total revenues) increased 42% year over year and 9% sequentially on ramped-up 5G deployments across multiple regions and strength in the wired business.

AIT revenues (40% of total revenues) jumped 13% on a year-over-year basis and 20%, sequentially, chiefly driven by strength across all sub-markets with record performance in the industrial end market and improvement in the aerospace & defense business.

Data Center Group (“DCG”) revenues (9% of total) slid 22% from the year-ago period and 3%, quarter on quarter, mainly due to a decline in the Compute end market, partially offset by strength in the networking business.

Geographically, the company registered an increase of 7% in North America, 23% in the Asia Pacific, 14%in Europe and 124% in Japan, on a year-over-year basis. Sequentially, North America, Europe and Japan regions registered growth of 20%, 16% and 8%, while revenues from Asia declined 3%.

Margins

The non-GAAP gross profit jumped 17% year over year to $644 million, while the gross margin contracted 260 basis points (bps) to 68.8%.

The company posted a non-GAAP operating income of $288 million during the fiscal second quarter, up 33% from the year-ago quarter. The operating margin expanded 260 bps to 30.8%, chiefly on lower operating expenses as a percentage of revenues, which more than muted the impact of lower gross margin.

Balance Sheet and Cash Flow

Xilinx exited the fiscal second quarter with cash, cash equivalents and short-term investments of $3.42 billion compared with the prior quarter’s $3.39 billion. The company’s total long-term debt (excluding current maturities) was $1.49 billion as of Oct2.

Xilinx generated $122 million of cash from operations and $107 million of free cash flow during the reported quarter. In the first-half of fiscal 2022, the company generated operating and free cash flows of $512 million and $480 million, respectively.

Zacks Rank and Stocks to Consider

Xilinx currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader technology sector include Applied Materials AMAT, Advanced Micro Devices AMD and CACI International CACI, all carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and CACI is currently pegged at 19.4%, 44.6% and 5.5%, respectively.

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