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Xilinx Posted Weak Guidance as Macro Uncertainties Prevailed

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Xilinx posted weak guidance for fiscal 4Q16

In the previous part of this series, we saw that Xilinx’s (XLNX) revenues were affected by the weak macroeconomic environment that has affected the entire technology industry. However, the company is banking on new products to drive growth in major sectors such as Communication, Automotive, and Industrial.

Like Advanced Micro Devices (AMD), Intel, (INTC), and Linear Technology (LLTC), Xilinx also posted weaker guidance for fiscal 4Q16.

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Revenue guidance

For fiscal 4Q16, Xilinx expects its revenue to remain flat at the fiscal 3Q16 level of $566 million, which is consistent with the consensus estimate. The company expects the fiscal 4Q16 sales to be driven by strong growth in Automotive, which is expected to post 30% YoY (year-over-year) growth in fiscal 2016. However, this growth would be offset by a decline in Industrial and Aerospace.

Overall, the Communications segment would also be down during the quarter as growth in mobile infrastructure would be offset by a decline in wired. At the fiscal 3Q16 earnings call, Xilinx’s chief executive officer, Moshe Gavrielov, noted, “Everything until 2020 is likely to be of a smaller scale and the next big surge will be driven by 5G.”

On the technology front, the company expects its 20nm sales to exceed its quarterly target of $25 million in fiscal 4Q16, driven by demand from Test and Measurement, Defense, and Consumer.

Profit guidance

For fiscal 4Q16, Xilinx expects to post a gross margin in the range of 68%–69%, almost similar to the fiscal 3Q16 level of 68.5%. It expects to reduce its operating expenses from $227.6 million in fiscal 3Q16 to ~$220 million in fiscal 4Q16.

The Technology Select Sector SPDR ETF (XLK) has ~10% exposure in semiconductor stocks, including 0.34% in XLNX, 3.13% in INTC, and 0.28% in LLTC.

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