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Xilinx Looks to Improve Its Revenue Growth in Fiscal 2018

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Xilinx’s revenue growth

In the previous part of this series, we saw that Xilinx (XLNX) could benefit from the technology shift toward parallel computing and IoT (Internet of Things). The first signs of growth were seen in its fiscal 4Q17 earnings[1. fiscal 4Q17 ended March 2017] when the company reported 7% YoY (year-over-year) revenue growth after growing at an average annual rate of 1% over the past five years.

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Fiscal 4Q17 revenues

In fiscal 4Q17, Xilinx’s revenues rose 7% YoY, or 4% sequentially, to $609.5 million, beating analysts’ expectations of ~$605.3 million and within its guidance range of $590 million–$620 million. The company’s revenue growth was driven by 20% sequential sales growth of its Zynq SoC (system-on-chip). Intel’s (INTC) revenues from its Altera business rose 1% sequentially during the same quarter.

Revenue growth drivers

In fiscal 4Q17, Xilinx earned more than $200 million in revenues from its 28nm (nanometer) products and $60 million in revenues from its 20nm products. Its 28nm products still contribute significantly to the company’s revenues because most FPGA (field programmable gate array) applications have long development cycles. Sales of 16nm products grew significantly to a new record, driven by strong demand from Amazon (AMZN) Web Services.

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The product mix was more inclined toward its Advanced Products segment—UltraScale+, Ultrascale, and 7-series products—as they accounted for 49% of the company’s revenues in fiscal 4Q17. Advanced Products sales rose 9% sequentially to $298 million, of which $61 million came from its Zynq SoC platform.

Xilinx serves eight end markets, five of which reported growth. The largest growth was reported by the Automotive and Test Measurement and Emulation segments, and revenues from both segments reached a new record.

Fiscal 1Q18 revenue guidance

For fiscal 1Q18, Xilinx expects its revenues to grow 1% sequentially to $615 million at the midpoint. The company expects strong growth in communications to be offset by declines in its Broadcast, Consumer, and Automotive segments. It expects demand from Industrial, Aerospace, and Defense to remain sequentially flat.

Fiscal 2018 revenue guidance

Xilinx’s fiscal 2017 revenues rose 6% YoY to $2.4 billion, driven by a 45% increase in revenue from Advanced Products. The company expects its revenues to grow 4% YoY to $2.5 billion in fiscal 2018.

Xilinx’s growth rate is currently slow, but it could increase significantly after 2020 as 5G deployment begins and autonomous cars hit the road.

Next, we’ll look at the company’s profitability.

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