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Is Xilinx the NVIDIA of 2019?

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Xilinx’s earnings growth

Xilinx’s (XLNX) stock is the best-performing semiconductor stock of 2019 with a 46% YTD gain. The stock’s momentum is being driven by strong double-digit revenue and earnings growth in fiscal 2019, which ended March 29, 2019. The company is witnessing strong growth momentum in the communications and data center markets with the growing adoption of 5G (fifth generation).

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Revenue growth trend

As seen from the above graph, Xilinx’s revenue growth started to accelerate from the first quarter of 2018. Revenues rose 10.4%, 13.5%, 19%, and 33.7% YoY in the four quarters of 2018. Xilinx’s revenue growth rate was higher than that of rival Altera, which is now a part of Intel’s (INTC) PSG (programmable solutions group). On the other hand, NVIDIA’s (NVDA) revenue growth rate decelerated throughout 2018.

Xilinx expects its revenue to rise 22.6% YoY in the first quarter of calendar 2019, whereas NVIDIA expects revenue to fall 31% YoY during the same quarter. Altera’s revenue is expected to grow 23% YoY in the first quarter.

How will 2019 be for Xilinx?

Xilinx’s double-digit growth comes at a time when the overall semiconductor demand is weak and data center capital spending has slowed. Its calendar 2018 revenue rose 16% YoY, whereas Intel’s and NVIDIA’s annual revenue rose ~13% and ~21%, respectively. 2019 is likely to be different, and Xilinx may overtake rivals based on revenue growth rate.

Analysts expect Intel’s 2019 revenue to grow 1% and NVIDIA’s to fall 4.7%. Analysts expect Xilinx’s 2019 revenue to grow 11% YoY. Most chip companies expect demand to revive in the second half of 2019 with new product launches and demand uptick by end consumers. For Xilinx, a revival in demand would mean accelerated revenue growth, especially driven by the 5G rollout.

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