Cypress Semiconductor (CY) has been in the news as it is being acquired by Germany’s Infineon Technologies for about $10 billion. With this acquisition, Infineon looks to overtake NXP Semiconductors (NXPI) to become the world’s largest automotive chip company. It expects to complete the acquisition by the end of this year or early next year.
Cypress released its second-quarter earnings results on Thursday, beating analysts’ estimate. This week, the company’s stock rose 2.1% ahead of its earnings release. TSMC, Texas Instruments (TXN), and Teradyne also beat analysts’ earnings estimates, reviving investor optimism.
Cypress combines its memory, microcontroller, and connectivity offerings to deliver embedded solutions to the fast-growing automotive and IoT (Internet of Things) markets. In April, Cypress divested its NAND (negative AND) joint venture with SK Hynix, reducing its memory revenue significantly.
Second-quarter earnings highlights
In the second quarter, Cypress’s revenue fell 14.7% YoY (year-over-year) and 1.3% sequentially to $532.2 million. The company beat its own midpoint revenue guidance of $530 million and analysts’ estimate of $531 million. Its revenue fell because of the company’s divestment of its NAND business, which contributed $49.5 million of Cypress’s revenue last year. After adjusting for the NAND business, Cypress’s revenue fell 7.4% YoY but rose 4.8% sequentially in the second quarter.
Even though the company’s revenue fell, its non-GAAP gross margin expanded by 110 basis points YoY in the second quarter. The gross margin improved as its product mix excluded narrow-margin NAND chips. However, its lower revenue dragged down its non-GAAP EPS, which fell 13.3% YoY to $0.52.
Cypress sees growth in automotive
Cypress’s IoT revenue fell 6% YoY but rose 30% sequentially in the second quarter. The sequential revenue growth came from strong demand for Wi-Fi–Bluetooth combos and standalone Bluetooth. Its revenue from automotive rose 5.2% YoY and 2.2% sequentially despite global auto sales falling due to lower demand in China. Cypress benefited from cars’ growing semiconductor content. Other automotive chipmakers’ revenue also grew YoY in the second quarter: Intel’s Mobileye revenue rose 16% YoY, and Xilinx’s automotive, broadcast, and consumer revenue rose 10% YoY. Xilinx’s auto sales rose less than expected because of weak auto sales in China.
Texas Instruments’ automotive revenue fell by a high-single-digit percentage YoY. We expect NXP’s and NVIDIA’s automotive revenue to grow YoY. Xilinx and Mobileye expect auto sales to grow in the third quarter. Cypress did not provide earnings guidance because it is being acquired by Infineon.