Why Xilinx, Inc. (NASDAQ:XLNX) Might be the Most Important Earnings Report this Season

Xilinx, Inc. (NASDAQ:XLNX) has offered up one of the least discussed, but perhaps most important earnings reports so far this season. In the face of extreme skepticism following terrible guidance and calls out of TXN, AMD, and MKSI, XLNX landed a very nice quarter, with a top and bottom beat and raise.

The big difference between XLNX and the other chip plays appears to be its connection with wireless and the 5G shift. Barclays raised its price target in reaction to the quarter, moving it from $60 to $75 PT. The reasoning given was the belief in “many of the positive drivers investors have been waiting for aligned this quarter, and XLNX should be one of if not the best performers through this earnings period.”

Xilinx, Inc. (NASDAQ:XLNX) trumpets itself as a company that designs and develops programmable devices and associated technologies worldwide.

Its programmable devices comprise integrated circuits (ICs) in the form of programmable logic devices (PLDs), such as programmable system on chips, and three dimensional ICs; adaptive compute acceleration platform; software design tools to program the PLDs; software development environments and embedded platforms; targeted reference designs; printed circuit boards; and intellectual property (IP) core licenses covering Ethernet, memory controllers, Interlaken, and peripheral component interconnect express interfaces, as well as domain-specific IP in the areas of embedded, digital signal processing and connectivity, and market-specific IP cores.

The company also offers development boards; development kits, including hardware, design tools, IP, and reference designs that are designed to streamline and accelerate the development of domain-specific and market-specific applications; and configuration products, such as one-time programmable and in-system programmable storage devices to configure field programmable gate arrays. In addition, it provides design, customer training, field engineering, and technical support services.

The company offers its products to electronic equipment manufacturers in sub-segments, such as wireline and data center, wireless, aerospace and defense, test and measurement, industrial, scientific and medical, automotive, audio, video and broadcast, and consumer. Xilinx, Inc. sells its products through a network of independent distributors; and through direct sales to original equipment manufacturers and electronic manufacturing service providers, as well as independent sales representatives.


Coming Up Roses

As noted above, XLNX just announced a very important quarter, with a top and bottom beat and raise just as the market world had decided the chip stocks were spiraling into the cyclical abyss.

We noted above that Barclays saw things steadily ramping up ahead. The firm further noted Communications drove the upside ($262M vs. our prior $216M) led by robust growth in Wireless, as customers are ramping 5G (RFSoC) sooner than expected (albeit off small base) and ZTE had a meaningful contribution. Datacenter and TME was also ahead ($157M vs. our prior $147M) with particular strength from Data Center (40%+ Q/Q).

Cowen chimed in as well, maintaining a Market Perform rating and $81 PT. The firm believes Xilinx printed a near pitch-perfect quarter despite an ugly semis backdrop and the firm expects shares to react accordingly. Trading at a large premium to peers, however, the firm sees risk/reward as balanced and await further signs of datacenter traction.

Needham reiterated Buy rating and $100 PT. They believe Xilinx’s transition to a platform company has enabled the company’s entry into new growth markets thereby reducing exposure to specific industry downturns. The firm notes Comms strength was driven by LTE upgrades, 5G trials and early 5G deployments, while the growth in DC & TME was driven by increasing adoption of Xilinx products in the Data Center and emulation and prototyping demand was able to offset weakness in the semiconductor test market.

In other words, the data was great, the guidance was great, and analysts have basically jumped on the bus here in reaction.

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