Xilinx FYQ1 in-line, shares sag; CEO Peng trumpets recovery in multiple markets

Shares of programmable chip maker Xilinx fell in late trading Tuesday despite in-line quarterly revenue. CEO Peng urged investors to look past “puts and takes.”

Shares of programmable chip vendor Xilinx were lower by about 3% in late trading Thursday at a $108.27, after the company reported quarterly revenue in line with expectations, helped by sales of data center chips, but said such chips will trend down this quarter as customers "digest" previous orders.

"There was a little bit of complexity" in the results, "and it's a little unfortunate because I don't know how much people got some of the really great strength in our business," said chief executive Victor Peng in a Zoom call with ZDNet following the company's conference call with analysts. 

"Even with this extraordinary pandemic, we are executing better than we did a quarter ago; to me, that's the underlying message."

Revenue in the fiscal first quarter ended in June of $727 million was down by 14.5%, year over year, and was at the mid-point of a range of $720 million to $734 million offered on June 29th, which was itself higher than the prior view at the time of $660 million to $720. 

The revenue figure was in line with the average analyst estimate going into the report.

Earnings per share of 65 cents, excluding some costs, was higher by a penny than the consensus as recorded by FactSet. 

Revenue from chips for data centers more than doubled, year over year, while products that go into the automative and consumer markets fell by 29%. Sales of chips for wired and wireless networks dropped by 33%, year over year, but on a quarter-to-quarter basis, they were up 27%.

The biggest area of complexity in the report was the U.S. Department of Commerce's action in June to ease some restrictions on sales of technology to Chinese firms. That move had spurred a rush to order parts from Xilinx in the quarter. Xilinx increased its outlook for its quarterly revenue on June 29th. 

On Thursday's call, the company said there would be a period of "digestion" of orders in the quarter. That digestion will hold back the level of new sales this quarter for data center and networking parts, the company said. 

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Still, CEO Peng trumpeted the rising trend in many parts of the business. 

"Our first half is doing better, and some portion of it was [commerce regulation], but there was underlying strength independent of that," he told ZDNet.

"In the coming quarter, we see broad strength in multiple markets," said Peng. "In the core vertical markets, everything other than [data center and networking], every sub-market except for industrial is going to be up, and some will be hitting records." 

That rising tide, noted Peng, includes a diverse array of markets for chips, such as consumer technology products, broadcast equipment, and automobiles. 

For the current quarter, the company sees $730 million to $780 million in revenue, higher than the average estimate for $730 million. The company said the outlook was based on "signs of strengthening in multiple markets through the rest of calendar 2020." It also warned, however, that "economic conditions are still quite fluid with a pandemic and use China trade relations."

The company touted its continued strength with "hyperscale" data centers, but after a "record" quarter in Q1, it said, revenue from that business will be "flat to down" in the current quarter. 

Asked how quickly data center and networking will move past the effect of the digestion, Peng told ZDNet, "we are still reluctant to get too far ahead of ourselves" in making predictions because "a lot might happen." 

"With this government and this tension between China and U.S., you don't know what might happen; we want to be prudent and say one quarter at a time."

"But the trend is heading in the right direction," Peng added.

Xilinx plans to offer more perspective during an investor day meeting this fall, which the company expects will be a virtual event. That date is not yet set. 

Shares of Xilinx have risen 14.4% this year, trailing the 18% rise in the Nasdaq Composite Index.