Categories Analysis, Earnings, Technology

Will wireless prowess help Xilinx (XLNX) overcome China issues in Q2?

Xilinx (NASDAQ: XLNX) disappointed the market a few months ago when it issued below-consensus guidance for the September-quarter and the stock suffered badly, despite the tech firm reporting impressive results for its first quarter.

The company, which develops programmable microchips, will be publishing its second-quarter results on Wednesday at 4:20 pm ET. Analysts are looking for earnings of $0.90 per share for the quarter, up 7% from last year. The consensus revenue forecast of $824.84 million represents a 16% year-over-year increase. The estimate, after the recent downward revision, is broadly in line with the management’s expectation.

China Woes

Xilinx is one of the US firms hit hard by the curbs imposed by the government on China-based tech firms. In recent months, shipments were affected by the restrictions on exports to customers in China, especially Huawei.

Related: Xilinx Q1 2020 Earnings Call Transcript

Interestingly, the company has been able to maintain shipment volumes in the Asian market, despite the China setback, mainly due to the strong demand associated with 5G deployments. However, the trade-related uncertainties and the resultant slowdown in Chinese industries, such as automobile, remains a concern for US tech firms including Xilinx.

Focus on Wireless

The growing global demand for wireless products is good news for Xilinx and the trend will have a positive effect on profitability in the to-be-reported quarter.

Given the steady demand for its Zynq platform, Xelinx can count on it to drive growth going forward, in addition to the UltraScale+ family. Also, the ongoing recovery of the data center business, after a long lull, might add to sales growth this time.

Q1 Performance

For the first quarter, the San Jose, California-based tech firm reported a 29% growth in earnings to $0.97 per share. Revenues grew 24% during the three-month period, aided by strong performance by the the wireless segment.

Racing Ahead

Xilinx has been making inroads into the microprocessor space ruled by Intel (INTC), giving the latter tough competition in AI-based datacenter offerings. Intel will be publishing its third-quarter results Thursday after the closing bell.

Also see: Why is AMD a better investment option?

Xilinx’s stock slipped to a new low in July, paring most of its early gains this year. The shares, which this week traded broadly at the levels seen a year earlier, grew about 22% in the past twelve months.

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