Silicon Laboratories (NASDAQ:SLAB) announced second-quarter 2017 results on Wednesday morning, easily exceeding its latest guidance and marking its sixth straight quarter of record Internet of Things segment revenue.

With shares of the fabless semiconductor specialist up 11% today to close at a fresh 52-week high, let's dig deeper to see how Silicon Labs ended the first half of the year, and what to expect going forward.

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Silicon Labs results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Growth

Revenue

$190.1 million

$174.9 million

8.7%

GAAP net income

$16.6 million

$15.6 million

6.5%

GAAP earnings per share (diluted)

$0.38

$0.37

2.7%

Data source: Silicon Laboratories. 

What happened with Silicon Labs this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition costs, net income was just under $34 million, or $0.79 per share.
  • By comparison, Silicon Labs' guidance (provided last quarter) called for lower revenue of $184 million to $189 million, lower GAAP earnings per diluted share of between $0.27 and $0.33, and lower adjusted earnings per share of between $0.68 and $0.74.
  • Internet of Things (IoT) revenue increased 27% year over year to $98 million, representing more than half of overall revenue for the first time.
  • Infrastructure revenue rose 7% year over year to $38 million, excluding $5 million related to the sale of patents during the quarter.
  • Broadcast revenue fell 4% year over year to $37 million.
  • Access revenue declined 10% year over year to $17 million.
  • New product launches during the quarter included the following:
    • the new EFM32GG11 Giant Gecko microcontroller, featuring more advanced capabilities and a larger memory footprint than any other competing solution in the low-power microcontroller unit market.
    • the new CP2615 USB-to-I2S bridge chip, a turnkey solution for digital audio data transfer.
    • the introduction of Silicon Labs' Si54x Ultra Series line of crystal oscillators, an ultra-low jitter frequency-flexible solution with a broad range of networking and communications applications.

What management had to say

Silicon Labs CEO Tyson Tuttle stated:

Five years ago, we accelerated our focus on the Internet of Things through a combination of organic investment and strategic acquisitions. This quarter, IoT surpassed 50% of total revenue, driving target model performance in year-on-year product revenue growth, gross margin, and operating income. Our strategy is coming together as we focus on core strategic growth drivers and capture share in target markets.

Looking forward

In the current (third) quarter of 2017, Silicon Labs sees revenue of $193 million to $199 million, GAAP diluted earnings per share of between $0.35 and $0.41, and adjusted earnings per diluted share of between $0.78 and $0.84. By comparison, investors were anticipating third-quarter revenue of just $192.8 million and adjusted earnings of $0.78 per share.

With shares of Silicon Labs already up more than 35% year to date leading up to this report, this was another simple case of the company under-promising and over-delivering, with the help of its thriving IoT business. 

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Silicon Laboratories. The Motley Fool has a disclosure policy.