Cypress Semiconductor Corporation (NASDAQ:CY) announced better-than-expected second-quarter 2017 results on Thursday after the market closed, highlighting record revenue from each of its key market verticals. But with shares of the embedded-semiconductor company already up 28% year to date, Cypress stock was little changed on Friday as the market absorbed the news.

Let's dig deeper into Cypress Semiconductor's performance to end the first half, as well as what investors can expect from the company going forward.

Cypress semiconductor products on a USB device

Image source: Cypress Semiconductor.

Cypress Semiconductor results: The raw numbers

Metric

Q2 2017

Q2 2016

Year-Over-Year Growth

GAAP revenue

$593.8 million

$450.1 million

31.9%

GAAP net income

($22.9 million)

($519.3 million)

N/A

GAAP earnings per diluted share

($0.07)

($1.65)

N/A

Data source: Cypress Semiconductor. 

What happened with Cypress this quarter?

  • Recall last year's GAAP results included a $488.5 million (or $1.56 per share) non-cash goodwill impairment charge related to Cypress' Programmable Systems Division and the company's merger with Spansion.
  • On an adjusted (non-GAAP) basis -- which excludes items like stock-based compensation and acquisition expenses -- Cypress' net income was $74.7 million, or $0.21 per share.
  • Both the top and bottom lines compared favorably to Cypress' guidance provided last quarter, which called for revenue of $530 million to $560 million and adjusted earnings per share of $0.14 to $0.18.
  • Adjusted gross margin was 40.9%, up from 39.3% last quarter and near the high end of guidance for 40% to 41%.
  • By business segment:
    • Microcontroller and connectivity division (MCD) revenue climbed 13% sequentially to $360.5 million.
    • Memory products division (MPD) revenue grew 9% sequentially to $233.2 million.
  • By geography:
    • Japan comprised 21% of total sales, flat from the first quarter.
    • Europe was 12% of sales, compared to 13% last quarter.
    • The Americas were 12% of sales, up from 11% last quarter.
    • The China and "rest of world" division remained flat on a sequential basis at 55% of total revenue.

What management had to say

Cypress CEO Hassane El-Khoury stated:

Cypress set another revenue record in the second quarter, supported by record revenue in each of our three key growth vectors: automotive, IoT wireless connectivity and USB-C. We remain laser-focused on driving revenue and earnings growth by investing in high-growth end-markets, expanding gross margins and broadening our customer base. It's now been a year since we embarked upon our Cypress 3.0 strategy, focused on selling embedded solutions into markets that are growing faster than the overall semiconductor industry. Our team has continued its strong execution of this strategy. It has been well-received by our customers, partners and employees, and it has begun to generate consistent growth in our top and bottom lines.

Looking forward

For the third quarter of 2017, Cypress Semiconductor expects adjusted revenue of $615 million, adjusted gross margin of 41% to 42%, and adjusted earnings per diluted share of $0.21 to $0.25. By comparison -- and though we don't usually pay close attention to Wall Street's demands -- consensus estimates predicted third-quarter earnings near the low end of Cypress' range on revenue of $578.2 million.

All things considered, this was another great performance from Cypress as it successfully implements its long-term strategy to continue outgrowing its peers. And though the market's initial reaction on Friday may not indicate as much, I think investors should be more than pleased with these results.

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