Cypress Semiconductor Corporation (NASDAQ:CY) released second-quarter 2018 results on Thursday after the market closed. The company notched another quarterly revenue record as the semiconductor manufacturing and design leader sustained its recent momentum in chasing the industry's most attractive markets.

With shares up modestly in after-hours trading as of this writing, let's take a closer look at the underlying drivers of Cypress' quarterly beat.

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Cypress Semiconductor results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Growth

GAAP revenue

$624.1 million

$593.8 million

5.1%

GAAP net income

$27.7 million

($16.9 million)

N/A

GAAP earnings per diluted share

$0.07

($0.05)

N/A

Data source: Cypress Semiconductor. 

What happened with Cypress this quarter?

  • Revenue was above the midpoint of Cypress' guidance provided in April, which called for a range of $605 million to $630 million.
  • On an adjusted (non-GAAP) basis, the company's earnings increased 67% year over year to $125 million, and rose 57.1% on a per-share basis to $0.33. Here again, Cypress' guidance was less optimistic in calling for a range of $0.27 to $0.31. 
  • Adjusted gross margin expanded 540 basis points year over year to 46.3%, near the high end of guidance for 45.5% to 46.5%.
  • By business unit:
    • Microcontroller and connectivity division (MCD) revenue grew 2.2% year over year to $368.5 million.
    • Memory products division (MPD) revenue increased 9.6% to $255.6 million.
  • Pioneer chose Cypress' automotive-grade Wi-Fi and Bluetooth combo solution for its flagship in-dash infotainment receiver.
  • The company collaborated with Semtech on a two-chip module for smart city applications.
  • It launched the new Semper NOR Flash storage family for automotive and industrial applications.
  • Cypress' USB-C solutions were selected for key reference designs for PCs and peripherals, including designs from both Intel and AMD.
  • The company introduced the industry's first seven-port USB-C hub controller for docking stations and monitor docks.

What management had to say

"The team is executing well and has delivered record revenue this quarter as Cypress continues to gain share in our high-growth markets of Automotive, Industrial and Consumer," stated CEO Hassane El-Khoury. "Our platform of Connect, Compute and Store solutions gives developers everything they need to create winning IoT products quickly and easily."

Looking forward

For the third quarter of 2018, Cypress is targeting revenue in the range of $655 million to $685 million, with adjusted gross margin of 46.5% to 47.5% and adjusted earnings per share of $0.36 to $0.40. Here again, the midpoints of the top- and bottom-line guidance ranges are well above most analysts' models for third-quarter earnings of $0.34 per share on revenue of $656.6 million.

In the end, there was little not to like about this solid quarter from Cypress as the company focuses on innovation to successfully penetrate high-potential opportunities. So even with shares up more than 16% over the past year, I suspect the market will continue to drive up Cypress shares on the heels of this report.

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