Silicon Laboratories (NASDAQ:SLAB) announced yet another better-than-expected quarter on Wednesday morning, including new high marks in revenue from its promising Internet of Things (IoT) and Infrastructure offerings. But the fabless semiconductor company also provided forward guidance that left the market wanting more. So after initially rising at the open -- and keeping in mind the broader stock market simultaneously endured steep losses today -- Silicon Labs' shares drifted lower to close with more than a 5% loss.

Let's take a closer look, then, at how Silicon Labs kicked off the second half, and what we can expect in the months ahead.

Hand holding a smartphone with a smart home interface, various connected devices highlighted in a home in the background

Image source: Silicon Labs.

Silicon Labs results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Growth

Revenue

$230.2 million

$198.7 million

15.9%

GAAP net income

$27.8 million

$19.9 million

39.7%

GAAP diluted earnings per share

$0.63

$0.46

37.0

Data source: Silicon Labs. 

What happened with Silicon Labs this quarter?

  • On a non-GAAP basis, which adjusts for items such as stock-based compensation and acquisition expenses, Silicon Labs' net income was $44.7 million, or $1.01 per share, up 12.2% from $0.90 per share in the same year-ago period.
  • These results were near the high end of Silicon Labs' guidance ranges provided in July, which called for revenue of $224 million to $230 million, and adjusted earnings per share of $0.95 to $1.01.
  • By segment:
    • IoT sales climbed 25% year over year and 8% sequentially, to $125 million.
    • Infrastructure revenue grew 35% and 2% sequentially, to $53 million.
    • Broadcast revenue fell 16%, but rose 6% from last quarter, to $36 million.
    • Access revenue declined 4%, but grew 5% sequentially, to $16 million.

What management had to say

Silicon Labs CEO Tyson Tuttle stated: 

We are delighted to report outstanding third quarter 2018 financial performance, including 16 percent year-on-year revenue growth. We saw sequential growth in all core business categories in Q3 and delivered record performance in IoT and Infrastructure. We have delivered target operating model performance in top line revenue growth, non-GAAP gross margin, non-GAAP opex and non-GAAP operating margin for the past five quarters.

Looking forward

Moving to the fourth quarter, however, Silicon labs expects revenue ranging from $221 million to $227 million, assuming continued sequential growth in IoT sales, but declines from its other segments. On the bottom line, that should translate to adjusted earnings per share of between $0.91 and $0.97. By comparison -- and though we don't usually pay close attention to Wall Street's demands, most analysts were modeling earnings near the high end of that range on revenue of $231 million.

During the subsequent conference call, Tuttle elaborated that the company is seeing "near-term turbulence in macro and regulatory environments as well as end markets." However, he also added that they're "keeping our eyes focused on the long term and are bullish about our ability to outperform the market."

Of course, there's always the chance that Silicon Labs will extend its habit of under-promising and over-delivering. Today's decline was also probably amplified by the broader market's weakness. In any case, it's unsurprising to see the stock fall, given the short-term headwinds Silicon Labs described.

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