Cypress Semiconductor (NASDAQ:CY) announced fourth-quarter 2018 results on Thursday after the market closed. The report highlighted modest top-line growth and -- thanks to the company's solid execution and enviable operating leverage -- better-than-expected earnings growth as it continues to make headway targeting the industry's most lucrative, high-growth markets.

With shares up more than 7% on Friday as of this writing, let's look at how Cypress ended 2018, and what investors should expect as it starts the new year.

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Cypress Semiconductor results: The raw numbers


Q4 2018

Q4 2017

Year-Over-Year Growth

GAAP revenue

$604.5 million

$597.5 million


GAAP net income (loss)

$267.1 million

($34.0 million)


GAAP earnings (loss) per diluted share




Data source: Cypress Semiconductor quarterly filings.

What happened with Cypress this quarter?

  • Adjusted for items like stock-based compensation and restructuring expenses, Cypress' non-GAAP earnings climbed to $131 million, or $0.35 per share, up 25% from $0.28 in the same year-ago period.
  • These results were near the high end of Cypress' guidance, which called for revenue in the range of $585 million to $615 million, and adjusted earnings per share of $0.31 to $0.35.
  • Adjusted gross margin expanded 240 basis points year over year to 47.8%, also near the high end of Cypress' outlook for a range of 47% to 48%.
  • By business segment:
    • Memory products division revenue declined 0.4% year over year, to $355.8 million.
    • Microcontroller and connectivity division revenue grew 3.5% year over year to $248.7 million.
  • Cypress expects the planned disposition of its NAND business to the joint venture with SK Hynix System IC to be completed in the second quarter of this year.

What management had to say

CEO Hassane El-Khoury said: "Our disciplined execution in 2018 resulted in record fiscal year revenue; the achievement of our 2018 gross margin improvement plans that we committed to at our 2017 Analyst Day event; and EPS that grew significantly faster than revenue, demonstrating the powerful leverage in our business model. While the current demand environment remains somewhat uncertain, we are focused on what we can control, and we will continue disciplined investments that will drive many of today's megatrends in the automotive, industrial, and [Internet of Things] markets."

Check out the latest Cypress Semiconductor earnings call transcript.

Looking forward

For the first quarter of 2019, Cypress expects revenue of $520 million to $550 million (down from $582.2 million in the same year-ago period), adjusted gross margin of 46% to 46.5%, and adjusted EPS of $0.22 to $0.26. For perspective, and though we don't typically lend much credence to Wall Street's demands, consensus estimates predicted earnings near the high end of Cypress' guidance range on revenue closer to $559 million. 

Of course, given Cypress' habit of underpromising and overdelivering, this isn't the first time investors have reacted favorably to a strong quarterly report and light forward guidance. And Cypress Semiconductor is hardly the only company in its space to voice caution in today's difficult macroeconomic environment.