What happened

Shares of Cypress Semiconductor (NASDAQ:CY) climbed 11.2% in value last month, according to data provided by S&P Global Market Intelligence.

A strong fourth-quarter earnings report in late January was just what the company needed following fears of a chip industry slowdown in late 2018. Even though management remained cautious about the near term, investor's were clearly more optimistic about the company's prospects following a solid round of earnings results.  

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So what

Despite the recent cautionary statements from executives in the chip industry, Cypress delivered an overall upbeat fourth-quarter earnings report in late January that shows the company continuing to capitalize on growth opportunities across the Internet of Things (IoT), industrial, and automotive. 

Cypress reported record revenue in 2018 of $2.48 billion, representing growth of 6.7% year over year. However, fourth-quarter revenue was up just 1.1% over the year-ago quarter, which reflects slowing demand from Chinese consumers. On the bright side, automotive revenue was strong, jumping 19% over the fourth quarter of last year, while industrial revenue was up 11%.

Earnings came in above expectations, thanks to good cost controls and execution as management adjusts inventory to meet the weakening demand they have seen in certain markets recently. Adjusted operating margin improved to 24.5%, up from 20.2% in the year-ago quarter. That translated to growth in non-GAAP earnings per share of 25%, to $0.35 for the quarter and $1.36 per share for the year.

However, management remained cautious on the operating environment in the near term, citing the trade battle between the U.S. and China. Regardless, Cypress continues to see customers choose its solutions for mission-critical needs in the connected car and IoT space. Cypress saw its product-design wins increase by 24% in 2018, of which 37% were from new products. 

Check out the latest earnings call transcript for Cypress Semiconductor.

Now what

No matter what happens with the economy in the near term, the IoT and automotive markets will continue to fuel demand for Cypress' technology over the long term.

CEO Hassane El-Khoury said, "We are still in the very early phase of the IoT buildout." He added that the "penetration of IoT technologies and smart home and appliances is only 20% today and expected to double by 2022." 

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