The last year has been rough going for Xilinx (XLNX). The field programmable gate array (FPGA) leader first started to show signs its growth run was coming to an end during the U.S.-China trade war, losing key customer Huawei after the White House restricted sales to China's tech infrastructure giant. The coronavirus pandemic is now proving to be a second jab, with key outlets like the auto and communications industries (including 5G network development) dropping off sharply due to the ensuing global economic freeze.

The result was record revenue in fiscal 2020 (the year ending March 28, 2020), but a drop in profitability. The company has taken steps to protect its balance sheet and set itself up for an eventual return to growth, but the outlook for the immediate future leaves a lot to be desired.

A Xilinx FPGA semiconductor.

Image source: Xilinx.

5G wasn't enough

There was some good news during the fiscal 2020 fourth-quarter update. Supply chain disruption due to COVID-19 hasn't been an issue, and the economy in China is rebounding. CEO Victor Peng said that sales to medical equipment makers across the Pacific were strong to help combat the spread of the pandemic, and sales to medical companies in the U.S. and Europe are also on the rise.  

Data-center construction spending was also strong at the conclusion of fiscal 2020, as high-performance computing in the cloud -- like machine learning and video delivered via a network -- continues to rise in importance. And there was good news on the worldwide rollout of 5G mobile networks as well. Peng said his company won a design win with Samsung on its second-generation 5G radio. Other networking hardware deals to help speed the spread of 5G were announced too.  

As to specific numbers, Q4 revenue was $756 million -- a 5% sequential increase over the 2019 holiday season, bucking the normal seasonal slowdown trend. Year over year, though, sales were down 9%, driven by a decline in communications and automotive industry end markets. Resulting adjusted earnings per share were down 17% from a year ago. For the full-year period, revenue still managed a new all-time high, but the bottom line deteriorated due to the multiple headwinds from the trade war and COVID-19.


12 Months Ended March 28, 2020

Months Ended March 30, 2019



$3.16 billion

$3.06 billion


Gross profit margin



(1.9 pp)

Operating income

$792 million

$957 million


Adjusted earnings per share




Pp = percentage point. Data source: Xilinx.  

Note that adjusted earnings fell far less than operating income did over the last year. That was thanks to Xilinx spending over $1.2 billion on share buybacks in fiscal 2020. But with year-over-year sales and profits now in decline, management said it would be more conservative for now in making those purchases, focusing instead on further strengthening the balance sheet. And on that front, Xilinx is in exceptional shape. Cash and equivalents ended at $2.27 billion and long-term debt at $747 million.

The dividend was raised by 3% to $0.38 per share each quarter, good for a current annual dividend yield of 1.7%.  

A not-so-great outlook, at least for now

But that's now all in the past, and it's the year ahead that is most important. Regarding the outlook, lower auto sales and a slowdown in global 5G rollout is going to take a toll. Full-year guidance wasn't provided, but fiscal 2021 first-quarter revenue is expected to be between $660 million and $720 million -- down 19% year over year at the midpoint. Some of the expected decline includes coronavirus demand disruption and data center sales that are proving to be unpredictably variable quarter to quarter. But the good news is that order backlog is higher than Xilinx's historical average.  

It will be rough going this year, and even though Xilinx stock is down nearly 40% from its all-time high last spring, it still trades for 20.2 times trailing 12-month free cash flow. Nevertheless, the long-term thesis for this semiconductor stock remains intact, with 5G still in the early innings of development and data centers only growing in importance over time.