Image source: Silicon Labs.

Mixed-signal semiconductor company Silicon Laboratories (NASDAQ:SLAB) just reported results for its third quarter of fiscal 2014. The company exceeded Wall Street's targets for this period, and followed up with strong guidance for the fourth quarter.

By the numbers
Silicon Labs' revenue rose 7.5% year over year to land at $158 million. Adjusted earnings grew 15.6% to $0.52 per diluted share. Adjusted earnings grew 15.6% to $0.52 per diluted share. It's a return to solid earnings growth after four straight quarters of negative year-over-year earnings changes, although sales stepped back from the second quarter's 9.5% annual growth.

Analysts would have settled for non-generally accepted accounting principles earnings of $0.45 per share on $155 million in total sales. 

Sales came in strong across all three of Silicon Labs' operating divisions, led by $80 million in the broad-based chip segment. Management underscored strong sales of microcontrollers, wireless chips, and analog sensor products.

Looking ahead, Silicon Labs set the midpoints of its fourth-quarter guidance range at $158 million on the revenue line and $0.46 for non-GAAP earnings per share. Both of these numbers are higher than Wall Street's current projections, and hitting these targets will result in another quarter of year-over-year growth on both counts. Remember, Silicon Labs just broke a four-quarter streak of shrinking earnings.

The business story behind the results
Management claims that Silicon Labs is gaining market share in key markets, and research budgets have been adjusted to support these growth drivers.

"Our multi-year investment strategy in our [microcontroller], wireless, sensor, power, and timing products is driving strong results in our two largest markets, the Internet of Things and Internet Infrastructure, where we have continued to gain share and see exciting prospects for growth," said Silicon Labs CEO Tyson Tuttle in a prepared statement.

The company sells a large number of products into the small, light, and power-efficient market, which is where you'll find Internet of Things devices in search of components. Silicon Labs chips can add key functions like low-power Wi-Fi networking, USB connectors in a small package, and sensors for a number of environment details in the real world. Judging by the reported figures and forward guidance, IoT device builders are embracing Silicon Labs' solutions in large numbers.

Buoyed by the news, the company's stock rose more than 15% in Thursday trading. The jump erased more than a month's worth of negative market action, driven by pessimistic market outlooks from other semiconductor companies.

The stock still trades far below its 52-week high of $54 per share. Generally speaking, the mixed-signal chip industry has underperformed the broader stock market in the last six months. Investors in this space are still looking for the next killer product in mobile computing and consumer electronics, unimpressed by recent launches.

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