What's happening: Shares of integrated circuit developer Silicon Laboratories (NASDAQ:SLAB) sank on Wednesday after the company reported mixed second-quarter earnings. Revenue of $164.9 million, up 6.4% year over year, missed analyst estimates slightly, while non-GAAP EPS of $0.56 was three cents better than analysts were expecting. At 2:10 Wednesday afternoon, the stock was down about 11%.
Why it's happening: IoT products, the largest component of Silicon Labs' revenue, managed a record quarter, growing by 35% year over year to $68.9 million. Infrastructure products also had a record quarter, bringing in $30.3 million, and Access products met the company's expectations, down slightly from the first quarter with $26 million of revenue. Broadcast revenue declined to $39 million, down 15% sequentially, with strong growth in automotive products unable to make up for weakness elsewhere.
On a GAAP basis, operating profit declined by more than 50% year over year, to $9 million. Gross margin declined to 59%, down from 63.7% during the same period last year, and operating expenses rose by 13.6% year over year. GAAP EPS was nearly cut in half year over year, falling to $0.17.
In addition to reporting mixed results, Silicon Labs' provided guidance that was below analyst expectations. The company expects revenue between $151 million and $156 million, well below a consensus of $174.3 million, and non-GAAP EPS between $0.39 and $0.45 is also far short of analyst expectations of $0.60. Weak demand for TVs is partly to blame for the poor guidance, with Broadcast revenue expected to decline by 15% sequentially during the third quarter.
While Silicon Labs' revenue grew during the second quarter, profitability deteriorated, and continued weakness is expected during the third quarter. Weak TV sales could end up being a temporary problem, as 4K TVs may eventually drive demand as prices become affordable. But for now, Silicon Labs' results, and its stock price, are being pressured.