Semiconductor name Mellanox Tech (MLNX 67.50, +2.40 +3.69%) trades at better than six-year highs dating back to December of 2012 after the company reported some solid revenue growth in Q4 and forecasted equally strong growth in Q1.
Top line revenues growth of 7% year-over-year to $237.58 million on earnings of $0.82 per share beat market expectations on both marks. Gross margins were down 186 basis points sequentially to 68.8%. The revenue mix at the top was skewed to Hewlett Packard Enterprise (HPE 15.99, +0.02 +0.13%), which accounted for 13% of total revenues, and Dell which accounted for 11%.
Specifically, in Q4 MLNX’s 25-, 50- and 100- gigabit per second Ethernet revenues were up 47% sequentially, driven by a broad adoption of Ethernet adapters, switches and cables across varying areas. In all of 2017, MLNX’s Ethernet revenues were up 26% year-over-year as significant expansion in demand for 25-, 50- and 100-gigabit per second Ethernet solutions pushed results.
Conversely, the company’s InfiniBand revenues were down about 15% due mainly to storage and embedded customers as customers transitioned from one product to another.
In Ethernet Adapters, growth in Q4 was driven by Tier 1 U.S. OEMs and Tier 1 and 2 hyperscale customers. The company anticipates a much broader adoption of the 25-gigabit per second and above Ethernet adapters in 2018, as deployments are forecasted to accelerate and expand across global OEMs, hyperscale, and financial services and artificial intelligence customers.
MLNX’s Spectrum Ethernet Switches saw revenues grow 41% sequentially as several Tier 1 and 2 hyperscale customers began initial deployments of the platform. The company anticipates production level spectrum shipments at additional U.S. based hyperscale customers in 2018. Even more, MLNX expects that in 2018, revenues growth among Ethernet Switches should more than double from 2017 levels.
As for guidance, MLNX expects Q1 revenues between $222-232 million on gross margins of 68.5-69.5%. Operating expenses for Q1 are expected in the range of $120-122 million and the company expects to recognize the remaining restructuring charges related to the discontinuation of 1550 nanometer silicon photonics activities in the amount of $9-12 million in Q1. And as MLNX notes strong momentum heading into 2018, the company sees revenues of $970-990 million for the year. Non-GAAP gross margins are expected between 68-69% while operating margins are slated to come in around 18-19%.
On a more broad note, MLNX management gave guidance for operating margins to further expand into the mid-20s and above into 2019. The company also sees more growth potential into 2019, expecting revenue to grow double-digits driven by continued customer adoption of the 25-gigabit per second and above Ethernet adapters and switches.
Guidance is king in this case, and with MLNX shares up more than 56% during the past 12 months (vs a 31% advance in the Nasdaq Composite over that time), the stock is on a pretty solid run.
Semi peers (SOXX) are fairly split at this juncture on Friday, yet a few names stand out in the green along with MLNX -- IDTI +2.20%, NVDA +2.05%, CY +1.04%, AMD +0.62%, MKSI +0.57%, TER +0.64%, MXIM +0.48%.