Silicon Labs reported record Medical revenue in the second quarter, with sales in the category increasing 78% year-over-year as the wireless semiconductor company also experienced accelerating design-win activity and stronger demand across its broader Internet of Things portfolio.
Total Q2 revenue reached $228 million, representing an 18% increase from the prior-year period. Growth was broad across the company’s major end markets, with Industrial & Commercial revenue increasing 23% to $135 million and Home & Life revenue rising 12% to $93 million.
Medical was a particularly strong area within the portfolio. Revenue from the category reached a quarterly record and increased 78% year-over-year, reflecting growing use of wireless connectivity across healthcare devices and other medical applications.
Silicon Labs supplies wireless semiconductor technology used in connected devices across industrial, commercial, home, consumer and medical markets. Its portfolio supports technologies including Bluetooth, Wi-Fi, Zigbee, Thread, Matter and other wireless protocols that are increasingly used to connect devices within IoT environments.
Beyond reported revenue, the company said leading indicators of future business strengthened during the quarter. Both the overall opportunity funnel and the volume of design wins materially accelerated, while bookings and new orders also improved. Design wins are especially important in semiconductors because a chip selected for a new product can potentially generate revenue throughout that product’s commercial life.
The company also reported continued normalization of customer and channel inventory. Inventory levels at distributors and end customers declined during the period, which can reduce a potential obstacle to future semiconductor demand because customers have less excess inventory to work through before placing additional orders.
Profitability improved substantially alongside the revenue increase. Non-GAAP diluted EPS reached $0.71, representing a 545% increase year-over-year. GAAP gross margin was 61.6%, which management attributed in part to the value and differentiation of Silicon Labs’ wireless solutions.
The stronger earnings performance also illustrates the operating leverage in Silicon Labs’ business model. As revenue expands, a larger portion of incremental sales can flow through to operating profit because many semiconductor research, development and corporate expenses do not increase proportionally with revenue.
Silicon Labs is currently operating under a different reporting environment because of its pending acquisition by Texas Instruments. The company has suspended forward-looking financial guidance while that transaction remains pending.
Until the transaction closes, Silicon Labs continues to focus on execution across its existing wireless portfolio and on converting the stronger design-win funnel into future revenue. The sharp increase in Medical revenue adds another growth area alongside the company’s established Industrial & Commercial and Home & Life businesses.
KEY QUOTES:
“Overall profitability improved meaningfully in the quarter, demonstrating the operating leverage inherent in our model. Gross margin was nearly 62%, reflecting the value customers place on our industry-leading solutions.”
Matt Johnson, President and CEO of Silicon Labs
