Will the S&P Top 5,000 for the First Time?

Earnings Highlights

Impinj (PI) reported strong results after the close last night, betting analyst consensus on the top and bottom line. Management stopped just shy of calling the bottom in the retail downtrend. It did credit the ongoing European roll-out of its self-checkout and loss prevention solution as one of the primary drivers of the upside in December. The company reported revenue of $70.7 million and EPS of $0.09 vs. consensus expectations of $68.3 million and $0.02. For March, management is guiding to $72-$75 million in revenue and non-GAAP EPS of $0.08-$0.13, both well above consensus estimates of $70.8 million and $0.02.

Onto Innovation (ONTO) beat Wall Street analyst expectations for the December quarter, reporting revenue of $219 million vs. an expected $209 million and EPS of $1.06, above consensus of $1.01. The revenue upside was driven primarily by stronger than expected demand for its Dragonfly inspection systems that support the packaging of memory and logic devices for AI applications. Management highlighted that its inspection business is expected to be three times what it was in Q123. Operationally, the company has put tighter controls in place, and expects to see operation efficiencies continue to improve throughout 2024, bringing the company back in line with its long-term financial model.

For the March quarter, management is guiding revenue and EPS above consensus estimates of $217.6 million and $1.09 to a range of $215-230 million and $1.00-$1.20 per share. Much of the expected growth in March, and throughout 2024, is expected to come from AI devices. Management highlighted that TSMC stated that it is expecting a 50% CAGR through 2027 for AI application processors, so this should continue to boost sales of ONTOs inspection systems. During calendar 2023, the company introduced two major new platforms in 2023 including its JetStep X500 system for glass substrates and its new Firefly G3 inspection system for yield improvement in and reduced time-to-market in cutting-edge fabrication techniques that have rapidly decreasing line widths.

Pixelworks (PXLW) reported in-line revenue for December of $20 million and a loss of ($0.07) vs. consensus expectations of a loss of ($0.04). Revenue was up 25% Q/Q in December, with mobile up 44% driven by OnePlus and Xiaomi Red K60 smartphones using the IRX image rendering accelerator. The company also benefitted from the launch of the Realm GT5 smartphone, which uses the X7 processor and the IRX certification. Management expects mobile, along with early studio adoption of its TrueCut Motion platform by Walt Disney and Universal Studios to drive higher gross margins throughout calendar 2024, with the company expecting profitability in the second half of the year.

For March, management expects revenue to remain flat, giving a range of $19-$20 million, but does expect incremental gross margin improvement in March and throughout 2024, hitting roughly 45% by the end of the year, where management expects to achieve profitability on a non-GAAP basis. Current March consensus is $16.0 million and ($0.09), so the higher guidance should be viewed positively by the Street this morning.

Synaptics (SYNA) slightly beat top line consensus estimates in December with revenue of $237.0 million vs. an expected $235.2 million. The company reported $0.57 in non-GAAP EPS, however, handily beating the consensus estimate of $0.44. Management also believes that its business has stabilized and is nearly poised for growth moving forward. The company highlighted its Core-IoT area specifically, as a segment that is expected to experience “significant” top-line revenue in the March quarter. It’s not all sunshine and roses, however, as the other business units are still being negatively impacted by channel inventory issues, demand declines and a seasonally weak March quarter in the consumer electronics markets. Therefore, the company expects March revenue to be flat, with a range of $220-$250 million, about $10 million shy of consensus of $245.3 million at the mid-point.

During the conference call, management discussed its decision to shift its focus towards Core IoT last year, which came at the expense of the top line in calendar 2023. CEO Michael Hurston believes that this was the right decision, and believes that they have seen a low in this business unit, particularly in wireless. Synaptics has been working down inventory across its supply chains in mobile, PC and wireless, although the enterprise inventories are taking longer. The enterprise products carry higher ASPs and margins, which is making it difficult for the company to drive higher revenue and EPS results, along with the company’s automotive products. Management sees enterprise and automotive as potentially weighing on its overall performance for the near term until demand returns to a more normalized level.

In Other News

Alphabet (GOOG) Yesterday, Google replaced its first generative AI offering, Bard with Gemini, and introduced a new mobile version. Bard was powered by a lightweight and optimized version of LaMDA (language model for dialogue applications), which was designed to allow it to move beyond the limitations of chat bots by engaging users in a more free-flowing conversation, jumping from topic to topic, in a way that more closely approximated human interactions. Bard has grown over the past 11 months since access was opened to the “experiment” in the US and UK, but it is now giving way to the newer models outlined in December and launched yesterday.

Gemini will be offered in three ways:

• Gemini Advanced

• Gemini

• Gemini Mobile

Gemini Advanced will be offered as part of the Google One AI premium plan for $19.99 per month. Advanced uses Goggle’s Ultra 1.0 AI model, which is the first to outperform human experts on massive multitask language understanding (MMLU), “ which uses a combination of 57 subjects such as math, physics, history, law, medicine and ethics for testing both world knowledge and problem-solving abilities.” (Alphabet) It can also understand, explain and generate high-quality code in popular programming languages, so everyone needs to lear how to start digging ditches real soon. Gemini will also be incorporated in existing Google programs including Workspace and Google Cloud, where it will replace Duet AI. On the mobile handset front, Gemini is now available as an app on Android, and from within the Google app in iPhone.

The FCC announced yesterday that AI-generated voices in robocalls are illegal. The declaratory ruling, which takes effect immediately, takes its authority from the Telephone Consumer Protection Act (TCPA). This decision was driven by early AI voice cloning applications that have enabled scandals involving fake messages from President Biden in New Hampshire that could eventually be litigated as vote tampering, to deepfakes of celebrities like Taylor Swift.

“Bad actors are using AI-generated voices in unsolicited robocalls to extort vulnerable family members, imitate celebrities, and misinform voters. We’re putting the fraudsters behind these robocalls on notice,” said FCC Chairwoman Jessica Rosenworcel. “State Attorneys General will now have new tools to crack down on these scams and ensure the public is protected from fraud and misinformation.”

The FCC wants to help Americans get fewer automated calls pushing questionable products. The TCPA helps with that by limiting telemarketing calls and "robocalls" using artificial or pre-recorded voices. Basically, companies need your explicit permission before inundating you with those automated messages.

The good news? This declaratory ruling clarifies that even the fancy, AI-powered voices used in some robocalls are covered by the TCPA. So, if you get a call that sounds eerily human-like but is peddling something unwanted, remember you have the right to decline and report them for violating the law.

Infleqtion, a quantum computing product company involved in positioning, navigating, timing and communication security, announced its new Sqorpius Program yesterday, alongside today’s largest qubit array, with 1,600 cubits. (At this stage of the game, quantum computing companies are leapfrogging one another weekly, so this will not likely remain the largest array for long, but this shouldn’t diminish the achievement.) The new program is intended to accelerate execution across its hardware and software solutions to deliver commercial-ready quantum computing. Sqorpius is a 5-year roadmap that outlines “substantial” investments in both hardware and software development, dedicated to creating error corrected logical cubits.

Infleqtion also announced a trio of partnerships/customer wins. The company’s been chosen to develop a quantum computer testbed for the National Computing Center (NQCC) in the UK, to lead the quantum development for the Defence Cyber Marvel 3 (DCM3), Europes largest cyber defense exercise, and it has signed a MOU with the Texas A&M Semiconductor Institute to develop a “world class” quantum program.