Semiconductor maker SMART Global Holdings (NASDAQ:SGH) reported results in line with analysts' expectations in Q1 FY2024, with revenue down 41.1% year on year to $274.2 million. The company expects next quarter's revenue to be around $285 million, coming in 2.9% above analysts' estimates. It made a non-GAAP profit of $0.24 per share, improving from its profit of $0.10 per share in the same quarter last year.

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SMART (SGH) Q1 FY2024 Highlights:

• Market Capitalization: $945.6 million

• Revenue: $274.2 million vs analyst estimates of $275 million (small miss)

• EPS (non-GAAP): $0.24 vs analyst estimates of $0.16 ($0.08 beat)

• Revenue Guidance for Q2 2024 is $285 million at the midpoint (raised from previous), above analyst estimates of $276.8 million

• Free Cash Flow of $26.83 million, similar to the previous quarter

• Inventory Days Outstanding: 99, up from 71 in the previous quarter

• Gross Margin (GAAP): 30.2%, up from 25.4% in the same quarter last year

“We are pleased with the progress we are making on our transformation journey, marked by the strategic divestiture of our Brazil business and another quarter of record non-GAAP gross margins reflecting the continued shift to higher value enterprise solutions,” commented CEO Mark Adams.

Based in the US, SMART Global Holdings (NASDAQ:SGH) is a diversified semiconductor company offering memory, digital, and LED products.

Processors and Graphics Chips

The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.

Sales Growth

SMART's revenue growth over the last three years has been unremarkable, averaging 11.8% annually. This quarter, its revenue declined from $465.5 million in the same quarter last year to $274.2 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

SMART had a difficult quarter as revenue dropped 41.1% year on year, missing analysts' estimates by 0.3%. This could mean that the current downcycle is deepening.

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