U.S. Markets closed

Xilinx Inc (XLNX) Q2 2019 Earnings Conference Call Transcript

Motley Fool Transcribers, The Motley Fool
Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Xilinx Inc  (NASDAQ: XLNX)
Q2 2019 Earnings Conference Call
Oct. 24, 2018, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. My name is Erica and I will be your conference operator. I would like to welcome everyone to the Xilinx Second Quarter Fiscal Year 2019 Earnings Release Conference Call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Matt Poirier. Thank you Mr. Poirier. You may begin.

Matt Poirier -- Investor Relations

Thank you, Erika, and good afternoon, everyone. With me are Victor Peng, CEO and Lorenzo Flores, CFO. We will provide a financial and business review of the September quarter, the business outlook for the December quarter and a revised outlook for fiscal year 2019. We will then open the call for questions.

Let me remind everyone that during our conference call today, we may make projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that such statements are predictions based on information that is currently available and that actual results may differ materially. We refer you to the documents the company files with the SEC, including our 10-Ks, 10-Qs and 8-Ks. These documents contain and identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

As we discussed in last quarter's earnings call, in addition to GAAP financial measures, we will also be disclosing certain supplemental non-GAAP financial measures used by management to evaluate the company's financial results. We provide these measures to facilitate period-to-period comparability for purposes of evaluating continuing business operations by excluding the effects of non-recurring and unusual items such as amortization of intangibles and certain one-time items related to acquisitions.

We believe that sharing these non-GAAP measures will be helpful for analysts and investors in analyzing the company's ongoing core business. A reconciliation of non-GAAP financial information to the closest GAAP measure is included in our earnings release and has been posted on our Investor Relations website.

This conference call is open to all and is being webcast live. It can be accessed from our Xilinx Investor Relations website.

Let me now turn the call over to Victor.

Victor Peng -- Chief Executive Officer

Thanks Matt, and good afternoon, everyone. I am very excited to report that executing on our new strategy is returning results in FY '19 that are well ahead of our original plan. We had broad strength in our business in Q2 with growth in six out of nine of our end markets.

Establishing ourselves in the data center and accelerating growth in our core markets resulted in a new quarterly revenue record of $746 million, which was up 19% year-over-year and drove the non-GAAP EPS up 30% year-over-year.

Given our first half FY '19 results and the continued near-term strength we see in multiple markets, we're raising our guidance for all of FY '19 to be between $2.95 billion to $3 billion. Now to be clear, we are watching the macro environment very carefully. Nonetheless, we feel this is the appropriate forward guidance.

So let me share some recent business highlights. So Communications was very strong in Q2, driven by LTE upgrades, pre-5G and some early 5G deployments. Our wireless business grew very significantly with broad-based strength in both radio and baseband applications with major OEMs across multiple geographies and we resumed shipping to ZTE.

Our wired business grew due to customer transitions to next generation products in several applications including OTN/Metro, Access and Data Center Interconnect.

In the Data Center segment, we continue to build momentum with hyperscale companies and acceleration deployment. So for example, Twitch, a subsidiary of Amazon shared at our Developers Forum how they achieved the industry's first broadcast quality live streaming platform using a new video encoding format VP9 and all accelerated on our FPGA.

Samsung announced at their Tech Day, their smart SSD product, which was the result of a yearlong collaboration between our companies. Samsung's Smart SSD combines our 60-nanometre ultrascale plus FPGA with their leadership storage technology for accelerating computing near the store data.

With regard to FAS, our leadership position in China market expanded as Alibaba changed their FPGA as a service from beta access to general access. And this follows on Huawei's general access that occurred for their FAS program this past June.

And recently, Amazon Web Services doubled their FAS availability zones from four to eight, adding London, Sydney, Frankfurt and most recently, China.

Now continuing in terms of Data Center and our platforms, earlier this month, we announced Alveo, a portfolio of very powerful, adaptable, accelerated cards that will increase performance in industry standard servers, both in the cloud and from data centers, a very broad range of applications including AI Inference.

And Alveo did ship revenue very late in Q2, but the revenue ramp really begins in the second half of FY '19. We expect revenue to grow at a good pace, but in absolute terms, it will be relatively modest for FY '19. We do expect Alveo to contribute meaningful revenue in FY '20.

We also made excellent progress in our data center partnerships and ecosystem. So working with AND, we achieved an industry record for the highest AI Inference throughput performance at 30,000 images per second with less than 2 milliseconds latency, all packed in for-use server form factor with two epic CPUs and eight Alveo accelerator cards.

Huawei has announced that they're integrating and deploying Alveo acceleration cards in their server product portfolio and we are collaborating together to foster an applications ecosystem in China.

Inspur, a leading global data center and cloud computing solutions provider announced that they'll be qualifying two Alveo cards together with their server platforms.

And on investment side, we made multiple investments last quarter in applications ecosystems, both in the data center or as well as in other markets for growth of applications and including database acceleration, mobility and next generation wireless technology.

In respect to acquisitions, we did complete our acquisition of DeePhi Tech, which is an AI technology company and integration is going quite well. Their products and technology significantly strengthens our AI capabilities and what we can offer for used cases in the cloud at the edge and at end points.

Now moving on to our progress overall as a platform company, our 28 and 60-nanometer zinc product families continues to grow very robustly. Zinc sales achieved a new record growing 70% from a year ago quarter and now represents 18% of sales.

Growth was across a broad set of applications in the communications, automotive, mostly advanced driver assist systems and industrial end market. Our zinc RFSoC products had a revenue growth of approximately 4X versus the prior quarter's revenue and we have well over 100 unique customers at various stages of engagement. And we see our opportunity pipeline growing in double-digit percentages.

And finally, the most profound recent milestone by far was our official announcement of our 7-nanometer RFSoC product family, the industry's first ACAP. ACAP product professional memory stands for adaptive compute acceleration platform and this is a new product category that goes far beyond the capabilities of FPGAs.

ACAPs are adaptable, scalable and a heterogeneous compute platform that is both hardware as well as software programmable. So the RFSoC family will accelerate a very broad range of applications including AI Inference and applications that have embedded AI in them across multiple end markets and from used cases that standard cloud, to the edge and endpoints and indeed communications infrastructure that connects connects them.

Versal delivers effectively the power of full custom silicon without the high cost and very long development cycles of silicon. And they could be optimized to accelerate applications on the fly and actual running systems.

So we're on track to tape out the first 7-nanometer Versal product at TSMC later this quarter and we also connect to you. So in closing, I'm extremely proud of our team's excellence in innovation and consistent execution. I'm excited to see the fruits of our efforts in our Q2 results and our expectations for the full fiscal year.

We continue to be deeply focused on executing our strategy for sustained, robust long-term revenue growth and shareholder value.

So thank you, and now I'll turn it over Lorenzo.

Lorenzo Flores -- Chief Financial Officer

Great. Hey, thank you Victor, and good afternoon, everybody. As Victor said, we are very pleased with our business performance this quarter and our outlook for the rest of the fiscal year.

Xilinx established several financial records and we are again in the fortunate position of increasing our guidance for FY '19. Excuse me, I will elaborate on that guidance after reviewing the quarter.

Now for Q2, revenue was at an all time high of $746 million, growing 9% from last quarter and 19% year-over-year. We exceeded the high end of our guidance on the strength of our advanced products, which grew 25% over last quarter and 43% year-over-year.

Victor pointed out the strength of Zynq. It grew 70% year-on-year and highlights our progress as a platform company. From an end market perspective, we saw strength from three of our four primary end markets. Data Center and TME grew significantly with both businesses contributing to the increase in sales.

In communications, wired grew more than expected and wireless was particularly strong. Automotive, broadcast and consumer was stronger than expected as automotive and broadcast growth more than offset a slight decline in consumer. Industrial and A&D declined as expected with a decrease mostly in A&D.

Finally Channel revenue was in line with expectations at $19 million. Note we remain below target levels of channel inventory. Gross margin was 69%, slightly below our guidance due to the strength of wireless and lower A&D in our end market mix.

GAAP operating expense was $282 million and non-GAAP operating expense was $279 million, both in line with our guidance. GAAP operating income was $233 million or 31.2% and non-GAAP operating income was $236 million or 31.6%.

Our tax rate was 10% for the quarter. Our non-GAAP rate was 6%. The primary difference between these rates consists of discrete items related to tax reform. Our GAAP net income was $216 million equating to $0.84 a share of earnings. Non-GAAP net income was $221 million or $0.87 of earnings per share. This is a record level of earnings for Xilinx.

Diluted shares for the quarter were flat at $256 million shares. There are a few key points on the balance sheet and cash flow I would like to highlight. We ended the quarter with $3.4 billion in gross cash, down slightly quarter-on-quarter and $1.7 billion in net debt.

We generated operating cash flow $313 million due in part to reducing accounts receivable to $372 million approximately 45 days. On capital allocation, we returned $114 million to shareholders with $91 million in dividends and $23 million in share repurchase at an average price of $66.08 a share.

As Victor discussed, we completed the acquisition of DeePhi in the quarter. This acquisition intended to accelerate our strategy, the dividend and our buyback, reflect the application of our capital allocation strategy as discussed at our Analyst Day.

On to Q3 and our updated FY '19 guidance, we expect revenue to continue to grow with Q3 between $760 million and $780 million. We are forecasting growth in Communications, Data center and TME and Industrial and Aerospace and Defense. Particular strength is expected in Aerospace and Defense, wireless and TME. Automotive broadcast and consumer looks to come in approximately flat.

Channel revenue is expected to be between $10 million and $20 million. In Q3, our gross margin is expected to be approximately 69% and GAAP operating expense in the range of $295 million. We expect non-GAAP operating expense to be approximately $290 million.

The increase quarter-to-quarter in operating expense is related to increases in employee compensation, including profit sharing and sales incentives and the full integration of the DeePhi acquisition. Other income will be approximately $5 million and our tax rate is expected to be between 10% and 12%.

For the full-year FY '19 forecast, we are now expecting our revenue to be between $2.950 billion and $3 billion. At the midpoint, this would be 20% year-over-year revenue growth. Gross margins for the year is expected to be between 69% and 70%. GAAP operating expense for the year is expected to be approximately $1.155 billion and non-GAAP operating expenses expected to be approximately $1.140 billion.

GAAP other income for the year will be approximately $15 million of income and non-GAAP other income will be approximately $5 million of income. Our GAAP tax rate for the year is expected to be between 10% and 12% and the non-GAAP rate between 9% and 11%. Share count is expected to be flat to very slightly up for the rest of the year.

In summary, we expect the year to show exceptional growth in revenue and profits. We are at the initial stages of realizing the benefits of our strategy and execution and we are excited to see our opportunities developing ahead of our expectations.

Let me now turn the call back to the operator for Q&A.

Questions and Answers:

Operator

The floor is now open for questions. (Operator Instructions) Your first question comes from Vivek Arya from Bank of America.

Adam Gonzalez -- Bank of America -- Analyst

This is Adam Gonzalez on for Vivek. Thanks for taking my question. My question relates to your Comments business. Just can you talk about any geographic concentration you have out there. More specifically, can you quantify your exposure to the China market and talk about the growth excluding China. And should we expect this to be the new baseline for the communications business. How sustainable are these trends as you move into 2019? Thanks.

Lorenzo Flores -- Chief Financial Officer

Well, China is an important market, but as I said in my comments that we saw growth actually with all the top customers in that segment world wide. So I would say that we're seeing growth in a number of areas although China is important.

I think we have that mentioned and of course where there is maybe an acceleration of 5G deployment that in any event you know one of the areas where there's maybe an acceleration of 5G deployments happening in Korea actually.

So again, while China is important, we're seeing growth actually in multiple geographies. We have consistently in the past said that we expected the really large ramp to happen 2020. It does appear that it's happening -- it's starting a bit earlier

We still believe that it'll continue to build and carry over in the pass, and of course, pass 2020, but it does appear that it's happening a bit earlier. So I think from that perspective, that's a new recent trend I suppose.

Operator

And your next question comes from Joe Moore with Morgan Stanley.

Joseph Moore -- Morgan Stanley -- Analyst

Great. Thank you. Can you talked about the growth in zinc? Obviously, it's pretty impressive growth there. How do you see it? Are you expanding TAM or the sockets that you might not have had or you not had the zinc integration and what's your visibility on continuing this very strong ramp that you've seen in zinc?

Victor Peng -- Chief Executive Officer

Yeah, Joe. I think zinc, it is very broad-based, which is -- what's so exciting about it right. As you know, this is something that we pioneer quite some time ago and I would say that in the early days it took a little bit longer and the thing that we gained from that was that there was more software work and things that took a while, but now what we're seeing is just -- we're just seeing very broad strength everywhere and certainly we do think that we are taking away from other types of solutions right; from other ASSP's, other embedded controllers.

And certainly some -- we were on that Board before within FPJ perhaps or now we're capturing more of the bomb and MPS receives the second generation and the RFSoC is based on that added to it the really high performance integrated ADCs and DOCs.

So we are expanding I would say, the footprint of zinc as well as the fact that the investment made back in 28-nanometers. Now, indeed most if the revenue is still 28-nanometer zinc. We've seen tremendous uptake in terms of design in the 60-nanometer, but most of the revenue for that is still in front of us.

Joseph Moore -- Morgan Stanley -- Analyst

Great, thank you. And I guess with several of your customers at your Developer Forum and we kind of heard about the use of zinc and about specifically we heard the comment that if Xilinx had more libraries then we'd be able to use Xilinx in more applications.

How do you think about that from an investment standpoint? How do you balance? It seems like there's a fairly direct tie to developing sort of more of the Xilinx generated IP and revenue, but obviously takes a loss. How do you balance that in this growth environment, should we expect R&D to maybe continue to move up as you look at those opportunities?

Victor Peng -- Chief Executive Officer

It's a very good point and again we're really trying to work that balance of continue to invest. We can keep on this very strong growth, but also returns to the investors. And so you will see some growth and on a percentage basis, we're increasing our headcount and software and IP and things above that silicon level if you will much more.

Having said that, we're also putting a big focus, that's why you hear me in the highlights and I think hopefully you took away from our Developers Forum that we really try and drive an ecosystem. So it's not just the Xilinx R&D budget, but it's the collective budget of the ecosystem as well as partners like A&T, like Samsung and others.

So it's an end of all those things, we're trying to do all those things. But it is part of our balance on how we deliver returns as well as continue to invest so that we can get higher leverage and more leverage in the model.

Joseph Moore -- Morgan Stanley -- Analyst

Okay, thank you and congratulations.

Victor Peng -- Chief Executive Officer

Thank you.

Operator

Your next question comes from C.J. Muse with Evercore.

C.J. Muse -- Evercore -- Analyst

Good afternoon. Thank you for taking my question. I guess first question, as it relates to wireless and early 5G deployment, can you speak to I guess whether this is just prototyping today or other? And then importantly, what you've learned now on a content basis and how that translates into sustained growth into 2020 and beyond?

Victor Peng -- Chief Executive Officer

Yes. So for the first part of it, it's -- what we're now seeing is not prototyping. I think we've been saying for some quarters that we're in virtually all the early proof-of-concept and prototyping. So now, what you're sort of seeing is some of that going into production. And I would say -- and then you heard me make the comment of radio and baseband.

So we do have more content than we have had traditionally RFSoCs and another element and that is actually still emerging. And in terms of what we'll see there and that is absolutely production. It is most cost effective, power efficient, and size weight form factor based solution out there. I don't want to really -- how is the product like RFSoC. So yeah, it's pretty strong. So the second part of the question regarding --

C.J. Muse -- Evercore -- Analyst

What you are looking from the early deployments today as to what the revenue contributions can look like as we go into as deployment?

Victor Peng -- Chief Executive Officer

Yeah. we continue to see wireless for the year ending up very strong. And although we still expect that things will be at times right, overall, 5G will be the largest deployment right, I think the industry has seen and so we're really well-positioned for that. Again, I think particularly with RFSoC, I think on the radio, we have an extremely strong position. Yeah. So, I do think this will go, but again no doubt there'll be some lumpiness as we go through.

C.J. Muse -- Evercore -- Analyst

Great. And I guess as a follow up here. At your Developers Forum and you launched I think one of the key questions was the software to follow up on Joe's question. So curious how we should be thinking about key milestones there in terms of developers training instances? What should we be focused on?

Victor Peng -- Chief Executive Officer

Yeah. We're trying to share each of those elements right. As you just said, expansion of FAS, but also non-FAS, it's certainly not all about that. Indeed, there tends to be a little bit of focus of us just in data center compute, but the Samsung Smart SSD product, we accelerate in storage.

We also have positions in SmartNIC and Converge mix (ph). So I think it a very strong trend in the networking side of the business. There's the ecosystem and then our board business right, which I think we gave a little bit of a foreshadowing all the way back to our Analyst Day and how we've executed to that.

So I think watch to see how many people are developing and offering that board and as those board and as that board business more meaningfully contributes to revenue in next fiscal year, that will be another sign of things. Our investment level, if we can keep up this great growth we're going to return some to the shareholders and we're going to reinvest to keep this flywheel spinning.

C.J. Muse -- Evercore -- Analyst

Very helpful. Thank you.

Operator

Your next question comes from John Pitzer from Credit Suisse.

John Pitzer -- Credit Suisse -- Analyst

Yeah. Good afternoon, guys. Congratulations on strong results. Victor, I wonder if you could elaborate a little bit more, in your prepared comments you said that you have your eye on the macro and if I look at the businesses that are probably most macro influence for you, it's industrial and A&D yet despite kind of a macro backdrop that we're all worried about, you're guiding pretty strong growth for the December quarter.

Curious if you could kind of square that circle for me and as you answer the question, maybe talk about what might be share gains that you're picking up in those markets?

Victor Peng -- Chief Executive Officer

Yeah. Well, A&D actually was down all that in the current quarter, but that was off a very strong quarter and we actually believe that going forward, that's going to strengthen up again. So we actually don't see any signs in the AND area for sensitive to that.

I'll give you one where we do as a sub segment of our overall basket as you know our baskets are pretty big right. So test measure and emulation and prototyping for instance.

You know within that there are semiconductor tests and we are seeing weakening as you might expect within that. On the other hand, emulation and prototyping, we're seeing great strength.

So given all of those puts and takes we're still seeing TME is on track for an excellent year. So and also within test is also very specially tested including like 5G test equipment and we're seeing good strength there for obvious reasons. So I think this is part of this is the strength of the diversity that we have and also the high value and innovation that we have that we're less sensitive than to other products that are have perhaps or more options available for people just to switch in and out or just not as high value or not in the core of the system right.

So I think that's that's one aspect of it. And again we walked into this quarter with very strong backlog I mean you know we feel good about the guidance and then of course FY '20 we give that in the Analyst Day and we'll certainly learnt a lot between now and then, but again we've looked at it and certainly we're very keenly aware of the environment. We're just seeing good signals for our business.

John Pitzer -- Credit Suisse -- Analyst

The other follow-up, just relative -- go ahead, I'm sorry.

Victor Peng -- Chief Executive Officer

No, no I think if you were -- I wasn't sure John whether you were referring to the overall growth that we're expecting quarter-on-quarter or just in the industrial and A&D is that one of the pieces you didn't talk about is continuing strength and communications particularly in wireless I think that aligns with the book the 4G LTE continued fill out and the growth in 5G. So that's the last piece of the overall growth story and then I'm sorry go ahead..

John Pitzer -- Credit Suisse -- Analyst

That's helpful. And then I guess Victor, as a follow-up I was intrigued by your comments about growth in data center in FY '20. Your confidence level seems pretty high. Seems like you've got a good line of sight. I know there's probably a lot you can't talk about, but I want to give you the opportunity to elaborate on that comment and what gives you that confidence that this new customers, is this silicon to board, maybe if you can help us just kind of parse that out?

Victor Peng -- Chief Executive Officer

Yes well it's actually a blend. As I said we actually did get some revenue at the very end of Q2 for the Alveo Board. And by the way, we only have one board. Well, actually we have two boards, the U200 to U250, but we are going to launch more boards through the course of the next number of quarters.

And I said that grow at a good rate, but it's starting from a very small number. So it's not meaningful, but FY '20 will be meaningful. So if you step back, we didn't have a Board's revenue stream at all, right. So that certainly is contributing to that.

The other thing is there's a lot of games I can't really speak to right now, but I did get I am able to say as I mentioned Samsung's SmartSSD they launched that. I could tell you that we have a design win to do a smart memory dimm with a very major memory supplier but I cannot say who.

So and then as you know a lot of the customers for competitive reasons play things close to the chest, but we do feel that next fiscal year, we will start seeing much more meaningful revenue. We've been saying that we are seeing good percentage growth of relatively smaller number and data center as a segment, but in next fiscal year particularly in the back half, we really see that it's going to start coming together. Does that help?

John Pitzer -- Credit Suisse -- Analyst

Congratulations again guys. It does. Thank you.

Operator

Your next question comes from Ambrish Srivastava with BMO.

Ambrish Srivastava -- BMO -- Analyst

Hi. Thank you very much. I just wanted to make sure I understood the confidence for the full-year. Victor is it and Lorenzo, is it dependent on comps 5G, 4G as well as Alveo beginning to kick in and what about the other segments? So I'm talking beyond the quarter that you're guiding for?

Victor Peng -- Chief Executive Officer

Let me give a briefing and I will let Lorenzo add comments to this as well. I think one of the reasons and I mentioned also why we're very dialed into watching the macro situation we still see it as the appropriate guide is because of the breadth of the strength that we saw in Q2, which was carrying over into this quarter and also from what we can see for the Board. So included the first half came in stronger than our initial expectations for the year.

So I would say it's the breadth. Yes. So that means generalizing your statement you just pointed out Communications and then Data Center board. But it goes beyond that because we're seeing strength in all the other markets. Even though within some of those markets there are weakness, right. As I said TME, our weaknesses in some of the segments within that bucket, but the overall larger end market that we report out looks really good for the year.

Lorenzo Flores -- Chief Financial Officer

No I don't have much to add. Just it's kind of obvious given the relative size of the end markets and the dynamic that we talked about with the growth in Communications. That continues, that's a large dollar contributor, but it is much more broad than that in a portfolio of end markets we support.

Ambrish Srivastava -- BMO -- Analyst

Okay. And then within Communications if I remember the number correctly, you said it was up 35% year-over-year, but if you go back because you give us a sense for it has to be well below the peak level we saw a few years ago. So how far below are we from that level and now you have more content.

So we should expect as we get into the broader 5G rollout six, eight quarters from now that number should be higher than what you did in the last build, thank you.

Victor Peng -- Chief Executive Officer

Yes, give me just one second to make sure I'm not miss-aligning things. It is still for both of the end markets and in Communications, it is still meaningfully below the highs we've seen for both wired and wireless, in the past three and five years ago, but I think also the other thing to think about it given the growth of our other end markets is it's a smaller percentage of our overall business.

So our overall exposure to that is smaller, but we do expect it that we have headroom as we discussed in both wired and wireless to get past the historic levels at some point in the future.

Ambrish Srivastava -- BMO -- Analyst

Great. We like the diversified model. Thank you.

Operator

Our next question comes from Toshiya Hari with Goldman Sachs.

Toshiya Hari -- Goldman Sachs -- Analyst

Thank you so much. Victor, obviously there's quite a bit of concern around end markets like industrials, automotives, semi test as you sort of addressed them. Can you give us an idea what sort of embedded in your back half guide for some of these end markets where we do have concerns.

Lorenzo Flores -- Chief Financial Officer

Well I think I talked a bit about TME right. We can start some weakness some areas but then some areas are up. So again from what we can see we think that for the year TME we will be up quite nicely overall and certainly in the first half things are strong right including service rate semiconductor test. On automotive we're seeing growth and we do still expect that to continue but just to put that in context I think we sort of talked about how automotive is sort of in the around --

Victor Peng -- Chief Executive Officer

7% of our business.

Lorenzo Flores -- Chief Financial Officer

Yes, about 7% of our business. So even if there's some fluctuation on that, let's just put that in context right. So I would say again yes we watch it very carefully and there's some segments that will feel it because you know not to be repetitive but since we had such broad strength and some of these areas we know the dynamics are such that they won't be affected like since the operators have decided they want to pull in 5G. They're going to back off.

Now they may modulate right the wrap but since we have always said that we really were planning more of a ramp in the later timeframe to some extent is the fact that accelerated has been upside right. And then RFSoC, which we've never had before that continues. We went like three more awards just this last quarter because there's just no other product like that. And so we will have more value in the radio side and there is more radio that's going to be deployed.

So yes there are some areas that are weaker but again because of the broad strength and some of the leadership products that we have I don't think we're going to be as affected, but of course we're going to watch this very carefully.

Victor Peng -- Chief Executive Officer

We're in a good position obviously in areas like wireless and even in auto where the platforms that we've been designed into with our products are high value products pretending to be in the ramp phase. So while macro factors may impact it, they're still in some ways gaining share versus alternatives in multiple end markets. But that puts us in a pretty good position.

Toshiya Hari -- Goldman Sachs -- Analyst

Great. And then as a quick follow up, Victor obviously you've been on the road quite a bit, hosting a lot of sessions and I'm sure you've had conversations with customers, but for Alveo specifically what's been the feedback so far? You talked about the ramp into December and more so into calendar '19. How should we think about the magnitude of that ramp again for Alveo specifically. Thank you.

Victor Peng -- Chief Executive Officer

Yes, for FY'19 again starting from effectively zero just the very end of last quarter, so growing a percentage basis while we're not seeing that to be very material but through the course of FY'20 as I said in my comments, it will be meaningful revenue.

I think the interest is high. I do think that how much more upside versus maybe being a little bit more moderate. There is certainly a degree of around some of the things that early questions around application development. In fact I'll just education and so forth and that's why we did the Developers Forum and hopefully you saw some of the momentum that we are getting and strong interest there, right.

So it's early days but we do feel like the signals are, there is a lot of interest and revenue being meaningful FY'20 timeframe not FY'19.

Toshiya Hari -- Goldman Sachs -- Analyst

Got it. Thank you.

Operator

Your next question comes from Tristan Gerra from Robert Baird.

Tristan Gerra -- Robert Baird -- Analyst

Hi good afternoon. You are now starting to go after semiconductor content that traditionally has been discrete chips to FPGA such as DAX and ADC in your RF series. What are the other content adjacency opportunities that you are seeing and can you talk about the candidate that if any in addition to that could be played as policy FPGA integration going forward?

Victor Peng -- Chief Executive Officer

Yes, so one is if you look at Versal, to a degree the reason why that we keep trying to make sure people appreciate that it's not FPGA, it is exactly because of the richness of the multiple different types of compute engines and all the infrastructure we've built into that.

It's got multi-core SOCs. It's got a network on a chip. It's got the next generation programmable adaptive hardware, the fabric and distributed GSP and memory and it's got this new some of the products, some of the sub families we call them series like for instance, CIA core series will have this new architecture called the AI engine.

And so if you look at just the integration level and that of course is going to have all the multi max, Ethernet Max, high speed 30s, somewhere talk to integrated HPM on a silicon interopposer. It's a really, really complete and powerful platform. So that is exactly the direction that we're going in and so because of that, we can expand and we will expand our SAM.

And we're increasing more and more the competition isn't just other FPGA. It's indeed well beyond that and then to get the leverage in, there's been a lot of good questions around this area, that that's why we're so focused on delivering the whole software stack and then driving an ecosystem around that. So yes they were integrating a tremendous amount of capability into our Versal products.

Tristan Gerra -- Robert Baird -- Analyst

Okay. That's very useful and then just going back on the Alevo broad opportunity. While we have opportunity -- even if we assume that the ASPs or has the list prize that you've mentioned trying to reconcile this with your targeted incremental revenue coming from Data Center suggest that you're probably making very conservative market share or adoption rate assumptions. Any color you could give us in terms of the assumption of market share or any type of adoption rate that you see so that you restrain to get to your guidance?

Victor Peng -- Chief Executive Officer

Well, what I would say is that we -- I wouldn't say that we're being very conservative. but we're certainly trying to be measured because it is new for us. But as I said, we are seeing strong efforts. It's just pretty early days.

I think we also we have to build out which we are, we're actively building out the whole go-to-market channels, all of that is being produced. So I would say again that we are going to be priced competitively but we deliver an awful lot of value and then we'll see about share.

The whole acceleration segment is relatively new, right but we do feel like this is a whole new product revenue stream as well as a way to accelerate people getting to market with applications, right. Because we don't people have to start with a chip. So that's why again, we're pricing the value when we think we're going to capture that value but it's an emerging area, so.

Tristan Gerra -- Robert Baird -- Analyst

Thank you.

Operator

Your next question comes from John Vinh from KeyBanc Capital.

John Vinh -- KeyBanc Capital -- Analyst

Hi, thanks for taking my question. I just wanted to follow up on kind of the Data Center question that was asked earlier. It seems like you've got very good proof points right now with several of your customers like Huawei, WS and Baba adopting SaaS, but it seems like there's a much more meaningful opportunity if you can convince one of your customers to move forward with an internal acceleration architectures similar to what we've seen at Catapult.

We think it'll take for one of your customers or potential customers to move forward with that used case. Is that something that we can think about happening potentially next year that's potentially baked into your expectations for a more meaningful growth in data center?

Victor Peng -- Chief Executive Officer

Well look I agree with you, that the world's not just fast and indeed like I said earlier, it's not for us it's unlike many other suppliers it's not even just not Data Center compute right like in storage just we're working on memory and we're are in smart and converged next.

But now back to your point, I agree and as I'm sure you heard in my opening comments, the Twitch grew, right, and they did an acceleration on video, right. So just goes to show again we do, do that and we are working with others.

Again it's just always a bit challenging in terms of when things can be shared, but yes we have many engagements for internal acceleration, some of which involve machine learning, some which do not. I think Alveo is going to also help that because again it lowers the barrier significantly right for people to develop applications and also to bring that on plan. So its not everything that's going to run in public cloud, right. So I agree with you and I hope that I can share that going forward.

John Vinh -- KeyBanc Capital -- Analyst

Great, thank you. And then my follow up is on 5G. It seems like your customers are approaching 5G with a combination of using RFSoC and MPSoC some other FPGAs. Can you just talk about your expectations for 5G? Do you expect the majority of your 5G customers to move to RFSoC and because of the integration and the performance and the bomb cost savings does that give you more staying power late in the cycle as your customers consider kind of ASIC reversion as an opportunity?

Victor Peng -- Chief Executive Officer

Absolutely. I think -- I couldn't have made the same statement better than you just articulated. I mean look the RFSoC really is like -- it's not hype. There's nobody that has a product like that. And by the way it's not just 5G, right. If any kind of massive MIMO itinerary application we see it in cable. We see it in other kinds of like radar applications and people are changing their architecture the radio architecture based on this.

And so in that sense it's certainly pretty sticky. I don't really see what in that particular instance, people are being able to disrupt that and it's just getting started right. We just recently went into production and people are deploying.

So I think RFSoC for certain will be very, very strong. But you're right it's not just the RFSoC. We are seeing usage of other MPSoCs as well as the fire FPJs at the 16 nanometer node. Some of that over the course of time could go to that.

But right now things are so dynamic and things are moving so quickly, that isn't happening and I think that's going to actually 5G so ambitious and there are so many things happening that, that will probably happen for a bit longer. But I am not necessarily suggesting that our position in baseband will be as durable as our position in radio for instance, right.

I think radio is and we already have a roadmap right. So it's not just the first generation RFSoC. We already have the product the next generation as well as in 7 nanometre, so.

John Vinh -- KeyBanc Capital -- Analyst

Great, thank you.

Operator

Your next question comes from Ross Seymore with Deutsche Bank.

Unidentified Participant -- -- Analyst

Hi this is Gene (ph) for Ross Seymore. Thanks for letting me ask a question. You touched on this previously, but how do you view Xilinx's benefit from the 5G transition as compared to the 4G transition, perhaps from a magnitude and duration perspective?

Victor Peng -- Chief Executive Officer

Yeah, I mean, I think 5G is going to clearly over time significantly pass what 4G was as a industry and as for us, it's a bigger opportunity as well and it's both because of the 5G from technology perspective is so much more disruptive. It's much broader and it's really is not just a communications standard, but it's really being used as a term for a basket of technology including things like massive MIMO and which isn't inherently necessarily 5G.

There's IoT being associated, also automotive. So it's very broad and very ambitious. And then it's not just because of the segment is bigger, it's also like, we innovated, we added value, that we're adding more value like again in RFSoC, for instance, right.

For that matter MPSoC, but back in the 4G, we didn't have integrated multi-core RMSoCs and we didn't have really high performance ADCs and DOCs monolithically integrated. So, yes I think the general market will be bigger and broader and I think our opportunity over time will be significantly larger.

Unidentified Participant -- -- Analyst

Okay, as a follow up on the OpEx side, how far along are Xilinx's software investments in support of the data center efforts, do you expect those investments to slow or do they need to persist on a instructional or customer by customer engagement basis?

Victor Peng -- Chief Executive Officer

Well I think, in broad strokes, it's certainly not going to slow. We need to in fact within what's reasonable and affordable so that we could return value to shareholders and still continue to invest.

As I said, we'll probably invest from a headcount perspective, fortunately more in software and things about Silicon and we would at the silicon level. Having said that, we are investing in the ecosystem and also doing partnership. So we're really trying to expand the footprint. So, it's not just us.

Now the other part that you alluded to is also true by some of the really, really big customers. There's a lot of customization of things that we work very closely with to make sure that we deliver to their needs and we are investing in doing that as well for, obviously with the top customers.

So yeah, for both of those reasons just the broad horizontal investment as well as some key major customers we are and we will be investing more on software and IP and related things.

Unidentified Participant -- -- Analyst

Okay, thank you.

Operator

Your next question comes from Blayne Curtis with Barclays.

Blayne Curtis -- Barclays -- Analyst

Thanks for taking my question. Just curious into the September quarter, you mentioned ZTE was back. Just curious how much that was and maybe versus what you were planning when you guided? And then just longer terms of curiosity, you talked about earlier 5G, if you can just relate it to the ramp of 4G and that's two sharp quarters in the beginning of 4Q and fell off.

It sounds like 5G maybe a little longer lived. Just curious as you look out over the next few quarters or even years, the trajectory of 5G versus 4G. Thanks.

Victor Peng -- Chief Executive Officer

Okay, so, the first part. ZTE, so as we said in the first, what all happened and which is I know everybody, we don't have any 10% customers or anyone that's even near 10% to be honest. Having said that, ZET is an important customer and so it was a component certainly of our growth. But again I want to emphasize that, that wasn't about ZTE. There is early deployments and we've seen strength from other major customers are wire to wireless.

I would say, because like that occurred just at the very start of fiscal '19, I would say that, it's not as though we ZTE being above our original plan. Obviously, the head-to-head one less quarter to ship in, but it's not over our original, original plan. But we did have to take them out at the start of the fiscal year, but then, once we knew that it's back end, we just did appropriately.

Okay so then in terms of 5G ramp, definitely as I said before, I think it will be larger. I think it will last longer, because it's so ambitious and there's so many -- there's going to be so many -- so much innovation even at the business model level of what's going to happen with 5G, but calling exactly the shape, heck, the last quarter we weren't saying that we were going to see it now. We're saying we were maintaining the 2020, mainly but now low and behold, it appears that people are wanting to start their deployment next year.

So, I don't feel terribly comfortable in telling exactly how that rolls out. I do think it is still somewhat be bursty and that's why I want to caution people on that. But integrate over time, it's definitely going to be a big opportunity for us and it will be a long opportunity, because data bandwidth is going crazy and people want low latency and high bandwidth. So that build out is going to be very substantial. Not only in wires by the way, that's wired too, right. The whole entire network has to go and get upgraded.

Blayne Curtis -- Barclays -- Analyst

Great.

Operator

Your last question comes from Chris Danely from Citigroup.

Chris Danely -- Citigroup -- Analyst

Thanks guys. I guess I'll try and ask that 5G question in another way.

Victor Peng -- Chief Executive Officer

I like to be honest.

Chris Danely -- Citigroup -- Analyst

Yeah, why not. I've been doing this for way too long. How far ahead of plan is your -- is your 5G? I know you're not going to give us the revenue, but if you look at the revenue you have right now, are we one, two, three quarters ahead of where you thought that would be?

And then I know you're not going to talk about like the curve, but if you go back and look at previous upgrades and area interface standards, how long was it from sort of the original or excuse me, the initial ramp until peak and then do you think that this one -- the 5G could be a longer ramp from the initial until the peak?

Victor Peng -- Chief Executive Officer

Okay. So the first part of the question is how far ahead and you consider one, two and three. I guess, what I would say is that I would imagine you're probably right, probably more than two, three kind of ish, I would say.

And then in terms of again, and try to peak, that offer, I really, look, I'm not going to claim that I'm the visionary on this to be quite candid. But from and I do -- but I do talk to a lot of customers, right and technologist people in Xilinx that are way brighter than I am.

So having said that, what I would say that you know, this is definitely going to be broader. It is very, very ambitious and by the way, and to add another big macro trend in so there everybody is looking at artificial intelligence, machine learning in the network right and that's going to bring a whole another level of things.

So just given how ambitious and how changing this is going to be, not just to traditional market, I do think it will be just broader, that would be my qualitative leave. I certainly don't think I'm smart enough to call the delta to the peak. But, you know what, when we get a whole lot closer to it, the future is hard to predict and predictions are hard especially about the future.

Chris Danely -- Citigroup -- Analyst

Great. I'll take it. Thanks, guys.

Victor Peng -- Chief Executive Officer

Okay, great.

Operator

And there are no further questions at this time.

Matt Poirier -- Investor Relations

Great. Well, thanks for joining us today everyone. We'll have a playback of this call beginning at 5:00 PM Pacific 8:00 PM Eastern, today. For a copy of our earnings release, please visit our Investor Relations website.

Our next earnings release date for the third quarter of fiscal year 2019 will be on Wednesday, January 23 after the market close. As far as conference participation this quarter, we will be attending the Credit Suisse Technology Conference on November 27. This completes our call and thank you very much for your participation.

Operator

Thank you. This does conclude today's conference call. You may now disconnect.

Duration: 56 minutes

Call participants:

Matt Poirier -- Investor Relations

Victor Peng -- Chief Executive Officer

Lorenzo Flores -- Chief Financial Officer

Adam Gonzalez -- Bank of America -- Analyst

Joseph Moore -- Morgan Stanley -- Analyst

C.J. Muse -- Evercore -- Analyst

John Pitzer -- Credit Suisse -- Analyst

Ambrish Srivastava -- BMO -- Analyst

Toshiya Hari -- Goldman Sachs -- Analyst

Tristan Gerra -- Robert Baird -- Analyst

John Vinh -- KeyBanc Capital -- Analyst

Unidentified Participant -- -- Analyst

Blayne Curtis -- Barclays -- Analyst

Chris Danely -- Citigroup -- Analyst

More XLNX analysis

Transcript powered by AlphaStreet

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

More From The Motley Fool

Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.