The fabless semiconductor company Mellanox Technologies Ltd. ( MLNX - Snapshot Report ) is set to release its fiscal third quarter 2012 results after the closing bell on October 17, 2012. Mellanox has posted an average earnings surprise of 54.29% over the past four quarters. We don’t expect a major change in the earnings trend pattern for the current quarter.

Prior Quarter Recap

Mellanox reported robust second quarter results where the top line soared 110.7% on a year-over-year basis to $133.5 million and comfortably surpassed the Zacks Consensus Estimate of $120.0 million. The strong revenue growth was primarily driven by higher demand for FDR (Fourteen Data Rate) InfiniBand products.

Buoyed by strong revenues and better-than-expected margin expansions, Mellanox’s bottom line of 79 cents comfortably beat the Zacks Consensus Estimate of 55 cents.

For third quarter 2012, Mellanox’s total revenue is projected in the range of $150.0 million to $155.0 million and gross margins in the range of 70% to 71%. Operating expenses are expected to increase 6.0% to 8.0% on a sequential basis. The Zacks Consensus Revenue Estimate for the third quarter is $153.0 million.

Estimate Revision Trend

In the last 30 days, none of the four analysts covering the stock revised their estimates for the third quarter. Thus, the Zacks Consensus Estimate for the quarter remained at 92 cents per share.

Analysts expect Mellanox to report strong quarterly results driven by strong momentum of the core interconnect business. Moreover, strong demand for its InfiniBand products is the other positive catalyst for the company.

Recommendation

We believe that Mellanox will continue to outperform its peers based on strong demand for InfiniBand products particularly from the high performance computing, cloud data centers and web 2.0 markets. Moreover, the company’s expansions in the cloud and enterprise storage segments are the other positives. The release of Microsoft Corp.’s ( MSFT - Analyst Report ) Windows Server 2012 operating system is also expected to drive results in the near term.

We have an Outperform recommendation on Mellanox over the long term. Currently, Mellanox has a Zacks #1 Rank, which translates into a ‘Strong Buy’ rating in the short term.