News: Microelectronics
25 February 2025
Skyworks’ Broad Markets revenue returns to year-on-year growth
For fiscal first-quarter 2025 (ended 27 December 2024), Skyworks Solutions Inc of Irvine, CA, USA (which manufactures analog and mixed-signal semiconductors) has reported revenue of $1068m, down 11% on $1201.5m a year ago but up 4% on $1025m last quarter and slightly above the midpoint of the $1050–1080m guidance range. This was despite a muted demand environment and ongoing inventory digestion across selective end markets.
Mobile products revenue grew 6% sequentially, comprising 67% of total revenue, as the firm supported multiple new product launches across its top mobile customers.
Skyworks’ largest customer (Apple) grew 9% sequentially to 72% of total company revenue. About 85% of that revenue from Apple related to its smartphones, as Skyworks supported the ramp of the latest model. The other 15% related to other products (the watch, tablet, PC, HomePod, the Vision Products, etc). In contrast, the Android-related segment [Google, Samsung, and China-based OEMs] was flat sequentially.
Skyworks’ Broad Markets products comprised 33% of total revenue, growing modestly for a fourth consecutive quarter (since the fiscal Q1/2024 bottom) and returning to year-on-year growth (of 2%). “We have observed consistent improvement in demand indicators within Broad Markets,” says chairman, president & CEO Liam K. Griffin. Specifically, Skyworks is seeing growth in wireless gaming, home audio and headsets, where customers are adopting its RF connectivity and audio technology. Also, despite a soft demand environment, the automotive segment grew as design wins in the connected car, onboard charging and infotainment are gradually converting into revenue. However, the industrial and infrastructure segments remain subdued due to persistent inventory challenges.
Highlights of the quarter include:
- securing 5G content for premium Android smartphones, including Samsung Galaxy, Xiaomi, ASUS and several others;
- supporting Gemtek’s launch of the first AI router with voice-enabled AI-powered healthcare service;
- enabling ASUS’s award-winning quad-band Wi-Fi 7 gaming routers;
- expanding the design-win pipeline in automotive with cellular connectivity and power management solutions.
On a non-GAAP basis, gross margin was 46.5%, level with last quarter but up slightly on 46.4% a year ago.
Operating expenses have risen from $191m (15.9% of revenue) a year ago to $212m (19.9% of revenue), reflecting strategic investments in technology and product roadmaps.
Net income is down on $317m ($1.97 per diluted share) a year ago but rebounded from $249.9m ($1.55 per diluted share) last quarter to $258.3m ($1.60 per diluted share, $0.03 above the $1.57 guidance).
“Revenue, gross margin and EPS met or exceeded the midpoint of guidance,” notes Griffin.
Operating cash flow has fallen further, from the record of $774.9m (operating cash flow margin of 64.5%) a year ago and $393.2m (38.4% margin) last quarter to $377.2m (35% margin). Capital expenditures was $39m (up from $22.2m a year ago). Free cash flow has hence fallen further, from the record $752.7m (free cash flow margin of 62.6%) a year ago and $393.2m (38.4% margin) last quarter to $338.2m (31.7% margin).
During fiscal Q1/2025, Skyworks distributed $112.5m in dividends. Overall, cash and marketable securities hence rose, from $1574.1m to $1754.8m (up from $1029.7m a year ago). Debt remains about $994m, providing “ample financial flexibility”.
Dividend payment and stock repurchase program
Skyworks’ board of directors has declared a cash dividend of $0.70 per share, payable on 17 March, to stockholders of record at the close of business on 24 February.
Also, as part of its “disciplined capital allocation strategy”, Skyworks’ board has authorized the repurchase of up to $2bn of the firm’s common stock, through to 3 February 2027. This succeeds in its entirety the stock repurchase program approved by the board on 31 January 2023. The firm expects to fund the repurchase program using working capital.
Outlook
During Q1/2025, Skyworks cut its internal inventory for an eighth consecutive quarter, from $784.8m to $699.7m, down from $927m a year ago. “We are seeing positive momentum in booking trends, backlog and sell-through patterns across Broad Markets. However, [excess] inventory headwinds remain acute in industrial and infrastructure,” notes senior VP & chief financial officer Kris Sennesael. “The inventory and the distribution channel has been cleared out, but there is still inventory at the customer level.”
For fiscal second-quarter 2025 (to end-March), Skyworks expects revenue to fall to $935–965m (driving gross margin down to 45.5–46%), due to a seasonal mid-to-high-teens sequential decline in Mobile revenue.
“In Broad Markets, we anticipate further sequential and year-over-year growth as demand signals and backlog improve,” says Griffin. “In certain segments, supply and demand dynamics are in equilibrium and channel inventories have normalized.”
Operating expenses will increase to $220–228m, driven mostly by a reset of the social charges at the beginning of the calendar year as well as an increase in R&D project expenses. Diluted earnings per share are expected to fall to $1.20.
“Overall, we are encouraged by the recent momentum in Broad Markets and are energized about new product cycles in automotive, electrification, Edge IoT and AI data center fueling long-term growth,” says Griffin. “In Edge IoT, we are observing higher levels of intelligence and, combined with more nodes being added to the edge of the network, driving higher levels of RF complexity. Artificial intelligence and machine learning increases the range of functionality, running models like voice and computer vision. RF connectivity is the conduit for secure, robust and lower-power AI applications. Moreover, the adoption of WiFi 6E and 7 systems by customers is contributing to the improvement in demand. These systems, characterized by enhanced complexity and utilization of additional bands enable transmission of higher-value content. We are currently in the emerging stages of a multi-year upgrade cycle with WiFi 7 shipments experiencing a ramp-up,” he adds. “In automotive, we expect our RF content per vehicle to grow driven by 5G cellular, WiFi, Bluetooth, and V2X.”
Regarding Mobile: “Over the last 18 years, we have benefited from a truly collaborative partnership with our largest customer [Apple], which has resulted in significant content and revenue growth over the years,” notes Sennesael. “However, the last couple of years have been challenging, in part because the competition has been intensifying, in part because of the multi-year baseband or modem transition, which has created some turbulence among the RF players. As it relates to the upcoming phone cycle expected to be launched in the fall of 2025, the Skyworks team developed a suite of high-performance RF solutions. Most of the sockets that we targeted, we actually were able to keep [including several highly integrated RF modules], but instead of being single-sourced [still] on one particular socket, it is being dual-sourced… Our content position is expected to be down 20–25%. This decline will start impacting our revenue in the fourth quarter of fiscal 2025 and throughout fiscal 2026. So, we are going to remain with under-utilization in our factories for a little bit longer than we initially anticipated. That is not going to help in gross margins improvement. We are going to continue and actually double down on trying to find operational efficiencies in our factories as we deal with this situation,” he adds.
“We have already started the development of a new suite of solutions for the next-generation [Apple] phone [due to launch in Fall 2026] with an expanding set of products and addressing more opportunities than ever before. The customer is demanding and asking for better and higher RF products, in part because they're bringing AI capabilities to the phone, which is increasing the technological burden inside the phone. They're asking for smaller footprint, lower power consumption, lower latency and higher throughput, and overall higher performance, and we are stepping up. We demonstrated that our technology and products can do it,” Sennesael says.
“Global adoption of generative AI on smartphones is still in its nascent stage,” notes Griffin.” We anticipate this to be a multi-year trend that will catalyze smartphone upgrades and increase the complexity and requirements for RF solutions.”
“In addition, we will continue to pursue growth opportunities with our other mobile customers… We continue to have a strong relationship with Google. We have already won substantial design wins for next year and the year after. With Samsung and China, we will remain selective, focusing on those segments of the market that demand high-performance RF. But there is design-win momentum that is starting to turn into revenue. We can grow our Android business as a whole this year and the year after and beyond,” says Sennesael.
“We will continue to drive our diversification strategy, supported by multiple secular growth trends in Broad Markets. Our Broad Markets business should be growing double digits, more than 10% year-over-year,” continues Sennesael. “We expect those opportunities to partially offset the revenue decline at a large customer in fiscal 2026 and position us for growth in fiscal 2027.”
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