Q3 2025 Skyworks Solutions Inc Earnings Call
Good day and welcome to the skyworks third quarter fiscal year 2025 earnings call. At this time, all participants are listening mode.
After the speaker's presentation, there'll be a question and answer session, instructions will be, given at that time.
As a reminder, this call may be recorded.
I would like to turn the call over to Raja Gil. Vice president, vest relations and corporate development. Please go ahead.
Thank you, operator. Good afternoon everyone and welcome to skyworks third fiscal quarter 2025 conference call with me today for a prepared remarks is Phil brace our chief executive officer and president and Rob SRI interim. Chief Financial Officer for skyworks. This call is being broadcast over the web and can be accessed from the investor relations section of the company's website at skyworks.com
In addition, the companies prepared remarks will be made available on our website promptly after the conclusion during the call.
Please refer to our earnings press release and recent SEC filings, including our annual report on form. 10K for information on certain risks. That could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. Additionally, today's discussion will include non-gaap Financial measures consistent with our past practice. Please refer to our press release within the investor relations section of our company website for a complete reconciliation to Gap with that. I'll turn the call over.
Refill.
Thanks rajie and welcome everyone.
skyworks delivered strong results, this quarter fueled by an upside in Mobile and sustained strength, across broad markets
We posted revenue of $965 million.
Delivering earnings per share of $1.33 and generating free cash flow of $253 million.
Revenue, gross margin, and EPS exceeded the high end of our guidance.
We returned 430 million to shareholders this quarter through. Share repurchases and dividends and more than a billion dollars across the past, 2 quarters supported by strong free, cash flow and discipline working Capital Management.
In Mobile Revenue, came in above seasonal Trends with strength, continuing into the September quarter, supported by healthy, sell through at our top customer and new product launches in Android.
While demand signals remain solid, we're actively monitoring the channel and are maintaining a disciplined approach to inventory.
Looking ahead, we see multiple drivers of long-term, RF content. Growth include an opportunity from internal motive adoption.
Higher, RF complexity with AI features and a larger addressable footprint within the smartphone.
At the same time, we'll continue to deliver more performance in smaller form factors enabling richer features within current sockets.
Smartphone replacement Cycles, remain historically long now, averaging over 4 years even as our top customer maintains our record installed base.
The first wave of AI capable phones is reaching scale and early demand signals are encouraging.
As AI capabilities become more intuitive and integrated, we believe this could drive an inflection and upgrade Cycles leading to a potential Tailwind to volumes and content over time.
Our deep RF expertise strong customer relationships and advanced manufacturing put us in a strong position to lead through this next phase.
Broad markets, continue to gain, momentum driven by new customer engagements across Edge iot and Automotive.
To build levels and lean Channel, inventory.
In Agile IoT Wi-Fi, 7 ADT is accelerating across consumer, enterprise, and industrial applications.
These systems demand faster speeds at ultra low latency translating to Greater RF complexity.
Looking ahead, we're already investing in Wi-Fi 8 to support the next wave of performance.
Automotive remains a key. Growth driver for skyworks, supported by long design cycles, that offer greater visibility and more durable revenue streams.
We broadened our reach across a growing roster of global oems securing programs. With byd, Ford gily Nissan and others
As vehicles become more software-defined and connected, the need for secure wireless links continues to grow, from 5G telematics to over-the-air updates and infotainment.
All of which increase our content opportunity.
In traditional Data Center and infrastructure.
Business activity is rebounding as inventory normalizes.
Meanwhile accelerating AI workloads are driving upgrades to 800 gig and 1.6 terabytes, which is increasing demand for our precision timing Solutions.
Altogether. Broad markets is becoming a stronger more resilient growth engine for skyworks. And we expect this momentum to continue with both sequential and year-over-year growth in the September quarter.
In aggregate. This is a 1.5 billion business with a double digit long-term growth profile and gross margins above the corporate average.
A core part of our portfolio that we believe remains underappreciated relative to its scale and contribution.
Today, we're taking action to optimize our manufacturing footprint with the planned closure of our Reuben, manufacturing facility, and the consolidation of operations into our Newbury Park site.
This move is designed to drive higher Fab utilization, lower fixed costs and approve overall efficiency in the future.
As our product, Miss, shifts towards more advanced, higher-value content, this consolidation positions us to expand gross margins over time while reinvesting in next-generation technologies and maintaining the scale and technical capability required to serve our premium customers at the highest levels.
Before we dive in the numbers, I want to welcome Rob shine to the team in his role as interim CFO.
Robert served on the skywards board for nearly 20 years and knows our business strategy and leadership team exceptionally. Well,
His appointment ensures continuity as we move through this transition.
On the CFO search, we've been taking a deliberate approach and have a number of strong candidates in the pipeline.
I expect the process to conclude shortly.
With that, I'll turn the call over to Rob for a discussion of last, quarter's performance, and outlook for Q4 of fiscal, 25.
Thanks, Phil.
It's a privilege to step in as interim CFO and support the skyworks team during this transition.
Having served on the board for nearly 2 decades and being a shareholder. I know the company well and have confidence in our strategy, our financial discipline, and our long-term growth opportunities.
Turning to our third fiscal quarter results.
Skyworks delivered revenue of $965 million, exceeding the high end of our guidance range.
During the quarter, our largest customer accounted for about 63% of Revenue.
Mobile represented 62% of total revenue up, 1% sequentially and 8% year-over-year driven by stronger, sell through at our top, customer at new product, launches in Android.
Broad markets, which includes Edge iot, automotive, industrial infrastructure and Cloud grew 2% sequentially and 5% year-over-year.
Growth and reflects stronger and demand and further inventory normalization across key verticals.
Gross profit was 454 million with gross margins of 47.1% of expectations. Driven by product mix and ongoing cost discipline. We see further opportunities to expand margins over time as we execute on our manufacturing efficiency roadmap,
Operating expenses total of 230 million aligned with our long-term product roadmap.
We remain disciplined with spend balancing investment, in future growth with prudent cost management.
operating income reached 224 million translating to an operating margin of 23.3%
11.2% resulting in net income of $200 million and diluted earnings per share of $1.33.
9 cents above our guidance.
Cash flow remains strong. With operating cash flow of 314 million and capital expenditures of 61 million, resulting in free, cash flow of 253 million, or 26% of Revenue.
Over the past two years, our free cash flow has benefited from effective working capital management, as we've reduced inventory levels.
We returned 430 million to shareholders during the quarter comprised of 104 million in dividends and 330 million, in share repurchases.
Over the past 2 quarters, we've returned more than 1 billion dollars to shareholders.
We entered the quarter with 1.3 billion in cash and Investments and 1 billion. In debt, maintaining a strong balance sheet and ample flexibility to support our strategic and financial priorities.
Looking ahead to the fourth quarter of fiscal 2025. We expect Revenue to range between 1 billion to 1 billion, and 30 million
In Mobile, we anticipate mid single digit. Sequential growth, we're seeing healthy sell through, lean Channel, inventories, and solid order. Visibility heading into September quarter.
Broad markets is set to grow. Again, this quarter with year-over-year Trends accelerating and continued strength in bookings, backlog and channel sell through.
Gross margin is projected to be approximately 47%, plus or minus 50 basis points, reflecting the stable product mix and ongoing cost discipline.
We expect operating expenses between $235 million and $245 million as we continue to fund key R&D initiatives while maintaining tight control over discretionary spend.
As a reminder, the September quarter includes a 14th week which adds about 7 million incremental expenses.
Below the line, we anticipate approximately $4 million in other income, an effective tax rate of 13%, and a diluted share count of 149.5 million shares.
At the midpoint of our Revenue Outlook, this equates to expected diluted EPS of a140.
With that, I'll turn it back to Phil for closing remarks.
Thank you rob. Before I close, I want to thank our employees, for their incredible dedication, and our customers and partners for their continued, trust and collaboration.
Operator, let's open the line for questions.
Thank you, if you'd like to ask a question. Please press star 1 1.
If your question has been answered and you'd like to remove yourself from the queue, please press star 1 again.
Our first question comes from Chris queso with wolf research, your line is open.
Yes, thank you. Good evening. Uh, I guess the first question is uh,
You know, within the handset business, is there anything that you can consider? That's, that's changed over the last 90 days or, uh, uh, you know, with respect to what you expect on content? Would you expect on on unit sales, just a little bit of color about, uh, you know what, what may have been changing within the mobile landscape?
Uh, thanks for the question. Look, I think in general, we've just seen strong demand. I mean, strong demand for some of our products. I think, you know, our largest customer had a conference call the other day and kind of reflected that in some very strong demand. We're seeing the benefit of stronger unit demand and, frankly, shipments that benefit us from a mixed point of view, so that continues to be strong, as reflected.
In our, in our results, in our forward-looking guidance.
Okay. Uh, and just with regard to the extra week, that you talked about, in the September quarter, um, you know, well, how should we think about December quarter seasonality? Uh, you know, both given, you know, some of the content changes that your largest customer, you know, typical seasonal effects, and then the impact of of the extra the absence of the extra week as you go into the December quarter.
just, you know, we're just focused on 1 Step at a Time continuing to execute and deliver and, you know, our guidance for the quarter kind of uh, stands
And just a quick follow-up. Chris, this is Rajie. The extra week did not have an impact on the revenue for the September guide; it just has an impact on the Opex.
Got it, okay. Thanks.
Thank you. Our next question. Comes from. Edward Schneider with Charter equity research. Your line is open.
Thank you very much. So you've talked at length earlier this year, about the changes that your largest customer. This, um,
This, uh, new product release. I want to touch on, um, a couple of things. Obviously that has a lot to do with the kind of odd mix of of phones, uh, that they'll be releasing this year. I know you can't talk about details but, um, as we move into 2026, if the trends that that, uh, they've talked about other companies, like Qualcomm have talked about, uh, and other folks have hinted to that. If they actually play out, as expected with the mix starts, favoring an internal modem, does that naturally increase your Blended content? Um, but not so much on the phones that are being produced now. But I mean if everything, if we take a snapshot and hold the hold things constant on internal versus external loan for 2026, um, would that give you guys a significant boost or are things going to change significantly or could change significantly for that next?
Next year's model. So everything's back up in the air, and we got to figure it all out from zero again.
Yeah, I mean, look for this particular cycle, we've kind of commented that generally speaking. We have more content available to us in the, in the internal modem as some parts that were previously unavailable to us now, become available us to again. So I think that that Apples to Apples, that that remains to be seen through in constant, uh, through through cycle. You know, as we look at things that affect our overall business, right? It that's 1 Factor uh mix of what the customer ships between the various different phones. Is another Factor mix of the various different, you know, iPhone particular models geography. There's there's a whole bunch of factors that are reflected that and I think right now we've got
a little bit of Tailwind with respect to. We we're getting solid demand across across the phones that have our content in them. So you know, as what happens going forward, I you know, we'll see, but right now it's uh, it's it's good.
but but part of, if I could follow up if part of
The part of the hand you were dealt this year. This, this fall was basically because, um, that internal element is such a small percentage of telephone soldier that dual something on the part is, is you lost, it's clear. You have talked about it. We've talked about it at length, the transmit, you see module. Uh, it's hard to split that when you're only doing maybe 10 or 15% until the volume. Uh, I guess my question is is it a rational um, expectations that that might get split on the internal modem and when volumes pick up as a natural,
Consequence of 1, you gaining back, share in that exact, uh, part, uh, in the upcoming phone on, on the external multiple. So clearly you qualify for that part against the Bargo a broadcom. Um, so I'm just trying to get a handle on is that it's a, is it um, uh, a rational, assumption to to assume that if the that volume picks up on that phone, the mix starts. Favoring you, and it's large enough to start splitting you to get a bigger chunk of that because if your content is already up on that without the transmit, diversity received and that's what you said. Um, then 1 would expect to be up significantly with it, right?
Yeah, I mean I I all things being equal, you know? I think that that's probably fair but I mean all things aren't necessarily equal, just depends on what phones, they ship and all the rest of that stuff. But I you know, generally speaking, we do have more content to us available on the on the internal motor is the external modem. So as that shifts more to the internal modem, there's a natural Tailwind for us there. I would say that.
Okay, thank you.
Yeah.
Thank you. Our next question comes from Carl Acraman with BNP Paribas. Your line is open.
Hi, this is Sam Feldman on for Carl aqumin.
So you indicated Android revenues were flat on a sequential basis in March quarter at around 7 million. How should we think about your Android business in this quarter relative to last quarter and going forward? Can you grow up in these levels?
Yeah. So um this is this is rajie so our, our Android Revenue um in the uh June quarter was up, significantly. It was up um, just under a hundred million dollars.
And this is really primarily related to our ramp with with Google um and we expect um continued growth into the September quarter when we're thinking about Android.
Versus Improvement. And what inventory levels are? You seeing are your end customers compared to last quarter.
Yeah, in general, we, we're trying to keep a really close eye on it. I think we've talked about our prepared remarks, some of the past year, we've really been trying to be disciplined to take our inventory, inventory down inventories, right now are a very, very thin lean levels. And so we're we're trying to maintain focus of that, you know, obviously, our customers. Don't always tell us why they're ordering products. We just trying to deliver where we can and
Um, we're just trying to keep our inventories low uh, to manage that and and you know, like our current guidance kind of reflects what we believe is is the current environment with respect to tariffs and all the rest.
Right, thank you so much.
Thank you. Our next question comes from Christopher Rowland with cesco Hannah, your line is open.
Hey guys. Uh thanks for the question and congrats on the results. Um Phil maybe for you now that you've
I had some more time to look deeply at things at Skyworks. Have you kind of solidified your view on the importance of diversification beyond handsets? And perhaps you have any thoughts, just broadly, without obviously identifying any targets, but thoughts on end markets or products that are desirable for Skyworks?
Works. Um, or alternatively, would you be open to a larger merger within the RF industry? How might you feel about that? Thank you.
Yeah. I I mean look I think that's a very broad question and I would say certainly I mean you just look strategically at the company and it's it's hard not to think that the, you know, the single customer concentration we have is, is certainly probably suppressing our multiples compared to what it otherwise would be otherwise. Um, so obviously kind of diversification and growing to business, um, is important having said that, right? I mean, there we remained incredibly focused on continuing to uh, keep our eye on the ball where where our current bread is butter, right? We we kind of maintain major focus on that. And so my message internally, the team is you need to walk and chew gum at the same time, right? We need to continue to be focused on on executing cleanly, delivering the the best parts we can for our largest customer and then frankly continue to look ways to grow and diversify our businesses elsewhere. I think if you ask me about priorities and how I look at things in general, I I'd probably look for things that are gross margin of creative a little stickier have a little a little uh, we'll say a longer, uh, time constant of the revenue.
Revenue to help help balance some of the potential volatility that comes from, from being, uh, in in the handset market. So, that's how I prioritize that. And in terms of size and scale, I mean, I'm really going to be focused on making sure that we can do things that are accretive, um, and I think that, you know, that's going to be kind of an important Focus for us in the management team.
Awesome. I am per perhaps as a follow-up. Uh, are there any economics attached with the
Closing the woolburn facility or consolidating that uh, are there any other opportunities? And um and and and and more broadly, maybe you can just talk to Opex growth from here uh, how you kind of view it on a on a, on a multi-year basis.
On the on the factory. You know question you you kind of I mean long term on that is we're not we're not really breaking out specific numbers at this time primarily because right it's it takes a while to get through that. We've got to manage a bunch of parts and do that. And frankly, the End gross margin that we have is going to be driven by the utilization and and all the things we get there. Having said that, I mean, clearly this will represent a Tailwind both. In fact, we utilization capex reduction, Opex Improvement and overall utilization of fixed cost assets and so, you know, it should remain to tell when it will continue to guide guide that as, as, as it goes on, you know, Robert you had any other comments on that. Yeah. A couple a couple of comments. First of all, you know, having been on this board for
For almost twenty years, I'm embarrassed to say. One of the things we are excited about when we brought...
Um, as as I indicated in my prepared, remarks, 235 million to 245 million in the September quarter and we just did 230 million in the June quarter. Now that 235 to 245 in the September quarter includes about 7 million related to the 14th week. So excluding that Opex is up only modestly quarter over quarter, and we'd expect expect it to Trend lower in the December quarter. So for the full year, the 16% year-over-year increase in FY. 25 reflexology.
But I I would also say looking ahead to FY 26 and Beyond Phil's made it very clear that we're going to be very disciplined.
Great to hear. Thank you, guys.
Thank you.
Thank you as a reminder to ask a question. Please press star 1, 1 1.
Our next question comes from VC Arya with Bank of America Securities. Your line is open.
Hi. This is Liam far on for rebeck. Thank you for taking our questions. Uh,
On the first 1, just what is your content visibility in Flagship phones into next year?
Thank you. Uh,
so,
well, I'm I'm I'm hesitating on the question because I mean clearly it depends on uh, lots of things. So if you're asking about the next down selection happened that typically doesn't happen till the the late fall, uh, you know, into Christmas January time frame so we won't have any other visibility. Other than that other than what we've already shared. Having said that right I mean I think you can see our results suggest that um you know, we've we've uh our customers shipping good, good mix of of the phones where we have high content now. And if I look out long term, what am I encouraged about? I'm encouraged about our app content growth as more transmit capabilities, come online as the intern modem comes online. And as frankly, as if the customer gets uh, good uptick in the in the, uh, refresh cycle. So,
All those things will kind of affect our performance going forward.
Makes sense. Okay? So then in terms of kind of the this pricing environment then we're betting from new sockets. Has there been any material change their over the last kind of 90 days or or 6 months um as you kind of continue to work for those sockets. Uh you know for you know, expanding off of your current base but also maybe rearrange the ones that you've lost that your your top customer.
Yeah, look the pricing. It is a highly competitive environment, we compete with, you know, very, very capable and, and credible competitors. And that, that, that those competition makes us stronger. I mean, it's when you're playing in in this game, you got to like, you got to like that game. It's a competitive game. And you, you gotta, you gotta, you got to thrive in that. And, and we do um, and I think that, you know, the pricing environment, really hasn't changed. Uh, they expect us to deliver the best part of the best price and we're kind of focused on doing that. I mean, long term. What I'm encouraged about is, you know, we've got some of the stuff I talked about long term, content, drivers include the movement to the internal modem more transmit capability, a balance of of increased um, transmit, which will drive more off content and frankly, a refresh capability on AI. So I kind of look at it and stepping even further back I go 99 Point as far out as you can go for some of the devices connected to the internet are going to be connected. Wirelessly and kind of I feel good about that spot too. So
Thank you very much, appreciate.
Thank you again to ask a question. Please press star 1, 1 1.
Our next question comes from Edward Schneider with Charter equity research. Your line is open.
Great. Thanks for the follow-up questions. So, Phil, I don't know if you want to, uh, pontificate about it or not. But, um, we've talked about this before. Do you feel like this year is probably your low point in content? Uh, it's your largest customer, given all the other trends.
Well yeah, look, I mean, we've we've obviously had a couple of down selections that have not, uh, worked in our favor. And I think uh, someone quoted happiness is a, is a upward sloping line. And so I think we've got to change the trajectory of the downward, sloping line to the upward sloping line. I think we're all laser focused on that.
Imagine 1 of the goals here is to increase utilization in Newbury, Park. Yeah. Um,
Long lead time items. So it it'll take a little while but long term. Look you're you're 100% correct, long term. This positions us to invest in leading technology in Newbury Park, driving increased stock reutilization better better fixed cost utilization as which should benefit gross margin and reduce capex and all the rest of it. So that's kind of where we are.
Is it 2 years or
A year.
No comment right now.
Okay, and then, um, am I correct assuming that it's all gas and we'll burn and as most of that gas for broad markets or mobile, is it split?
um,
It's split. I mean, the gas technology is used for um, as uh, for amplifiers, right? So it's it's split.
But it is all gas.
Yeah.
Okay, thank you.
Thank you. Our next question comes from Chris sanker with TD Cowen. Your line is open.
Yeah, hi. Thanks for the quick question. I actually had like 3 of them first, 1, in terms of the auto business. Can you see how big the auto business is today, is it mid single digit percentage 10%? And, uh, could this double in the next year? How do you think about it? And then I have 2 follow-ups?
Yeah, that's a great question. Chris, this is rajie. So so Automotive is Now tracking around 60 million a quarter. Um, and up, you know, significantly on a year-over-year basis and, you know, in the press release, we talked about a a number of, of programs, uh, that we won particularly at byd. Nissan Ford, and it's really across a variety of our products, whether it's 5G telematics, uh, infotainment power isolation. Um, so we, um, are quite bullish on that on that business. And it's, it's very long design cycles and, um, more durable revenue streams. So we have a, a good pathway there to continue to accelerate that Revenue.
But thanks for that. And then, um, on the mobile side, how solid is the visibility of your largest customer versus Android, you know, compared to let's say, 3 months ago, you think stronger sales due to content or units or any any color on? Um, ios's Android visibility. Those are 3 months ago. It would be helpful and then I have 1 last fall off.
uh, I don't, I mean right now our
I mean, if you
You know, right now our visibility is strong across the board. Primarily I booked to build higher than higher than 1, um, Channel inventors are low, and
So, you know, our visibility is solid. At this point, we don't see any material difference between the two.
Got it. And then how long?
how do you think about?
Here, you know, like um, or I should say Opex this year relative to posting opportunities in 2026, you know, is there flexibility on it, or should you assume that's going to kind of grow for future revenue growth? How do you think about Opex? Thank you.
Yeah, I think when I started I kind of mentioned look, we're going to be taking very disciplined views as Opex. I think over the past couple of years, the companies made significant increase Investments and you can look at that as Opex and that was really designed to, frankly focus on our R&D. We we are an engineering focused company and to the extent, we do have some any modest increase in in Opex. Uh, it'll be really targeted on on core R&D. Having said that, we're going to be disciplined about that. I, I, you know, I I wouldn't expect anything other than kind of nominal.
Rates of Opex improvement over time.
Awesome, thank you very much, appreciate it.
Thank you.
Thank you. Our next question comes from Nicholas Doyle with nem. Your line is open.
Hey guys, thanks for taking my questions. Um, asking about the infrastructure, networking Cloud sub segments, uh, in fiscal 24. You guys talked a lot about inventory, digestion, impacting the business. And I think that lasted through the year, but we're seeing a lot of positive demand signals from those Ed markets. So can you just talk about how that business is performing in the quarter and any specific demand drivers? I think you mentioned um 800 gig and 1.6 transition helping as well.
Yeah, I mean, I think I think you, uh, you got exactly right. I think, in the past couple of quarters, we talked about that. The fact that, that we did continue to see a little bit of inventory, overhang in that space, uh, that does appear to be behind us at this point. Even inventory seems to be low and we're starting to, you know, continue to get, uh, you know, seeing orders in order to grow. So it, it does appear to be that the, the inventory issue is behind and that, that, uh, our supply demand is, is kind of aligned with consumption at this point.
Know, 15% of overall Apple Revenue in in 32 or 4 q. Thanks.
Yeah Nick this is this is roie. So you know, our top customer uh in the quarter in June was roughly you know 63% of sales. The split was roughly 85% mobile, 15% broad, markets thereabouts. And we expect both the, the similar percentage of sales and a similar split going into the September quarter.
Thank you.
Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Philip Brace for closing remarks.
Great. I'd like to thank everybody for participating on today's call and I look forward to speaking with you add upcoming investor conferences during the quarter, thank you.
Thank you for your participation. You may now disconnect good day.