Skyworks Solutions (SWKS) Q4 FY2025 Earnings Call Transcript

Date: November 4, 2025 | Source: StockAnalysis.com (full transcript) / company IR

---

Operator: Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Skyworks' fourth quarter fiscal year 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the call over to Raji Gill, Vice President of Investor Relations of Skyworks. Please go ahead.

Rajvindra Gill (VP of Investor Relations, Skyworks Solutions): Thank you, Operator. Good afternoon, everyone, and welcome to Skyworks' fourth fiscal quarter 2025 conference call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President, and Philip Carter, Senior Vice President and 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. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Additionally, today's discussion will include non-GAAP financial measures consistent with our past practice. Lastly, for detailed information regarding the Skyworks and Qorvo combination announced on October 28th, I encourage you to review the press release, investor presentation, and related materials available on our Investor Relations website. Today's call, however, will focus on our fiscal fourth quarter and full year 2025 results, as well as our outlook for the December quarter. With that, I'll turn the call over to Phil Brace.

Philip Brace (CEO and President, Skyworks Solutions): Thanks, Raji, and welcome, everyone. Before getting into the quarter results, I want to take a moment to reflect on what we've accomplished over the past few quarters. One, we've had three straight quarters of solid execution, with both revenue and non-GAAP EPS exceeding expectations. We're seeing strong momentum across mobile and broad markets as our teams continue to execute. Two, we streamlined our sales and marketing teams to be more customer-focused and enhanced collaboration with the engineering teams, appointed a new executive to lead global sales, and welcomed a new Chief Financial Officer. Three, last quarter, we announced the consolidation of our Woburn facility to improve our long-term cost structure and support healthier gross margins. Finally, four, last week, we announced an agreement to combine with Qorvo — a transformative deal that, upon closing, will add meaningful scale, diversification, and a broader, highly complementary technology and product portfolio.

Moving to the quarter, Skyworks delivered strong results fueled by significant upside in mobile and sustained strength across broad markets. We posted revenue of $1.1 billion, delivered earnings per share of $1.76, and for the full fiscal year, we generated $1.1 billion of free cash flow, representing a 27% free cash flow margin. In mobile, results again were strong, with revenue up 21% sequentially and 7% year-over-year. Our outperformance reflects healthy sell-through and a richer product mix at our top customer, along with continued growth in Android. Looking ahead, we see multiple drivers of long-term RF content growth: internal modem adoption, added AI functionality, and higher RF complexity are expanding our opportunity inside the smartphone.

Broad markets delivered another solid quarter, with demand broad-based across edge IoT, automotive, and data center. In edge IoT, Wi-Fi 7 adoption continues to accelerate across home, enterprise, and industrial applications, and we're making good progress on next-generation Wi-Fi 8 programs. In automotive, design activity remains robust as vehicles become more connected and intelligent — the run rate exiting fiscal 2025 represents a new record for our automotive business, surpassing our previous high in fiscal 2023. In data center infrastructure, activity continues to rebound as customer inventories have normalized, including increasing timing design win activity for next-generation 800G platforms. Taken together, broad markets have evolved into a more balanced and durable growth engine for Skyworks — now an approximately $1.5 billion business with positive momentum over the past seven quarters, expanding customer reach, and margins above the overall corporate average.

Before we move into the financial details, I'd like to take a moment and welcome Philip Carter as our new CFO. Philip brings extensive financial and accounting experience in the semiconductor space, having previously served as Skyworks' principal accounting officer before becoming the chief accounting officer at AMD. With that, I'll turn the call over to Philip for a discussion of last quarter's performance and outlook for Q1 of fiscal 2026.

Philip Carter (SVP and CFO, Skyworks Solutions): Thanks, Phil. I'm excited to be back at Skyworks and to work again with such a talented team. Now, turning to our fourth fiscal quarter results, Skyworks delivered revenue of $1.1 billion, exceeding the high end of our guidance range. During the quarter, our largest customer accounted for approximately 67% of revenue. Mobile represented 65% of total revenue, up 21% sequentially and 7% year-over-year, supported by stronger sell-through at our top customer and continued growth in Android. Broad markets grew 3% sequentially and 7% year-over-year, driven by growth across edge IoT, automotive, and data center.

Gross profit was $511 million, with gross margin of 46.5%. Operating expenses were $247 million, slightly above the high end of our guidance range, primarily due to higher employee incentive accruals tied to stronger quarterly revenue. Operating income reached $264 million, translating to an operating margin of 24%. Other income was $11 million, and our effective tax rate was 4.1%, resulting in net income of $264 million and diluted earnings per share of $1.76. For the full fiscal year, we generated $1.3 billion of operating cash flow and capital expenditures of $195 million, resulting in annual free cash flow of $1.1 billion, or a 27% free cash flow margin. We do expect free cash flow to remain solid in fiscal 2026, but below fiscal 2025, given the lower expected revenue base and more normalized working capital trends.

We ended the quarter with $1.4 billion in cash and investments and $1 billion in debt, maintaining a strong balance sheet. Looking ahead to the first quarter of fiscal 2026, we expect revenue to be between $975 million and $1.025 billion. We anticipate mobile to decline low-to-mid teens sequentially. We expect broad markets to be up slightly sequentially, representing 39% of sales and up mid-to-high single digits year-over-year. Gross margin is projected to be approximately 46% to 47%. We expect operating expenses between $230 million and $240 million. Below the line, we anticipate approximately $4 million in other income, an effective tax rate of 10%, and a diluted share count of 150.5 million shares. At the midpoint of our revenue outlook of $1 billion, this equates to expected diluted earnings per share of $1.40. With that, I'll turn it back to Phil for closing remarks.

Philip Brace (CEO and President, Skyworks Solutions): Thank you, Phil. A heartfelt thank you to our employees, customers, and partners. Your hard work and support fuels our success and sets the stage for continued leadership and growth. Operator, let's open the line for questions.

---

Questions & Answers

Harsh Kumar (Piper Sandler): On the Qorvo combination, can you frame the expected synergies and the timeline?

Philip Brace (CEO and President): The combination with Qorvo is highly strategic and transformative, bringing greater scale, deeper R&D, and a broader technology portfolio. We expect to achieve healthy gross margin through the cycles in the 50% to 55% range, supported by significant operating leverage, with a clear path to more than $500 million of synergies over time. The combined company will generate robust free cash flow, underpinned by an extremely favorable capital structure with expected net leverage of approximately one at close. We expect the transaction to close in early calendar year 2027, subject to regulatory approvals and shareholder approvals.

Analyst (Q2): Broad markets momentum — can you speak to the growth across edge IoT, automotive, and data center, and expectations into fiscal 2026?

Philip Brace (CEO and President): Broad markets has evolved into a balanced and durable growth engine, now an approximately $1.5 billion business with positive momentum over the past seven quarters. In edge IoT, Wi-Fi 7 adoption continues to accelerate across home, enterprise, and industrial, with solid backlog and order trends. In automotive, the run rate exiting fiscal 2025 represents a new record for our automotive business, surpassing our previous high in fiscal 2023, with a robust pipeline of design wins across 5G telematics, infotainment, and power management. In data center infrastructure, activity continues to rebound as customer inventories have normalized, including timing design win activity for next-generation 800G platforms. All three are growing, and we do expect some seasonality as we enter fiscal 2026.

Craig Ellis (B.Riley): On the executive changes — new CFO and new head of sales — do you feel you have the right team in place across the broader organization?

Philip Brace (CEO and President): I feel great about the leadership team that I have in place now, and I'm not anticipating any changes.

Craig Ellis (B.Riley): On fiscal Q2 seasonality and working capital/inventory into the seasonally softer period?

Philip Carter (SVP and CFO): We don't guide beyond one quarter out. Generally speaking, it does look like normal seasonality. In terms of working capital, we benefited greatly in fiscal 2025 from burning down inventory; I do not anticipate that to repeat next year, so there is going to be some inventory build as we get near the end of the year. There are low inventory levels in the channel, so we have pretty good visibility there.

Philip Brace (CEO and President) (closing): Great. Thanks for participating in today's call. I look forward to speaking with you at upcoming investor conferences throughout the quarter. Thank you.

Operator: Gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.