Sign in
NS

NXP Semiconductors N.V. (NXPI)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $3.173B, up 8% sequential and down 2% YoY, modestly above guidance midpoint and a slight beat versus S&P consensus; non-GAAP EPS of $3.11 was a penny above company guidance but a small miss versus S&P consensus . Revenue consensus was ~$3.156B* vs actual $3.173B; EPS consensus was ~$3.118* vs actual $3.11. Values retrieved from S&P Global.
  • Mix and utilization produced resilient margins: non-GAAP gross margin 57.0% (down 120bps YoY) and non-GAAP operating margin 33.8% (down 170bps YoY), while opex discipline held opex about flat YoY .
  • Q4 2025 guidance: revenue midpoint $3.300B (+4% QoQ), non-GAAP gross margin 57.5% ±50bps, non-GAAP operating margin 34.6%, and non-GAAP EPS ~$3.28; management noted improvement vs its “flat/slightly up” view 90 days ago .
  • Emerging cyclical upturn signals: stronger backlog at distribution partners, improved short-cycle orders, customer escalations and product shortages; still no direct customer inventory restocking, with channel inventory to fluctuate between 9–10 weeks to optimize mix .
  • Strategic catalysts: completed acquisitions of Aviva Links ($243M) and Kinara ($307M), bolstering automotive connectivity and edge AI, and announced sale of MEMS sensors (up to $950M) to STMicroelectronics; resumed buybacks and paid a $1.014 per share interim dividend .

What Went Well and What Went Wrong

What Went Well

  • Broad-based sequential growth across regions and end markets; revenue topped guidance midpoint by ~$23M as “signals of a cyclical recovery” strengthen .
  • Opex control and profitability: non-GAAP operating margin 33.8% and EPS $3.11, both at or slightly above guidance midpoints; CFO emphasized cost efficiencies and test-time reductions to offset price gives .
  • Strategic execution: closed Aviva Links and Kinara acquisitions, aligned to software-defined vehicles and AI at the edge; CEO reaffirmed Investor Day strategy focus and accretive product ramps .

Management quotes:

  • “Our outlook reflects the strength of our company specific growth drivers and signs of a cyclical recovery.” — Rafael Sotomayor
  • “We expect non-GAAP gross margin to be 57.5% plus or minus 50 basis points [in Q4].” — Bill Betz
  • “We have received all regulatory approvals. We have closed both Aviva Links and Kinara.” — Rafael Sotomayor

What Went Wrong

  • Year-over-year declines persisted: total revenue -2% YoY; non-GAAP margins down YoY (gross margin -120bps; operating margin -170bps) amid unfavorable mix (record Mobile and weaker Comms Infra & Other) .
  • EPS vs consensus: non-GAAP EPS of $3.11 was a slight miss vs S&P Global consensus ($3.118*), while EBITDA (non-GAAP) lagged S&P consensus ($1.238B*) given mix/utilization and staging inventory; values retrieved from S&P Global.
  • Limited restocking: management still sees no direct customer inventory restocking in auto; inventory normalization remains in early stages, keeping visibility limited and requiring selective channel staging .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Billions)$2.835 $2.926 $3.173
GAAP Gross Margin %55.0% 53.4% 56.3%
Non-GAAP Gross Margin %56.1% 56.5% 57.0%
GAAP Operating Margin %25.5% 23.5% 28.1%
Non-GAAP Operating Margin %31.9% 32.0% 33.8%
Diluted EPS (GAAP, $)$1.92 $1.75 $2.48
Diluted EPS (Non-GAAP, $)$2.64 $2.72 $3.11
EBITDA (Non-GAAP, $USD Billions)$0.928 $0.866 $1.093
Adjusted EBITDA (Non-GAAP, $USD Billions)$1.073 $1.103 $1.232

Segment revenue

Segment Revenue ($USD Billions)Q1 2025Q2 2025Q3 2025
Automotive$1.674 $1.729 $1.837
Industrial & IoT$0.508 $0.546 $0.579
Mobile$0.338 $0.331 $0.430
Communication Infrastructure & Other$0.315 $0.320 $0.327

KPIs and working capital

KPIQ1 2025Q2 2025Q3 2025
Days Inventory (DIO)169 158 161
Days Payables (DPO)62 60 58
Days Sales (DSO)34 33 31
Cash Conversion Cycle (days)141 131 134
Channel Inventory (weeks)9 9 9
Gross Financial Leverage (x)2.4x 2.4x 2.6x
Net Financial Leverage (x)1.6x 1.8x 1.8x

Consensus vs actual (Q3 2025)

MetricS&P Consensus (Q3 2025)*Actual (Q3 2025)Delta
Revenue ($USD Billions)$3.156*$3.173 +$0.017B (~+0.5%)
Non-GAAP EPS ($)$3.118*$3.11 -$0.008 (~-0.3%)
EBITDA (Non-GAAP, $USD Billions)$1.238*$1.093 -$0.145B (~-11.7%)

Estimates marked with *; Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($USD Billions)Q4 2025“Flat/slightly up sequential” commentary $3.20–$3.40 ($3.30 mid) Raised vs prior qualitative view
Gross Margin (Non-GAAP, %)Q4 2025None specified57.0–58.0 (57.5 mid) New range provided
Operating Margin (Non-GAAP, %)Q4 2025None specified33.7–35.4 (34.6 mid) New range provided
Operating Expenses (Non-GAAP, $M)Q4 2025None specified~$757 ± $10 New level provided
Financial Expense (Non-GAAP, $M)Q4 2025None specified~$103 New level provided
Tax Rate (Non-GAAP, %)Q4 2025None specified~18% New level provided
Non-controlling Interests ($M)Q4 2025None specified~$14 New level provided
Equity-accounted Investees (loss, $M)Q4 2025None specified~$(3) New level provided
Shares – Diluted (M)Q4 2025None specified254.3 New level provided
Diluted EPS (Non-GAAP, $)Q4 2025None specified$3.07–$3.49 ($3.28 mid) New range provided
Dividend ($/share)Q3 2025N/A$1.014 declared, paid Oct 8, 2025 Announced/paid
Q3 Revenue ($USD Billions)Q3 2025Guided $3.05–$3.25 ($3.15 mid) Actual $3.173 Above guidance
Q3 Non-GAAP EPS ($)Q3 2025Guided $2.89–$3.30 ($3.10 mid) Actual $3.11 Slightly above

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
Cycle & demand signalsQ1: “uncertain environment influenced by tariffs” with cautious optimism ; Q2: “emerging cyclical improvement” + company-specific drivers Backlog strengthening, improved short-cycle orders, escalating shortages; guidance improved vs prior “flat/slightly up” view Improving cyclical backdrop
Inventory strategyQ1/Q2: Channel at ~9 weeks; disciplined inventory management No direct customer restocking; channel to fluctuate 9–10 weeks for competitive product mix; selective staging Normalization underway; still cautious
Gross margin driversLong-term model reaffirmed; hybrid manufacturing strategy Q4 non-GAAP GM guided to ~57.5%; mix headwinds from Mobile and Comms Infra; utilization high-70% offsetting mix Recovery toward model
Automotive SDV contentStrategy highlighted; TTTech acquisition closed in Q2 Core accelerators (S32 processing, radar, connectivity) driving auto; near prior peak; leadership reaffirmed Structural content growth
Industrial & IoTQ1/Q2: challenging end market; signs of improvement Mid-20% YoY growth expected in Q4; demand strengthening in ESS, building automation; smart glasses tailwinds Company-specific upcycle
Manufacturing JV investmentsVSMC/ESMC plan communicated Q4: $250M capacity access fee + $350M equity to VSMC; $45M to ESMC; ~200bps GM uplift beyond 2027 Executing hybrid strategy
Capital returnStrong returns vs FCF Buybacks restarted, $256M dividends paid; 12-month owner return 106% of non-GAAP FCF Ongoing capital return discipline
M&A and portfolio optimizationTTTech Auto closed (Q2) Aviva Links ($243M) and Kinara ($307M) closed; MEMS sensors sale (up to $950M) announced Focused portfolio moves

Management Commentary

  • Strategic reaffirmation: “The strategy we laid out during our November 2024 Investor Day stays firmly in place... highly differentiated product roadmaps position us well to achieve our long term goals.” — Rafael Sotomayor .
  • Cycle signals and inventory: “We do not yet anticipate direct customer inventory restocking... distribution inventory may fluctuate between nine and 10 weeks as we are selectively staging additional products in the channel to be competitive.” — Rafael Sotomayor .
  • Margin outlook and drivers: “We expect non-GAAP gross margin to be 57.5% plus or minus 50 basis points... every $1 billion of revenue on a full year basis drives approximately 100 basis points improvement to gross margin.” — Bill Betz .
  • Hybrid manufacturing execution: “We will continue to substantially invest in VSMC... When VSMC is fully loaded in 2028, it will drive a 200 basis points improvement in total gross margin.” — Bill Betz .
  • M&A strategic fit: “Aviva Links... standardizes sensors... around our S32; Kinara brings high performance, low power NPUs to accelerate intelligence at the edge.” — Rafael Sotomayor .

Q&A Highlights

  • Inventory/restocking: No material customer restocking yet; tier-1 auto inventory normalized to end demand; selective channel staging to 9–10 weeks to optimize product mix and competitiveness .
  • Gross margin trajectory: Q4 GM guided up (~+50bps QoQ) on higher revenue, improved ops, and utilization offsetting unfavorable mix; price gives typically in Q1 but offset by cost efficiencies .
  • Industrial & IoT strength: Company-specific drivers (ESS, building automation, smart glasses) underpin stronger-than-peers outlook; business still ~20% below prior peak but improving .
  • Automotive content growth: SDV accelerators (S32, radar, connectivity) continue to drive performance; auto revenue only ~3% below prior peak in Q3 .
  • Capital allocation: Buybacks resumed; 12-month owner returns at 106% of non-GAAP FCF; continued balance with JV investments and acquisitions .

Estimates Context

  • Q3 2025 actual vs S&P consensus: Revenue beat (~$3.173B vs ~$3.156B*), EPS slight miss ($3.11 vs ~$3.118*), EBITDA miss ($1.093B vs ~$1.238B*) as mix and staging inventory weighed on margins; values retrieved from S&P Global.
  • Q4 2025 guidance vs S&P consensus: Revenue midpoint $3.300B near consensus ($3.302B*); EPS midpoint $3.28 slightly below consensus ($3.299*), implying modest downside to EPS vs street; values retrieved from S&P Global.
  • Implications: Street may raise revenue trajectories modestly on industrial IoT strength and auto normalization, but EPS revisions could be tempered by mix and higher below-the-line items (non-GAAP financial expense ~$103M, tax ~18%) .
    Estimates marked with *; Values retrieved from S&P Global.

Key Takeaways for Investors

  • Mix dynamics matter: Strong Mobile and weaker Comms Infra & Other bring margin headwinds, but utilization and cost efficiencies keep non-GAAP GM ~57% and OM ~34% in Q4; track segment mix and Mobile cadence .
  • Early-cycle signals without restocking: Backlog/order improvements and escalations point to recovery, yet direct customer restocking hasn’t started; upside optionality if auto restocking emerges .
  • Guidance improved: Q4 revenue midpoint raised relative to prior qualitative view; EPS guide slightly below street—trade setup favors revenue momentum vs EPS precision near-term .
  • Structural margin drivers: Hybrid manufacturing investments (VSMC/ESMC) and accretive new products support margin expansion beyond 2027; watch capex cadence and JV milestones .
  • Portfolio sharpening: Closing Aviva Links and Kinara expands SDV networking and edge AI; MEMS sale to STMicro streamlines portfolio and adds cash flexibility .
  • Capital return steady: Dividends ($1.014/share) and buybacks resumed; 12-month returns at 106% of non-GAAP FCF—supports shareholder yield while funding growth .
  • Trading lens: Near-term catalysts include Q4 execution (industrial IoT strength, auto normalization) and segment mix; medium-term thesis rests on SDV/edge AI content gains and margin uplift from 300mm strategy .

Notes on non-GAAP adjustments: Non-GAAP results exclude items such as amortization of acquisition-related intangibles, purchase accounting effects, share-based compensation, restructuring, other incidentals, certain financial items, and equity-accounted investees outside foundry partners; reconciliations provided in the release .

Additional references:

  • Q3 2025 press release and 8-K exhibit: full financials and guidance .
  • Q2 2025 press release and Q3 2025 guidance baseline .
  • Q1 2025 press release for prior trends and tariff context .
  • Acquisitions closed (Aviva Links, Kinara) ; Q3 interim dividend .