NXP Semiconductors (NXPI)·Q4 2025 Earnings Summary

NXP Q4 Beat, Stock Falls 4% as RF Power Exit Announced

February 3, 2026 · by Fintool AI Agent

NXP Semiconductors delivered Q4 2025 results that topped expectations on both revenue and earnings, with management expressing confidence that 2026 will operate "within its long-term financial model." However, shares fell approximately 4% in aftermarket trading to $221 as investors weighed the company's decision to exit the RF Power business and ongoing semiconductor cycle dynamics.

CEO Rafael Sotomayor characterized 2025 as "a tale of two halves," with inventory digestion in H1 followed by accelerating demand in H2 that aligned with NXP's 8-12% long-term growth targets.

Did NXP Beat Earnings?

Yes — NXP beat on both metrics:

Revenue of $3.34 billion was $35 million better than the midpoint of guidance, growing 7% year-over-year and 5% sequentially. Distribution inventory finished at 10 weeks, with management planning to move toward the long-term target of 11 weeks as demand improves.

What Changed From Last Quarter?

Segment performance showed meaningful shifts:

Key observations:

• Automotive returning to growth: After inventory digestion in H1, auto finished Q4 within 1% of its prior peak in 2023 and is guiding year-over-year growth in Q1
• Industrial & IoT momentum: Growth is "fairly broad-based" across healthcare, smart glasses, factory automation, and energy storage with 20% Y/Y growth in Q4
• Comm Infra restructuring: Secure Cards now >50% of segment, with RF Power (~25%) being exited and Digital Networking (~25%) maturing

What Did Management Guide?

Q1 2026 guidance came in above consensus:

Segment guidance for Q1 2026:

• Automotive: Up mid-single-digit Y/Y, down mid-single-digit Q/Q (includes only $25M or one month of MEMS sensor revenue)
• Industrial & IoT: Up low-20% Y/Y, down mid-single-digit Q/Q
• Mobile: Up mid-teen% Y/Y, down ~20% Q/Q (seasonal)
• Comm Infrastructure: Up mid-teen% Y/Y, up 10% Q/Q

CFO Bill Betz stated: "Based on the positive trends, including current order rates and business signals we track, we are confident NXP will operate within its long-term financial model for the full year of 2026."

How Did the Stock React?

Stock fell ~4% aftermarket despite the beat:

The negative reaction likely reflects:

1. RF Power exit announcement: ~$90M restructuring charge and wind-down of ~25% of Comm Infrastructure segment
2. Extended cycle concerns: Despite stabilization commentary, investors remain cautious on automotive semiconductor timing
3. Margin pressure in Q1: Operating margin guided to 32.7% at midpoint, below Q4's 34.6%

Strategic Updates: RF Power Exit & MEMS Divestiture

RF Power Business Exit

• NXP will stop new product development in RF Power
• ~$90M restructuring charge taken in Q4 GAAP results
• Business will wind down over ~2 years (similar trajectory to Digital Networking exit 8 years ago)
• R&D resources redirected to SDVs and Physical AI

MEMS Sensor Business Sale (Completed)

• Closed January 5, 2026 (sold to STMicroelectronics)
• Gross proceeds: $900M, with additional $50M upon certain conditions
• One-time gain: ~$630M (reflected in Q1 GAAP results)
• Annual revenue impact: ~$300M (Auto segment)
• Rationale: Buyer manufactures front-end, preventing future gross margin headwinds

Key Q&A Highlights

On Inventory & Demand Signals:

"Over the quarter in the last 90 days ago, all our internal signals that we talked about in the past have improved. Our backlog, our distributions backlog, our customer escalations have increased. The short-term orders continue to increase as well... we haven't seen anything like this in quite a while." — Bill Betz, CFO

On Auto Growth Drivers:

"Our auto exposure is shifting to more and more structural and less cyclical... tying our roadmap to secular trends that are really transforming the architectures of auto. The thesis is completely intact." — Rafael Sotomayor, CEO

On China EV Incentives:

"The changes in China increase certain regulations to improve the quality and resilience of the vehicles... we see some of the changes actually are good for us, for NXP and our auto business." — Rafael Sotomayor, CEO

On Physical AI Traction:

"The interest in the combination of the Kinara NPU and the i.MX family of products is really, really strong. The level of the conversations right now that we're having with our customers has changed significantly." — Rafael Sotomayor, CEO

Capital Allocation & Manufacturing Investments

VSMC & ESMC Investment Progress:

• About 50% through investment cycle ($1.7B of $3.4B total)
• VSMC: Majority of remaining equity payments expected in 2026; ramp 2027, full load 2028
• ESMC: Payments stretching 2027-2029; ramp later than VSMC
• Expected gross margin lift: +200 bps at company level when VSMC fully loaded (2028+)

Q4 Cash Flow & Returns:

Balance sheet: Net debt of $8.96B at 1.9x Adjusted EBITDA, with 14.7x interest coverage. Post-quarter, NXP repurchased another $36M under its 10b5-1 program and redeemed the $500M March 2026 notes with cash on hand.

Full Year 2025 Results

FY 2025 showed the second year of decline:

Segment full-year performance:

• Automotive ($7.1B, flat Y/Y): Inventory digestion in H1 masked underlying strength; H2 aligned with 8-12% model
• Industrial & IoT ($2.3B, flat Y/Y): H2 growth "materially above" model driven by physical AI, factory automation
• Mobile ($1.6B, +6% Y/Y): Stronger demand and content gains in premium mobile
• Comm Infrastructure ($1.3B, -24% Y/Y): Digital networking normalization, RF Power deceleration, Secure Cards growth

Gross Margin Outlook

CFO Bill Betz provided a framework for margin modeling:

Near-term drivers:

• Low single-digit annual price concessions (VPAs completed)
• Partially offset by operational efficiencies
• Rule of thumb: ~100 bps expansion per $1B revenue at full-year level
• Front-end utilization: High 70s% in Q4, remains in high 70s% in Q1

Longer-term:

• Internal utilization improvement as volume recovers
• VSMC/ESMC benefits: +200 bps gross margin lift expected when fully loaded (2028+)
• Mix improvement through new product introductions and long-tail go-to-market

Inventory note: Pre-builds were 7 days at end of 2025. Expected to reach 15-20 days by end of 2026 due to manufacturing consolidation efforts, but net inventory days expected to decline through the year.

Long-Term Model Confidence

Management reiterated Analyst Day 2024 targets:

*Note: 2024 baseline should be adjusted for ~$300M MEMS divestiture

Accelerated Growth Drivers (Auto):

• Software-Defined Vehicles: S32M 5nm vehicle compute, S32K 16nm zonal processors, automotive Ethernet
• TTTech Auto acquisition accelerating SDV architecture delivery by end of 2026
• Radar and electrification recovering from H1 inventory impacts
• Revenue contribution from TTTech Auto, Aviva Links expected beyond 2027

Physical AI Growth (Industrial & IoT):

• Kinara NPU + i.MX family creating complete edge AI platforms
• Applications: Medical imaging, workplace safety systems, logistics automation, robotics
• Strong design win pipeline expected in 2026

Geographic Reporting Change

NXP announced a shift from ship-to based regional reporting to headquarters-based reporting, effective with Q4 2025.

Rationale: Better reflects how NXP manages the business internally, directs sales resources, and where customer engagements and design win awards occur. Example: A major handset maker receives products in Asia, Europe, and US, but most decisions are made at headquarters.

Historical data has been restated in the IR presentation.

Risks & Concerns

1. Automotive cycle timing: While inventory digestion is "largely behind," broader industry cyclical headwinds remain
2. Memory constraints: Customers discussing DDR4 shortages as potential H2 concern, though not yet reflected in orders
3. RF Power wind-down execution: Business will linger for ~2 years, with uncertain revenue trajectory
4. China exposure: Regional dynamics remain fluid; EV incentive changes create both tailwinds and uncertainty
5. Margin compression in Q1: Seasonal factors and annual price concessions pressure operating margin

Forward Catalysts

• Q1 2026 earnings (late April): Validate continued recovery trajectory and 2026 model confidence
• SDV architecture delivery: S32 system expected by end of 2026 via TTTech Auto integration
• Physical AI design wins: Expected material contribution from Kinara NPU engagements
• VSMC ramp (2027): Manufacturing strategy milestone approaching
• 2027 Analyst Day targets: Approaching critical year for validating growth framework

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For more on NXP, explore the company page or read the Q4 2025 earnings transcript.