Q1 2025 Earnings Summary
- Qorvo is confident in growing and gaining market share at its largest customer, expecting to increase content this year and next year.
- Strong adoption and ramp of Qorvo's new low-mid-high (LMH) products in the Android ecosystem, with significant engagement across customers, expected to drive growth in coming quarters.
- Increasing opportunities in China, particularly in automotive with ultra-wideband adoption and VDX trends, along with growing demand in power management for AI and data centers, supporting solid-state circuit breaker adoption with silicon carbide solutions.
- Qorvo is guiding for a slight year-over-year revenue decline in the September quarter, primarily due to declines in smartphone revenues. Despite content gains at large customers, total smartphone market units, SKUs, timing, and mix are leading to a conservative outlook.
- The company is on the "other side" of strong ramps in key models such as the Samsung S24 (with over $5 of content) and the Pixel (with about $15 of content). New products like their low mid-high are only starting to ramp at the end of this quarter, leading to timing issues causing revenue softness in the near term.
- Qorvo does not expect near-term benefits from AI smartphone trends, as they are not modeling any uplift from AI at this time, indicating potential cautiousness in mobile demand forecasts.
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Mobile Revenue Decline
Q: Why is mobile revenue down year-over-year despite content growth?
A: The slight decline in September guidance is mainly due to smartphone revenues. Although we've seen significant gains at our largest customer, overall market factors like SKUs, unit volumes, and mix contribute to the decrease. We had strong ramps in the first half with models like the S24, where we had over $5 of content, and the Pixel with about $15 of content, but we're now on the other side of those ramps. Additionally, our new low mid-high products will start ramping at the very end of this quarter, impacting revenues going forward. -
Gross Margin Outlook
Q: How are utilization rates and gross margins expected to change?
A: In the September quarter, we expect a substantial sequential increase in gross margin, primarily due to a higher mix of customized solutions for flagship-tier phones. This product mix includes more externally sourced silicon and SOI content, not impacted by internal utilization levels. Underutilization headwinds were about 200 basis points last quarter, expected to fall to around or slightly less than 100 basis points in September, and negligible for the back half of the year. -
Content Growth at Largest Customer
Q: What's the outlook for content growth at your largest customer?
A: We are confident in our ability to grow with our largest customer and gain share this year. We also believe we're in a great position to gain share again next year. -
AI Smartphone Demand
Q: Is AI driving increased demand in smartphones?
A: We're taking a conservative approach regarding AI. While Samsung's S24 had a nice ramp and we have excellent dollar content there, it wasn't tremendously above expectations. Our largest customer hasn't released their next-generation phones, so we can't comment. It would be fantastic if AI reduces replacement cycle times, leading to an uplift, but that's not what we're modeling at this time. -
New Product Development
Q: Any new products that could be significant?
A: Our low mid-high (LMH) products are interesting as we're tiering them for different segments in the Android ecosystem, from entry to high tier. We're starting to release a lower-cost LMH, and we expect ramping to begin this quarter, growing significantly into next year. We're also working on other products but prefer not to telegraph those at this time. -
Internal vs. External Production
Q: How are you balancing internal production versus external foundries?
A: It's technology-dependent. For silicon or SOI, we rely on partners as they can produce more efficiently. In areas where we can differentiate ourselves, like BAW filters where foundry options aren't available, we continue to produce internally. This strategy helps support margin expansion. -
China Mobile Market
Q: What's the outlook for the China mobile market?
A: We're seeing slightly better data year-over-year, expecting the market to be up low single-digit percentages, similar to the overall smartphone market. The 6/18 holiday was a bit better year-over-year, but cumulative smartphone sales are flat to slightly up. -
Non-Mobile China Growth
Q: Any areas of strength in China outside mobile?
A: While we wouldn't focus on China specifically, we're seeing broad-based growth across High Performance Analog (HPA) and Connectivity and Sensors Group (CSG). In China automotive, ultra-wideband adoption is accelerating for features like presence detection and advanced radar. In power, AI and data centers are driving demand for improved efficiency and silicon carbide adoption, which is a great trend for us. Additionally, China's leading in adopting our VDX technology, which is exciting as it will ramp next calendar year.