Q1 2025 Earnings Summary
- Expanding Design Wins in High-End Android Market: Skyworks is securing 5G content for premium Android smartphones, including Samsung Galaxy and Google Pixel, with substantial design wins for the next year and beyond. The company believes it can grow its Android business this year and in the future. , , ,
- Growth in Broad Markets Segment: Skyworks' broad markets segment has experienced modest sequential growth for four consecutive quarters and returned to year-over-year growth. Key areas like connected IoT devices (40-45% of broad markets revenue) and automotive (approximately 20%) are less impacted by inventory issues and are expected to drive double-digit year-over-year growth. This growth in broad markets also contributes to a favorable gross margin tailwind. , , ,
- Strengthening Technology Roadmaps and Product Development: Despite recent challenges with its largest customer, Skyworks is developing more products than ever before and is addressing more opportunities, focusing on delivering high-performance parts to win back share. The company remains committed to investing in technology and collaborating closely with customers to support upcoming product cycles. , ,
- Skyworks expects a 20% to 25% reduction in content per device at its largest customer in the upcoming phone cycle, as it moves from being single-sourced to dual-sourced on key sockets. This decline will start impacting revenue in Q4 fiscal 2025 and continue throughout fiscal 2026.
- The company is facing intensified competition, with rivals improving their product performance and competing for sockets that Skyworks previously held exclusively. This has resulted in market share losses and reduced content at major customers.
- There are ongoing inventory headwinds in the industrial and infrastructure markets, with persistent excess inventory at customer levels and lack of visibility on when these challenges will subside, which may slow growth in these segments.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | **-11% YoY ** | The decrease from $1,201.5 million to $1,068.5 million was driven primarily by lower demand for mobile products and an unfavorable macro environment, with some offset from direct customer sales. Further share losses at a key customer are expected starting in Q4 FY 2025. |
Cost of Goods Sold (COGS) | **-10% YoY ** | The decline is aligned with lower production volumes and unit shipments resulting from reduced demand. Additionally, ongoing cost-control measures and favorable changes to depreciation practices contributed to the COGS reduction. |
Operating Income (EBIT) | **-30% YoY ** | EBIT of $181.1 million fell due to reduced revenue, unfavorable product mix, and increased operating expenses, particularly in R&D. Although there were cost-containment efforts, they did not fully offset the impact of lower sales volume. |
Net Income | **-30% YoY ** | The net income decline (to $162.0 million) reflects lower operating income driven by the same demand challenges and higher R&D investment. Slightly lower tax expense only partially mitigated the overall drop in profitability. |
R&D | **+15% YoY ** | Rising to $176.4 million, the growth is mainly due to increased headcount-related costs and engineering prototype expenses, reflecting the company's strategy to invest in new product development despite the weaker demand backdrop. |
Interest Expense | **-32% YoY ** | The decrease to $6.8 million stems from continued debt repayments, which reduced outstanding obligations and thus lowered interest expense compared to the prior year. |
Net Change in Cash | **-25% YoY ** | The decline to $233.9 million net inflow (from $310.9 million) was driven by lower net income and unfavorable changes in working capital, partially offset by reduced financing outflows. Despite these headwinds, the company maintained positive operating cash flow. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue | Q1 2025 | no prior guidance | $1.050B – $1.080B | no prior guidance |
Gross Margin | Q1 2025 | no prior guidance | 46% – 47% | no prior guidance |
Operating Expenses | Q1 2025 | no prior guidance | $209M – $215M | no prior guidance |
Other Income | Q1 2025 | no prior guidance | $3M | no prior guidance |
Effective Tax Rate | Q1 2025 | no prior guidance | 12.5% | no prior guidance |
Diluted Share Count | Q1 2025 | no prior guidance | 160M shares | no prior guidance |
EPS | Q1 2025 | no prior guidance | $1.57 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue | Q1 2025 | $1.050B to $1.080B | $1,068.5M | Met |
Gross Margin | Q1 2025 | 46% to 47% | ~41.4% (calculated from Revenue 1,068.5MMinus COGS 626.6M) | Missed |
Operating Expenses | Q1 2025 | $209M to $215M | $259M (SG&A 82.6M + R&D 176.4M) | Missed |
Diluted EPS | Q1 2025 | $1.57 | $1.00 | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
High customer concentration risk from the largest customer | Remained very high (65%–69% of revenue) and a key dependency across Q2–Q4 2024. | Largest customer reached 72% of revenue, with an expected 20%–25% content decline starting in late FY25. | Consistent and increasing dependency |
Ongoing focus on Android market expansions, design wins | Emphasized across Q2–Q4 2024 with selective targeting of high-end Samsung and Google devices, showing sequential stabilization. | Continue to stress design wins and product ramps with both Samsung and Google, reinforcing a long-term strategic focus in premium Android. | Continues with stable Android strategy |
Broad markets growth (IoT, automotive, industrial) vs. inventory | Q2–Q4 2024: Modest, sequential growth tempered by excess inventory in automotive, industrial, and infrastructure; anticipated mid-single-digit y/y growth once inventory normalizes. | Achieved year-over-year growth of 2% in broad markets; still seeing inventory headwinds but expecting further sequential growth in IoT, automotive, and industrial segments. | Ongoing recovery despite persistent inventory issues |
AI-enabled smartphones | Q3 & Q4 2024: Highlighted as a significant future driver, increasing RF complexity for smartphone upgrades. | Minimal direct mention; only noted that global AI adoption in smartphones is still nascent. | No longer emphasized |
Shift from single-sourced to dual-sourced at largest customer | Not mentioned in Q2–Q4 2024 beyond references to a socket loss, but no explicit move to dual-sourcing with a specific 20–25% reduction. | First detailed discussion in Q1 2025, confirming a 20%–25% content reduction after largest customer introduced dual-sourcing. | New development |
Automotive segment | Q2–Q4 2024: Muted demand amid excess inventory; long-term optimism for EV and connected car trends. | Q1 2025 shows improvement with design wins converting to revenue, indicating a return to y/y growth. | Sentiment improved |
Intensifying competition & dual-sourcing impact | Previous calls focused on socket losses but did not detail a dual-sourcing pivot. | Q1 2025 reveals heightened competition as product performance was only “as good as” competitor’s, prompting the largest customer to dual-source, causing a significant content reduction. | Potentially large impact on future results |
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Revenue Impact from Content Loss at Largest Customer
Q: What is the expected revenue impact from content loss at your largest customer?
A: We anticipate a 20% to 25% decline in content at our largest customer due to moving from being single-sourced to dual-sourced on an important socket. This decline will start impacting revenue in the fourth quarter of fiscal '25 and throughout fiscal '26. The final impact depends on product mix, including new versus legacy products and different basebands. -
Gross Margin and Operating Expenses Outlook
Q: How will the content dynamics affect gross margins and operating expenses?
A: Revenue growth challenges will lead to continued underutilization of our factories, which will not help gross margin improvement. We will focus on operational efficiencies and cost reductions in our factories. While we plan to manage operating expenses tightly, we will continue to invest in R&D to support our technology roadmaps and growth opportunities in broad markets. -
Relationship with Largest Customer and Future Prospects
Q: How are you approaching your relationship with your largest customer given recent challenges?
A: We have a strong, longstanding relationship with our largest customer and will continue to collaborate closely. We are developing more parts than ever before, targeting more opportunities, as requested by the customer. Our goal is to support their baseband transition and position ourselves to regain content in future generations, including the product expected to launch in fall 2026. -
Diversification Strategy and Broad Markets Growth
Q: Are you accelerating your diversification strategy into broad markets?
A: Diversification has always been part of our strategy. We like our broad markets business, which addresses multiple end markets like consumer, enterprise, infrastructure, networking, cloud, industrial, and automotive. We expect our broad markets business to grow double digits, more than 10% year-over-year, and we will continue to invest to drive growth. -
Growth Prospects in Android Market
Q: What are your growth prospects in the Android market?
A: We are remaining selective in the Android market, focusing on the high end where high-performance RF is demanded. We have a strong relationship with Google, with substantial design wins for next year and beyond. We expect to grow our Android business this year and in the future. -
Manufacturing Footprint and Capital Expenditures
Q: Will you make any changes to your manufacturing footprint or capital expenditures?
A: We do not plan to make changes to our manufacturing footprint. We are currently operating with less capital intensity and have no capacity expansion CapEx in our plans. Our CapEx plan will remain about the same.