Skyworks Solutions Q2 2025 Earnings Call Transcript

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Provided by Quartr
May 7, 2025
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Operator

Good afternoon, and welcome to Skyworks Solutions Second Quarter Fiscal Year twenty twenty five This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President of Investor Relations and Corporate Development for Skyworks. Mr. Gill, please go ahead.

Raji Gill
Raji Gill
VP - Investor Relations and Corporate Development at Skyworks Solutions

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' second fiscal quarter twenty twenty five conference call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President and Chris Cennesall, 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 at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call.

Raji Gill
Raji Gill
VP - Investor Relations and Corporate Development at Skyworks Solutions

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. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10 ks for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward looking statements made today. Additionally, today's discussion will include non GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP. With that, I'll turn the call over

Raji Gill
Raji Gill
VP - Investor Relations and Corporate Development at Skyworks Solutions

to Phil.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Thanks, Raji, and welcome, everyone. I'm excited to join you today for my first earnings call as CEO of Skyworks. Over the past few months, I've engaged with our customers, partners, employees and shareholders, and I'm energized by the opportunities ahead. Since stepping into the role, I've spent time getting to know our teams across the company, and I've been incredibly impressed by the depth of talent and expertise throughout the organization.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

We have some of the smartest engineers I've ever worked with and there's a real energy and passion for innovation that you can feel everywhere. There's also a competitive edge and a hunger to win. It's been exciting to jump in and be part of such a strong and capable team. Skyworks sits at the center of the wireless revolution, backed by a rich history in RF innovation. Our proprietary technologies power some of the most demanding connectivity platforms in the world, from five gs and Wi Fi to automotive and edge IoT, and we're continuing to push the bounds of what's possible.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Now let's review our fiscal Q2 results. Skyworks delivered solid performance driven by our diversified portfolio and disciplined execution, we posted revenue of $953,000,000 delivered earnings per share of $1.24 and generated free cash flow of $371,000,000 Revenue, gross margin and EPS exceeded the midpoint of our guidance. We returned a record $600,000,000 to shareholders through share repurchases and dividend payments, the highest amount ever. This underscores our confidence in the long term outlook as well as our commitment to delivering value to shareholders. Let's provide some additional color on the business.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

In mobile, we experienced typical seasonal patterns during the March, while executing on multiple new product launches with our leading mobile customers. Smartphones are evolving with AI, driving more uplink intensive workloads like real time voice processing and enhanced imaging. Over time, this trend should drive higher transmit power, better efficiency, and expanded uplink MIMO, areas where Skyworks is strongly positioned. In our diversified businesses, we've seen a steady recovery underway for more than a year, with five consecutive quarters of sequential revenue growth and two quarters of positive year over year comparisons. This improvement is being driven by strength in automotive, edge IoT, and Wi Fi seven adoption across consumer and enterprise devices.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Demand signals are firming, bookings are improving, and in most segments we're seeing inventory normalization across the distribution channel. In Edge IoT, Wi Fi seven adoption is accelerating to meet real time demands like high resolution video and smart sensors. Its advanced capabilities are driving greater RF content per system, creating strong momentum for our connectivity portfolio. In addition, we've already begun early development on Wi Fi eight to solidify our technology leadership in the next generation wireless connectivity. In automotive, the move to software defined vehicles is driving the need for robust wireless connectivity.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

As these vehicles rely on over the air updates, real time sensor data processing, and interconnectivity between vehicle systems, the RF content should also scale up. Lastly, as AI drives more complex data center workloads, the need for tighter integration between timing devices and processors is growing. While still early, we see a long term opportunity to capitalize on this trend with our precision timing portfolio. Overall, we're encouraged by the momentum in our diversified businesses. Our position in next generation product cycles from automotive connectivity to edge IoT to timing reinforces our long term trajectory.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Turning to our quarterly business highlights. We secured design wins across five gs premium Android smartphones and for in vehicle infotainment systems with major OEMs. We also expanded Wi Fi seven across enterprise access points, routers and home mesh networks. Before I turn the call over to Chris for a discussion of last quarter's performance and outlook for Q3 of fiscal twenty twenty five, I would like to highlight some changes to the executive leadership team. First, Mark Denninger will be succeeding Chris as the CFO of Skyworks, effective 06/02/2025.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Mark brings significant CFO level and strategic experience across the technology sector. His deep expertise and proven track record make him a strong addition to the Skyworks leadership team. Chris will be stepping down to pursue another professional opportunity. On behalf of the entire board and everyone of Skyworks, I would like to thank him for his valuable contributions and wish him success in his new endeavors. Second, Todd Lipinski will be succeeding Carlos Borey as Skyworks' Senior Vice President, Sales and Marketing effective 06/02/2025.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Todd brings experience driving global revenue growth and building high performance teams in the semiconductor and technology sectors. Carlos will be shifting to an advisory role to help ensure a smooth transition. I'm looking forward to partnering with Mark and Todd and leveraging their strong leadership capabilities as we execute on our long term strategic initiatives.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Thanks, Phil. First of all, I would like to thank all Skyworks stakeholders, including the board, the executive team and employees around the world for many years of strong collaboration. It's been an honor and privilege to serve as Skyworks CFO for the last eight years. I only worked for a short period of time with Phil, but I know that under his leadership with the help of Mark and Todd and the rest of the executive team, Skyworks will prosper in the years ahead. Now, let's turn to the quarterly results.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Skyworks revenue for the second fiscal quarter of twenty twenty five was $953,000,000 above the midpoint of our outlook. Mobile revenue was 62% of total revenue, down 17% sequentially consistent with historical seasonal patterns as demand normalizes following peak holiday shipments. Revenue from our broad markets portfolio, which includes Edge IoT, Automotive and Industrial and Infrastructure, Networking and Cloud increased 2% sequentially and grew 3% year over year, marking our fifth consecutive quarter of growth since reaching a cyclical low in the December quarter of twenty twenty three. This sustained momentum reflects the expanding diversification of our business. Even amid a volatile microenvironment and ongoing inventory digestion in certain end markets.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Gross profit was $445,000,000 with gross margin at 46.7%, exceeding our expectations driven by favorable mix, continued execution on our cost reduction initiatives and operational efficiencies. We also made further progress in improving our working capital position, marking our ninth consecutive quarter of inventory reduction. Operating expenses were $223,000,000 aligned with our strategic priorities. These investments support our long term technology and product roadmaps. Looking ahead, we remain focused on striking an appropriate balance, investing in innovation and strategic market expansion, while maintaining cost controls to protect and grow profitability.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

We delivered operating income of $222,000,000 translating into an operating margin of 23.3%, demonstrating financial discipline as we invest for growth. We generated $5,000,000 of other income and our effective tax rate was 13.4%, driving net income of $197,000,000 and diluted earnings per share of $1.24.00 $4 above our guidance. We demonstrated robust cash generation with operating cash flow of $410,000,000 capital expenditures of 39,000,000 and a free cash flow of $371,000,000 or a 39 percent free cash flow margin. Our ability to consistently convert earnings into cash is a cornerstone of our financial strategy. Throughout the second fiscal quarter, we remained committed to disciplined capital allocation, returning value to shareholders through both dividends and share repurchases.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

During fiscal Q2, we distributed 111,000,000 in dividends and repurchased 7,400,000.0 shares of our common stock for a total of 500,000,000 translating to over $600,000,000 capital return to shareholders, the largest quarterly return ever. After the end of the quarter and through May 2, we repurchased an additional 3,600,000.0 shares of our common stock for a total of $212,000,000 under an established 10b5-one program. At quarter end, we maintained a solid cash position and a well structured balance sheet with over $1,500,000,000 in cash and investments and $1,000,000,000 in debt, providing us with financial strength and flexibility to support both near and long term priorities. We view our strong balance sheet and consistent free cash flow as key strategic assets. Before we go into the details of our outlook for Q3 of fiscal twenty twenty five, I'd like to briefly address the recent macroeconomic and tariff developments.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

While the evolving tariff landscape presents new complexities, we believe our diversified global supply chain positions us to navigate potential disruptions. As this is a dynamic environment, we will continue to actively monitor the situation. With that context, for the third quarter of fiscal twenty twenty five, we anticipate revenue of $920,000,000 to $960,000,000 We expect our mobile business to decline low single digits sequentially in line with typical seasonal patterns. Broad markets remain on track for another quarter of sequential growth with year over year trends accelerating. We are encouraged by improving bookings backlog and channel sell through.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Gross margin is projected to be between 4647%. We anticipate operating expenses in the range of $220,000,000 to $230,000,000 as we continue to invest in our technology and product development roadmaps fueled by our strong cash flow generation. Below the line, we anticipate $5,000,000 in other income, an effective tax rate of approximately 13% and a diluted share count of approximately 152,000,000 shares. Accordingly, at the midpoint of the revenue range of $940,000,000 we intend to deliver diluted earnings per share of $1.24 Now, let me hand it back to Phil for some final remarks.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Thank you, Chris. As we wrap up, I want to take a moment to reflect on some key business initiatives. First, we must reinforce our leadership position in mobile focusing on what we do best, developing the most innovative solutions in the industry and delivering the highest performance RF products to our customers. Second, accelerate the growth in our diversified businesses. Third, optimize operational efficiency with cost discipline and gross margin improvements.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Before I close, I want to thank our employees for their incredible dedication and our customers and partners for their continued trust and collaboration. Operator, let's open the line for questions.

Operator

Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. Given time constraints, please limit yourself to one question and one follow-up.

Operator

We'll go first to Chris Caso at Wolfe Research. And Chris, your line is open. You may have yourself on mute.

Chris Caso
Managing Director at Wolfe Research LLC

Hi, good morning. Hope you can hear me now.

Chris Caso
Managing Director at Wolfe Research LLC

So welcome, Phil and Chris. We'll certainly miss you. But perhaps, Phil, the first question would be for you. You haven't been at Skyworks long, but I'm sure you've been working hard to kind of dig in here. Perhaps some initial thoughts about strategy about sort of where you're looking to take the company, just kind of an assessment of what particular strategic changes might be contemplating at the moment?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yeah, thanks, Chris. I appreciate the acknowledgement. Some of the things I've been most excited about so far, first, when you look at the core technology and the core engineers that we have, some of the smartest people I've worked with in my career and really are at the foundation of kind of the core wireless capability you have. And so one of the things I'm most excited about when you think about where Skyworks is positioned long term, you look at how many devices are out there connected to the Internet and the vast majority of them are and will be connected wirelessly. And some of our core technology is right in the center of that.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And so I think you can imagine that some of the things I'm looking for going forward is how do we take and build upon that core wireless capability and look for adjacencies that continue to fuel that growth. And that's really where I'll be focused some of my energy.

Chris Caso
Managing Director at Wolfe Research LLC

Great. As a follow-up question, it's with regard to broad markets. And it sounds like you've a little bit of bookings improvement and certainly some sequential growth there. What sort of, I guess, the short term, what sort of growth do you think? Well, I guess to start, do we think that customer inventories have now normalized and therefore, we're getting on a more normal growth path here?

Chris Caso
Managing Director at Wolfe Research LLC

And what do you think that growth path is likely to be? Where do you see the longer term growth in this broad markets business? And where's the trajectory for the rest of the year?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes, I think that's a good question. I think in general, like if we look step back and look overall at those businesses in general, I think if we look in general, a lot of those businesses still had pretty significant inventory corrections post COVID. In many cases, some the businesses had the infamous golden screw, right? And so as a result, customers just bought just tons and tons of inventory. I think in general across the landscape, we've seen a normalization of that and we started to see inventories getting back to normal positions, booking trends continue.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

So I think in general what we're seeing is kind of that hangover that we experienced. Think we think that's behind us. If we dig down, right, and look at the kind of the three segments underneath it with Edge IoT, that's really about Wi Fi seven adoption, right? That is really at the early ages or early innings, I would say, of deployment that has more RF content per device, more performance, strong customer value proposition. I think that will be a tailwind for us going forward.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

On the automotive side, we're seeing good year over year growth there. And it's really important to note that that what we're seeing there really is not just tied to EVs or particular how the combustion engines, whether it's EV combustion engines or hybrids, it's really around the software defined vehicles and all the connectivity that's around that. And so we're seeing good growth there. And then on the infrastructure networking cloud, that's an area where it's still a

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

little bit choppy from that side.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

But I think long term, of the secular trends with respect to what's happening in the data centers and the connectivity space, I think that's going to continue to normalize there as well. So on balance, I think we've seen overall inventory correction, we're starting to see some return to normal growth. And then underneath that, it's Wi Fi seven connected cars and infrastructure networking cloud. That's kind of how we see that.

Operator

We'll move to our next question from Karl Ackerman at BNP Paribas.

Yang Pu
Senior Equity Research Associate at BNP Paribas

This is Yan Pooh on for Karl Ackerman. Thank you for taking my question. So I just want to touch on tariffs. I know it's a fluid topic, but I just want to understand how your view how do you view tariffs and what portion of your COGS could could get qualified for USMCA import exempt status given that you have the Mexico fab? As you address that, could you also discuss how you can how much of your ability to pass on tariffs cost to other customers?

Yang Pu
Senior Equity Research Associate at BNP Paribas

Thank you very much.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. So this is Phil. Maybe I'll just take a high level remark, and then I'll pass it over to Chris for any particular details on it. Look, in general, the tariff environment is incredibly dynamic, right, as you can probably imagine. I'm not telling you any news there.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

I think our current assessment, though, given our supply chain and where we are, the current guidance really reflects any impact that we see from that. And we're continuing to monitor that daily. And I think our guidance reflects what we believe to be the current environment right now. And I think our diversified supply chain, where we ship things, how we ship them, where we get them manufactured, free trade zones, all sorts of other things that are happening, I think all of that is reflected in our current guidance. Having said that, obviously, we monitor every single day and we'll continue to do so.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

But right now, the current guidance reflects what we believe is the current environment for tariffs. Chris, any other comments you want to say?

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

No. Just I mean based on our current understanding of the tariff landscape, we don't see any major direct impact on our business. Obviously, we will continue to work with our customers and supply chain partners, but for now as it stands no major direct impact on our business.

Yang Pu
Senior Equity Research Associate at BNP Paribas

Thank you. And as a follow-up, can you discuss, will you be able to maintain your CapEx outlook? Or do you have any intention to move around your manufacturing locations to avoid tariffs? Thank

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Our CapEx spending is really focused on new product, new technology development versus any sort of production capacity. So any most of the CapEx you see, the vast majority of it is on new technology development. So I wouldn't necessarily see I wouldn't expect to see any change with respect to our CapEx plans based on that.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Right. And just CapEx is running on or about mid single digits as a percent to revenue.

Yang Pu
Senior Equity Research Associate at BNP Paribas

Thank you very much.

Operator

We'll go next to Edward Snyder at Charter Equity Research.

Edward Snyder
Analyst at Charter Equity Research

Thank you very much. A couple of questions if I could. First off, it looks like based on the content and your largest customers falling from the teardowns we've done and other folks have done, and stuff we sell from last year that is it fair to assume that you think your content will bottom end of this year and then maybe make a slow recovery? I know it depends a lot on mix, and I know that's hard to predict. I think Qualcomm guided for '30, 3070 mix favoring their solution.

Edward Snyder
Analyst at Charter Equity Research

So I just wanna get an update on your on your view of where you think your content will bottom at your largest customers? And then I have a follow-up. Thanks.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Ed, it's Phil. Nice to talk with you again. As you might imagine, we can't really comment on specific customers' plans and what's going. But generally speaking, let me try and give you a little bit of color. I mean, when I look holistically, I think we have some tailwinds behind us in that regard.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

The first is we've got to deliver better products and compete for the sockets that we believe we have the chance to win. And I think we're putting our best foot forward there on that. Second, I think there's going to be a trend that's going to have more RF content, as I talked about, with complexity workloads, MIMO capabilities and those kind of things. And then thirdly, I do think there's some potential content differences that may happen with respect to certain solutions that may happen on the baseband side. And I think some of those trends, should play in our favor.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

So look, I think overall, I think there's three things. And then you overlay that, where hopefully you get some tailwind on the unit side with respect to AI adoption, and I think we've got some things that work in our favor. Look, we have to continue to execute. As I've always said, we've got to deliver great products. You have a great product, you win.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

You have a jump ball, you split. And you have a bad product, you lose. And that's the game we're playing. So that's what we're focused on.

Edward Snyder
Analyst at Charter Equity Research

Okay. My follow-up, I know that your filters are built out of Japan, BAW is anyway, and then the part that you kind of gave up to Avago used a lot of those, and so you got utilization issues there. First of all, between the lower utilization and some of the advances you made in filters reducing the die size, is it fair to assume that even if you were to win a larger module that takes a lot more filters, you wouldn't have to put a lot more CAPEX into that facility, or it depends on the module like the mid high band, etcetera. It's got 22 filters in it. No matter what, if that were to come about, you're still gonna need CAPEX expansion even with where you are today.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. I just thanks, Ed. I think one clarity is the particular area you talked about, I would characterize those as a jump ball, where we split versus a clear win where we got 100%. So it wasn't I would just say that. And the other to your point on CapEx expansion, I mean, look, right now, I think we are sufficiently capitalized from a production capability.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

I don't expect to have any capacity concerns with respect to that. Our capacity investments right now are really focused on new technology development that we need to power the innovation forward. So right now, I'm not expecting certainly not expecting any incremental capacity need for production based on what I can see as far as the eye can see.

Edward Snyder
Analyst at Charter Equity Research

Okay. But just to be clear, you have to have the capacity in place before you award a big module at any big OEM, correct? This can't be done after the fact, correct?

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Right. And so Ed, we do have plenty of capacity in place to absorb a potential large upside to the business.

Edward Snyder
Analyst at Charter Equity Research

Great, thank you.

Operator

Next we'll move to Gary Mobley at Loop Capital.

Gary Mobley
Managing Director & Senior Equity Analyst at Loop Capital

Hi guys, thanks so much for taking my question. I really just have a multi part question and that's it. Phil, you highlighted your three priorities, one of which is stabilizing and maybe regrowing your business with your leading smartphone customers. So do you feel any differently today versus what you communicated last quarter with respect to your blended content in the upcoming smartphone launch at your largest customer? And then with respect to optimizing operational efficiency, could you give us a sense of where your utilization rates are now?

Gary Mobley
Managing Director & Senior Equity Analyst at Loop Capital

And what the goal may be in terms of optimizing that manufacturing footprint?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes, let me try and I'll have Chris jump in here. I think the one thing that I guess I would characterize, if you look at in general, the mobile business in general, it's characterized by very short product cycles. You got to earn the business every year, every other year. You got to deliver highly competitive parts and it's a very I believe we've got some of the best, if not the best ARPA engineers in the planet.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

But sometimes, having the best team on the floor doesn't necessarily mean you win every game. But I'm feeling very good about where we are, the investments we're making, the people we've got, and we're working really hard to do it. And we're laser focused on doing it. And frankly, I'm taking a no excuses kind of thing. We just got to deliver better parts, period.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

The answer is we've to deliver better parts. And there's a lot of rhetoric around stuff being done to us, and I just don't like that rhetoric at all. I think the reality is we've got to deliver the best parts and we'll take care of ourselves. And that's what we need to be focused on. I think your was your other question was around utilization and Utilization.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

And so Gary, as it relates to utilization rates, obviously, have multiple factories in The U. S, in Japan and Singapore and in Mexico, the utilization rates varies by manufacturing location. But I would go back to my previous answer. We have plenty of capacity in those factories. And so as future revenue growth is going to fuel better factory utilization that will lead to gross margin improvements without us having to put much capacity in place to fulfill future revenue growth.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Gary, maybe as it relates to of course the blended content at the next upcoming phone that obviously has not changed.

Gary Mobley
Managing Director & Senior Equity Analyst at Loop Capital

Thank you, guys.

Operator

Our next question comes from Christopher Rolland at Susquehanna.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Hi, guys. Thanks for the question and welcome Phil And Chris, sorry to see you leave. Phil, you mentioned some wireless excellence at the company and looking at adjacent markets. Also, you came from the IoT world previously. Could that be an adjacency for you, whether it's cellular or unlicensed spectrum?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. Look, I'm not going to comment on particular areas of focus there. Obviously, I came from the IT side. But I would say my purview is a very wide landscape. I mean, some of our core technologies are acoustic resonators, filter design, some of the core processes that are involved in that packaging, multi chip packaging modules, very tight integration.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

I mean, the technology required to deliver some of our solutions is just incredible. And so I look to a wide range of things where we could go there. So I'm not going

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

to comment on

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

specific areas as you might guess.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Fair enough. And then secondly, SAW and typically lower frequencies, You have made a push into BAW, but we haven't had any major updates there, think, in a little bit. Is this a focus for you? And is there kind of do you see any evidence of greater traction in BAW moving forward, doubling your efforts there? Thanks.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Look, think BAWs is like a critical component of our technology and we remain significantly invested in that and we've got a very robust roadmap going forward. And so I think we've seen good traction in that and that continues to be a cornerstone of our investment.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Thanks a lot.

Operator

Our next question comes from Tom O'Malley at Barclays.

Thomas O'Malley
Thomas O'Malley
Director - Equity Research at Barclays

Hey guys, thanks for taking my question. And Phil, Mark, congrats on the roles. I look forward to working with you. A tactical one first and then a longer term one. In the March and the June, can you guys give what Android did in both of those quarters in the mobile business?

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Yes. So Android was in the March flat on a sequential basis. So in that call it on or about $70,000,000 range. But we do expect a sizable sequential bump up in the June for Android.

Thomas O'Malley
Thomas O'Malley
Director - Equity Research at Barclays

Okay. And then I guess the second one is the broader one and that kind of encompasses answer there. But when you're looking at what you think is pulled forward, obviously, there's a new phone that's launching or that's just launched here that's gonna help you with some content. But obviously, buying patterns are a bit different and Android traditionally isn't seasonally up in June. Can you guys like try to parse out to the extent that you can, what you're seeing, what is a pull forward, what is better demand and how you guys are going about that internally to protect against potentially like stronger first half, weaker second half?

Thomas O'Malley
Thomas O'Malley
Director - Equity Research at Barclays

Thank you.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes, it's a good question. Look, we continue to monitor that carefully. I don't think order patterns now represent what we've seen historically and represent seasonality. And if you look at kind of our results, it was kind of in where we in the range or a little bit above the range where we started in January, which is before a lot of this turbulence. And so I would say that what we've seen is what pretty typical order patterns at this point.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Obviously, we're trying to manage it closely and we're keeping a close eye on it, but that's the best we can say now. No evidence of anything other than what we'd expect to see seasonally at this point.

Operator

Our next question comes from Harsh Kumar at Piper Sandler.

Harsh Kumar
Harsh Kumar
Managing Director & Senior Research Analyst at Piper Sandler Companies

Yeah. Hey. Congratulations, Phil. Looking forward to working with you. Chris, I've worked with you multiple years.

Harsh Kumar
Harsh Kumar
Managing Director & Senior Research Analyst at Piper Sandler Companies

We'll certainly miss you and best of luck to you. So Phil, I wanted to ask you about, follow-up maybe on the new modem at this large customer and what that means to you. Typically with that, there comes a lot of shifting around with content and provides a lot of opportunity for people. So I'd be curious how you view this content and maybe you could talk about what this means to you and what you might have won and what you think you can do with this. And I've got a follow-up.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. So look, I think that it's we can't really get into those specifics per individual customer and segments and what happens really. It's not something we can do. But let me just comment just in general why I think there's some tailwinds there. And I would focus on probably, what I would say is more secular long term trends with respect to increased RF content as a result of things like more transmit, higher power requirements, lower battery requirements, new frequency bands.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And certainly, the any particular choice they have with baseband may result in some potential incremental content opportunities for us. But I think in general, I would just focus on, I think that over time, we're going to see increased RF content as the workloads demand it, as the RF complexity gets harder and the requirement to kind of manage power continues to be a key component. So I think in general, I think we do now clearly, have to execute, we have to deliver the best parts. But I think we've got the canvas upon which we can draw a pretty good picture.

Harsh Kumar
Harsh Kumar
Managing Director & Senior Research Analyst at Piper Sandler Companies

That's it. Thank you. That's it for me. Thanks.

Operator

Next we'll move to Timothy Arcuri at UBS.

Analyst

Great. Thank you. This is Jamal Khan for Tim. Phil or Chris, I wanted to double click on the guidance, specifically what changed versus ninety days ago, what segments you've seen improved, what got worse. And can you speak to that bump up in Android in the June?

Analyst

What's driving that?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Well, I don't this is Phil. I'm going let Chris jump in here because he was on the program. I mean, I don't think we necessarily guided two quarters ahead. So I think what we're doing now reflects our current view of the next quarter ahead. And I would say that in general, certainly on the mobile side, we're seeing pretty typical order patterns, the Android segment up as a result of new product launches that we talked about.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And in broad markets, we're just seeing continued sequential year over year sequential growth and continued year over year growth as I talked about. So I wouldn't say there's anything abnormal. And so mobile, I would say, is seasonal added on a product launch. And in broad markets, it's kind of a continuation of the trend we've seen for the past few quarters.

Analyst

Got it. And then one quick one on pricing at your largest customer. Do you expect to see any sort of pricing pressures in the coming quarters given the most recent tariffs?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

No, I'm obviously not going to comment on that. I'll just say it's a highly competitive market and we are expected to deliver the best performance parts at a very aggressive cost point. And that continues to be the game across the board in this industry. So I don't think there's anything changed and we have to deliver great parts at the right price.

Analyst

Thanks guys.

Operator

Next, we'll go to Joe Moore at Morgan Stanley.

Joseph Moore
Joseph Moore
Analyst at Morgan Stanley

Great. Thank you. In terms of your priorities for the business, you talked about growing the diversified part of the business. Can you talk about organic versus inorganic priorities there? And just how you think about that?

Joseph Moore
Joseph Moore
Analyst at Morgan Stanley

And do you think M and A is even sort of doable in the current environment?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. Hi, Joe. Nice to talk to you again. Yes, look, when we look at overall strategies and certainly capital structure and capital allocation priorities, I think we have enough firepower to enable us to pursue a number of different options, both organic investments and I talked about some of those. I mean, we clearly continue to invest in a level that allows us to sustain a robust innovation roadmap that we have.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And so I feel good and comfortable about that. And clearly, the M and A front, I mean, there's a number of different things we can look at. I'm going to be really focused on making sure that's in our strategic priority. We can get the right value and focus on making sure that we can deliver values to shareholders as we look at that. I think with respect to the overall M and A environment, it's obviously a little complex right now.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

But I think that there's no shortage of things we can look at, and it certainly is something I'll be spending some time on as CEO.

Joseph Moore
Joseph Moore
Analyst at Morgan Stanley

Appreciate it. Thank you.

Operator

Our next question comes from Peter Peng at JPMorgan.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

Hey, guys. Thanks for taking my question. You guys talked about seeing seasonal trends on the wireless side for the March and June quarter. But then when you listen to the earnings call from your largest customer, they're clearly talking about some inventory build for some tariff mitigation. So I'm just wondering why there's this kind of discrepancy between what your end customer is saying and between some of the suppliers they're seeing.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

So Peter, maybe I'll take a shot at that. As you know, there are it's a very complex supply chain, and there are multiple partners between us and the end customer. There are distributors, there are contract manufacturers, each of them act a little bit as a buffer and have their own inventory dynamics. Again, if you look at the March, we guided to nine fifty and we delivered nine fifty three. So we did not really see pull ins or anything like that.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

And as we guide for the June, we assume there's no pull ins and we have no clear evidence of that.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

Got it. Okay. That's helpful.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

And then just for the broad markets, guys are back in the year on year growth for a number of quarters now. Can you maybe just talk about within that bucket which markets are showing year on year growth, which still have some work to do to get to year on year growth trajectory?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes, this is Phil. I'll take a crack at that. I mean, look, the strongest tailwind you have growth is WiFi seven, right? That's just and I think that's in early days and we're seeing that that'll be that should be a tailwind for us for a while. Think only a small percentage, single digit percentage of the units out there are Wi Fi seven.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

So I think we're at the early innings of that. So that's a strong one. Automotive is another good year over year growth comparison, as I talked about, as more and more cars are being connected independent of their combustion mechanism. And then I think the other area where we got some more work to do is, I would say, on the infrastructure side, that side. It's kind of inching along a little bit, but there's some more ups and downs.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And we'll be seeing some growth there, but that's probably the area where we've got some more growth that we need to see in the future.

Peter Peng
Equity Research Analyst at JP Morgan Chase & Co

Perfect. Thank you.

Operator

Next, we'll go to Nick Doyle at Needham.

Nick Doyle
Vice President at Needham & Company

Hey, guys. Thanks for taking my questions and welcome Phil and Mark. How big was a large customer in the quarter and directionally how is their broad markets piece performing? Thanks.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Yes. So the largest customer in the March was approximately 66% of total revenue. And we've seen a split between mobile and broad markets in line with historical trends there, roughly 85% ends up in mobile and roughly 15%, maybe a tad more in broad markets. And we expect that to continue in the next couple of quarters.

Nick Doyle
Vice President at Needham & Company

Thank you. And then for the gross margins, they're kind of holding steady above this 45% level now, even with revenue dropping down a little bit next quarter. I guess, how are you able to hold these above 45% even as we kind of the utilization levels remain a little bit lower? Thank you.

Kris Sennesael
Kris Sennesael
SVP & CFO at Skyworks Solutions

Yes. Well, if you look at the June, you have mobile being down sequentially and broad markets being up sequentially. And so you have a continuous benefit there from a mix point of view. As I said before, even within broad markets, we see some mix shift that is favorable for gross margins and that's why we're comfortable to guide to this 46%, forty seven % range for the June.

Operator

And we'll go to our next question from Vivek Arya at Bank of America.

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Hi, this is Liam Farr on for Vivek. Thank you so much for taking our questions. Just looking at the Android market, you've been pretty selective in pulling back somewhat in some parts of the Android ecosystem. As AI and RF complexity rises, how do you think about reengaging more deeply with Android OEMs to capture more incremental contents? Or are you just kind of remaining to focus and keep focused on that high end tier of the Android ecosystem?

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Thank you.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Yes. Look, I I guess what I would say is, I mean, we're certainly always open to working with customers where we can deliver value and get to value the performance and the solutions that we provide in an economic that's economically viable for us. And so to the extent that there's trends that lend itself to that favor, then we're going to be trying to take advantage of that. But I think we're just we're taking an economic ROI based view of where we do. We've got the opportunity cost for engineers is really high.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

A lot of these solutions are highly complex, highly engineered and tightly integrated. And frankly, we look for environments where we can deliver the value to the customer and frankly get paid in return ourselves. And so we'll continue to look for those solutions.

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Thank you. Then just a quick follow-up on your largest customer. Looking ahead at twenty twenty six models and even twenty twenty seven, are you in terms of timeline of engagement with that customer? When should investors be looking to hear from that? And how are you kind of best setting up to hedge against any more jump balls that are split?

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Well, I it's obviously, I can't comment on specific things like that. But let's just say this, we have been engaging deeply with that particular customer, but all our customers in general, but that one for a long, long time. And so there's a typical investment design cycle that happens year in and year out. And frankly, in many cases, you're continuing to invest of the curve to develop technologies that can go there. And you work and you're self critical along the way.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

To use a sports analogy, you're looking at game film, you're trying to understand what you did, what you didn't do better. You're doing competitive analysis, you're trying to look at the limit of what's possible with the physics, you're developing new technology. And you're putting all those things together and you're delivering a part and that gets benchmarked to get other parts competitively. And if you do a good job, you win. And that's what we're trying to do.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

I really don't think there's any change in dynamic. And I think with respect to insulating what we can do, I think that frankly, the best insulation is continuing to execute and execute cleanly. That customer is a very demanding customer and requires a lot of focus on it. And it's such a big customer that you can't necessarily take your foot off the gas. You have to keep pedals of metal all year long.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

And that's what we need to do.

Liam Pharr
Liam Pharr
Equity Research Analyst at Bank of America

Thank you.

Operator

Ladies and gentlemen, that concludes today's question and answer session. I'll now turn the call back over to Mr. Brace for any closing comments.

Philip Brace
Philip Brace
CEO & President at Skyworks Solutions

Great. Thank you. Thank you for participating in today's call. I look forward to speaking with you at upcoming investments during the quarter, and we'll talk soon.

Operator

And ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

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Key Takeaways

  • Leadership Transition: Phil Brace took over as CEO and highlighted Skyworks’ deep engineering talent and focus on innovation across 5G, Wi-Fi, automotive and edge IoT connectivity.
  • Strong Q2 Results: The company delivered $953 M in revenue, $1.24 EPS, 46.7% gross margin and generated $371 M in free cash flow, all above guidance.
  • Record Capital Return: Skyworks returned a record $600 M to shareholders in Q2 through share repurchases and dividends, underscoring confidence in its long-term outlook.
  • Diversification Momentum: Broad markets revenue grew for a fifth consecutive quarter, driven by strength in automotive connectivity, edge IoT and accelerating Wi-Fi 7 adoption.
  • Q3 Outlook: Skyworks anticipates $920 M–$960 M in Q3 revenue, with a low-single-digit sequential mobile decline, continued broad markets growth and a 46%–47% gross margin.
AI Generated. May Contain Errors.
Earnings Conference Call
Skyworks Solutions Q2 2025
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