NXP Semiconductors NASDAQ: NXPI reported second-quarter 2026 revenue and earnings above the midpoint of its guidance, citing broad-based growth across end markets and continued momentum in software-defined vehicles, industrial edge processing and data center infrastructure.
Revenue totaled a record $3.5 billion, up 19% from a year earlier and 10% sequentially. Non-GAAP operating margin was 35.1%, while non-GAAP earnings per share reached $3.61, exceeding the company’s guidance by $0.11.
“Demand improved across all end markets, highlighted by strength in both our company-specific growth drivers and core business,” President and CEO Rafael Sotomayor said. He said the company’s growth drivers rose in the mid-20% range year over year and accounted for roughly one-third of quarterly revenue, while core businesses grew in the high teens.
Automotive, Industrial and Infrastructure Growth
Automotive revenue was $1.94 billion, up 12% year over year. Excluding the sale of NXP’s MEMS sensor business earlier in 2026, automotive revenue increased 17%. The company’s automotive growth drivers grew in the low-20% range and represented 47% of automotive revenue, supported by software-defined vehicle, electrification and connectivity products.
Sotomayor said the company continued to win designs for its S32N and S32K vehicle-processing platforms and secured awards for next-generation multi-gigabit Ethernet switches used in in-vehicle network architectures. He characterized these programs as multiyear platform commitments that could raise NXP’s content per vehicle.
During the question-and-answer session, management said it had not seen a broad restocking effect among Western automotive Tier 1 customers. Instead, Sotomayor said automotive growth was being driven primarily by content gains associated with the shift toward software-defined vehicle architectures.
Industrial and IoT revenue rose 38% year over year to $755 million. Growth drivers in the segment, including the company’s i.MX, RT and MCX processing portfolios, increased 40% and represented 36% of industrial and IoT revenue. Communications infrastructure revenue increased 41% to $452 million, while mobile revenue grew 6% to $351 million, reflecting what management described as normal midyear seasonality in secure mobile transactions.
Physical AI and Data Center Exposure
NXP highlighted its exposure to AI-related infrastructure and edge computing. The company said it generated approximately $200 million in data center revenue in 2025 and expects to exceed $500 million in 2026.
The company’s data center products include Layerscape processors used for top-of-rack switching and smart network interface card control, as well as processors that control, monitor, cool and secure data center rack components. Sotomayor said NXP is accelerating its Layerscape roadmap as higher-speed data plane switching requires greater control-plane performance.
Management also emphasized what it calls “physical AI,” or AI deployments in vehicles, factories and robotics. Sotomayor said edge AI systems require real-time performance, low power consumption, safety and security—areas where NXP has established products across automotive and industrial markets.
NXP estimates AI-enabled processors will account for about 15% of its industrial IoT processor revenue in 2026, more than double the prior year’s level. Chief Financial Officer Bill Betz said the company’s physical-AI design funnel, including the Kinara asset it acquired, exceeded $1.5 billion and involved more than 200 distinct customers. Management said the figure is a leading indicator and will need to convert into design wins.
Margins, Cash Flow and Capital Returns
Non-GAAP gross margin was 58%, expanding approximately 150 basis points from a year earlier, while gross profit rose 23% to $2.03 billion. Betz attributed the improvement to product mix, factory utilization and operating leverage from higher revenue.
NXP generated $860 million of operating cash flow and $791 million of non-GAAP free cash flow during the quarter, equal to about 23% of revenue. The company ended the quarter with $10.98 billion in total debt, $3.2 billion in cash and net debt of $7.7 billion.
During the quarter, NXP retired $750 million of debt and returned $360 million to shareholders, including $256 million in dividends and $104 million in share repurchases. It also invested $174 million in VSMC and $12 million in ESMC, its manufacturing joint ventures.
Third-Quarter Outlook
For the third quarter, NXP forecast revenue of $3.75 billion, plus or minus $100 million, representing 18% year-over-year growth and 7% sequential growth at the midpoint. The company expects non-GAAP gross margin of 58.5%, plus or minus 50 basis points, and non-GAAP operating margin of 36.9% at the midpoint.
NXP projected third-quarter non-GAAP earnings per share of $4.11 at the midpoint. The company expects automotive revenue to rise in the low-double-digit percentage range year over year, with growth in the high teens when adjusted for the MEMS sensor business sale. Industrial and IoT revenue is expected to increase in the high-30% range, while communications infrastructure and other revenue is projected to rise about 50%.
Management said order backlog, lead times, customer escalations and late-quarter orders have strengthened. Betz said the company’s book-to-bill ratio remained above one and that visibility had improved into the fourth quarter and first quarter of 2027. However, executives declined to provide formal guidance beyond the third quarter.
About NXP Semiconductors (NASDAQ:NXPI)
NXP Semiconductors N.V. is a global semiconductor company headquartered in Eindhoven, the Netherlands, that designs and supplies mixed-signal and standard product solutions for a broad range of end markets. The company focuses on enabling secure connections and infrastructure for embedded applications, developing technologies used across automotive, industrial and Internet of Things (IoT), mobile, and communication infrastructure segments. NXP's offerings target customers that require reliable, secure, and high-performance semiconductor components for connected devices and systems.
Product lines include microcontrollers and application processors, secure elements and authentication technologies, RF and high-power analog components, connectivity solutions, and vehicle networking and infotainment systems.
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