Skyworks SWKS shares have declined 20.9% in the trailing six months, underperforming the broader Zacks Computer and Technology sector’s return of 6.7%.

SWKS's underperformance can be attributed to high inventory levels in traditional data center and wireless infrastructure segments, which have delayed recovery. Subdued global demand in the automotive and industrial markets, along with increased competition and excess inventory, further pressurized the company's top-line growth.

Skyworks' significant reliance on major customers like Amazon AMZN and Apple AAPL creates risks, as they contribute to a large portion of its revenues. Any changes in demand or supply-chain issues with these clients could greatly impact its performance.

Stiff Competition to Challenge SWKS's Prospects

Skyworks faces competition from several major market participants. In the mobile platforms segment, its key competitors are Broadcom AVGO and Qorvo. In the linear products market, SWKS faces competition from Analog Devices.

However, Skyworks has broadened its market reach by developing cutting-edge, high-performance connectivity solutions. The company has focused on advancing integration through the use of innovative packaging technologies, which help reduce the overall footprint of its products while improving energy efficiency.

Skyworks has placed its 5G technology in premium Android smartphones, including models like the Google Pixel 9, Samsung Galaxy, Oppo and OnePlus. These collaborations emphasize the company's expanding role in the high-end smartphone market and its capability to provide advanced connectivity solutions for next-generation devices.

SWKS strengthened its Wi-Fi 7 design win pipeline by partnering with leading companies like Linksys, Charter, NETGEAR, CommScope and TP-Link, showcasing its commitment to advancing next-generation wireless connectivity solutions.

SkyWorks anticipates long-term growth in the age of IoT, electric vehicles, advanced security systems and AI-driven cloud upgrades. The demand for Wi-Fi 6E and 7 is growing, ushering in a multi-year upgrade cycle as Wi-Fi 7 shipments increase.

SWKS is set to benefit from rising wireless connectivity demand, fueled by AI, 5G and data growth. Global 5G data use is expected to triple in three years, with 39 billion IoT connections, including connected cars, projected by 2029.

SWKS’s Sales & Earnings Estimates Show Uncertainty

The Zacks Consensus Estimate for second-quarter fiscal 2025 revenues is pegged at $942.25 million, indicating a 9.92% year-over-year decline.

The Zacks Consensus Estimate for the second-quarter fiscal 2025 bottom line is pegged at $1.19 per share, unchanged over the past 30 days. The estimate suggests a year-over-year decline of 23.23%.

The Zacks Consensus Estimate for fiscal 2025 revenues is pegged at $3.99 billion, implying a 4.39% year-over-year dip.
The consensus mark for earnings is pegged at $5.34 per share, unchanged over the past 30 days. The estimate suggests a year-over-year fall of 14.83%.

SWKS has a solid track of strong quarterly performances, beating the Zacks Consensus Estimate in three of the last four quarters and matched in one, with an average surprise of 1.24%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Conclusion

While SWKS faces challenges from high inventory levels, muted demand in key markets and increased competition, its long-term growth potential remains strong, driven by investments in next-gen technologies like 5G and IoT. The company's focus on expanding its product portfolio and partnerships positions it for success.

SWKS currently has a Zacks Rank #3 (Hold), which implies that investors should wait for a favorable time to accumulate the stock.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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