• Revenue: $1.068 billion, slightly above the midpoint of guidance.
• Earnings Per Share (EPS): $1.60, $0.003 above guidance.
• Free Cash Flow: $338 million, representing a 32% free cash flow margin.
• Gross Margin: 46.5%, in line with expectations.
• Operating Income: $285 million, with an operating margin of 27%.
• Net Income: $258 million.
• Operating Cash Flow: $377 million.
• Capital Expenditures: $39 million.
• Dividends Distributed: $112 million.
• Cash and Investment Balance: Approximately $1.75 billion.
• Debt Level: $1 billion.
• Mobile Revenue: 67% of total revenue, increased 6% sequentially.
• Broad Markets Growth: Returned to year-over-year growth at 2%.
• Inventory: Internal inventory decreased slightly below $700 million.
• Operating Expenses: $212 million.
• Effective Tax Rate: 12.2%.
• Q2 Revenue Outlook: $935 million to $965 million.
• Q2 Gross Margin Outlook: 45.5% to 46%.
• Q2 Operating Expenses Outlook: $220 million to $228 million.
• Stock Repurchase Program: New $2 billion approved.

• Warning! GuruFocus has detected 6 Warning Signs with SWKS.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Skyworks Solutions Inc (NASDAQ:SWKS) reported solid financial results for the first fiscal quarter of 2025, with revenue of $1.068 billion and earnings per share of $1.60, meeting or exceeding the midpoint of their guidance.
• The company generated a robust free cash flow of $338 million, representing a 32% free cash flow margin, and increased their cash and investment balance to approximately $1.75 billion.
• Skyworks Solutions Inc (NASDAQ:SWKS) experienced sequential growth in their Mobile segment, with a 6% increase in revenue, driven by successful product launches across top mobile customers.
• The Broad Markets segment showed modest growth for four consecutive quarters, with expectations for further improvement as demand signals and backlog improve.
• The company announced a new $2 billion stock repurchase program, demonstrating a commitment to disciplined capital allocation and returning value to shareholders.

Negative Points

• Skyworks Solutions Inc (NASDAQ:SWKS) is facing challenges with their largest customer, resulting in a projected 20% to 25% decline in content position, impacting revenue in the fourth quarter of fiscal 2025 and throughout fiscal 2026.
• The Industrial and Infrastructure segments remain subdued due to persistent inventory challenges, posing a headwind to growth.
• The company anticipates a decline in their Mobile business by mid- to high-teens sequentially in the second quarter of fiscal 2025, in line with historical seasonality.
• Gross margin is projected to decrease slightly to between 45.5% and 46% in the upcoming quarter, reflecting seasonally adjusted lower sales volume.
• Skyworks Solutions Inc (NASDAQ:SWKS) is experiencing intensified competition in the RF connectivity market, leading to dual-sourcing of certain sockets with their largest customer, which affects their market share.

Q & A Highlights

Q: Can you provide more details on the competitive dynamics with your largest customer and the impact on your content share? A: Kris Sennesael, CFO, explained that the content loss is primarily due to a shift from single-sourcing to dual-sourcing on a key socket. Despite this, Skyworks has maintained its position in several other sockets and is actively working on next-generation products to regain share. The company remains committed to its partnership with the customer and is expanding its product offerings for future opportunities.

Q: How are you planning to address the manufacturing footprint and operating expenses given the changes in content dynamics? A: Kris Sennesael stated that there are no immediate plans to alter the manufacturing footprint. The focus will be on improving operational efficiencies and managing operating expenses tightly. The company will continue investing in R&D to support new product developments and growth in Broad Markets.

Q: What is the strategy for the Android market, and how do you see it evolving? A: Skyworks is focusing on high-performance RF solutions for the high-end Android market, including partnerships with Google and Samsung. The company expects to grow its Android business by targeting selective, high-value opportunities and leveraging its technological expertise.

Q: Can you elaborate on the opportunities in Broad Markets and the expected growth trajectory? A: Kris Sennesael highlighted that Broad Markets have returned to year-over-year growth, driven by demand in connected IoT devices and automotive sectors. The company anticipates double-digit growth in Broad Markets, supported by secular trends and strategic investments in technology.

Q: How do you view the long-term relationship with your largest customer, and will this affect your diversification strategy? A: Skyworks remains committed to its long-standing relationship with its largest customer, despite recent challenges. The company will continue to focus on diversification through growth in Broad Markets, leveraging its strong technology and customer relationships across various sectors.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.