NXP Semiconductors N.V. Q4 FY2025 earnings call

• Fourth quarter revenue was $3.34 billion, up 7% year-on-year and 5% sequentially, $35 million better than guidance. Non-GAAP operating margin was about 35%, 40 basis points above prior year. • 2025 was a tale of two halves, with first half having weaker demand and second half demand accelerating. • Automotive: Revenue $7.1 billion, flat year-on-year with inventory digestion behind us, second half aligns with 8% to 12% long-term growth outlook, strong in software-defined vehicles. • Industrial and IoT: Revenue $2.3 billion, flat year-on-year, second half growth above long-term outlook, strong in physical AI with combination of i.MX and Kinara MPU. • Mobile: Revenue $1.6 billion, up 6% year-on-year, strong in premium mobile market. • Communications Infrastructure: Revenue $1.3 billion, down 24% year-on-year, offset by secure card growth. • First quarter guidance: Revenue $3.15 billion, up 11% year-on-year, down 6% sequentially; automotive mid-single-digit y-o-y growth, mid-single-digit sequential decline; industrial and IoT low 20% y-o-y growth, mid-single-digit sequential decline; mobile mid-teen percent y-o-y growth, 20% sequential decline; communications infrastructure mid-teen percent y-o-y growth, 10% sequential growth. Confident in operating within long-term financial model for 2026.

Automotive: Revenue was $7.1 billion, flat year-on-year. Industrial and IoT: Revenue was $2.3 billion, flat year-on-year, with second half growth materially above the 8% to 12% long-term growth outlook. Mobile: Revenue in 2025 was $1.6 billion, up 6% year-on-year. Communications Infrastructure: Revenue was $1.3 billion, down 24% year-on-year. Fourth quarter revenue was $3.34 billion, an increase of 7% year-on-year and up 5% sequentially, $35 million better than guidance. Non-GAAP operating margin in the fourth quarter was about 35%, 40 basis points above the same period a year ago.

• First quarter revenue guided at $3.15 billion, up 11% versus year ago period and seasonally down 6% sequentially. • Automotive expected mid-single-digit y-o-y growth in Q1 2026 and mid-single-digit percent range sequential decline versus Q4 2025. • Industrial and IoT expected up in low 20% range year-on-year and mid-single-digit range sequentially. • Mobile expected up in mid-teen percent range year-on-year and down 20% range sequentially. • Communications Infrastructure and Other expected up in mid-teen percent range versus Q1 2025 and 10% versus Q4 2025. • Confident NXP will operate within its long-term financial model for the full year of 2026.

• Macro-economic impact on specific end markets. • Sale of new and existing products. • Expectations for first quarter 2026 results. • RF Power business no longer aligns with strategic direction, $90 million restructuring charge. • Closure of NXP's MEMS sensor business acquisition.

Q: Tom O'Malley asked about channel restock.

A: Rafael Sotomayor said channel strategy shifted to long-term target of 11 weeks, finished Q4 with about 10 weeks and will move to 11 weeks in 2026.

Q: Matthew Prisco asked about customer ordering trends.

A: Bill Betz said internal signals improved, backlog, distribution backlog, customer escalations, short-term orders increased.

Q: Ross Seymore asked about auto accelerated growth drivers.

A: Rafael Sotomayor said auto in 2025 was two halves, second half accelerated, thesis intact, auto exposure shifting to structural.

Q: Joseph Moore asked about auto supply disruptions.

A: Rafael Sotomayor said memory not impacting orders, customers discuss memory as concern but not reflected in orders.

Q: Joshua Buchalter asked about gross margin.

A: Bill Betz said gross margins performing to expectations, driven by low single-digit price concessions and operational efficiencies, long-term hybrid manufacturing to lift gross margins.

Q: Vivek Arya asked about industrial and IoT growth.

A: Rafael Sotomayor said industrial and IoT 60% core industrial, 40% consumer, strong growth in physical AI, design wins in health care, smart glasses, factory automation, energy storage.

Q: Joseph Quatrochi asked about auto software-defined vehicle acquisitions.

A: Rafael Sotomayor said TTTech Auto accelerates software-defined vehicle story, delivery of Sono architecture and systems by end of year, Kinara MPU and i.MX family strong in physical AI.

Q: Christopher Caso asked about auto accelerated growth drivers below plan.

A: Rafael Sotomayor said 2025 first half inventory digestion paused growth, second half accelerated, thesis continues.

Q: Gary Mobley asked about MEMS sensor sale impact.

A: Bill Betz said revenue impact $300 million, gross margin improvement minimal, OpEx impacted by restructuring.

Q: James Schneider asked about capital allocation.

A: Bill Betz said capital allocation policy unchanged, comfortable with buybacks below net leverage ratio of 2x.

Q: Tore Svanberg asked about geography reporting change.

A: Rafael Sotomayor said reflects internal management of business, where customer engagements and design wins occur.

Q: Vijay Rakesh asked about auto software-defined vehicles revenue growth.

A: Jeff Palmer said content per vehicle is real accelerator, SAAR flattish but EVs and Chinese OEMs market share gains help.

Q: William Stein asked about China EV incentives and data center AI.

A: Rafael Sotomayor said China EV incentives and regulations tailwinds, data center revenue in industrial segment, growing nicely.