SKYWORKS SOLUTIONS, INC. Q2 FY2025 earnings call

Phil Brace started by introducing himself as the new CEO and highlighted the company's strong performance in Q2 with revenue of $953M, EPS of $1.24, and free cash flow of $371M. He discussed the diversified portfolio, mobile trends with AI driving smartphone evolution, recovery in diversified businesses, and quarterly highlights like design wins in 5G smartphones and in-vehicle infotainment. Kris Sennesael detailed the quarterly results, including gross profit of $445M, gross margin of 46.7%, operating income of $222M, and operational highlights like nine consecutive quarters of inventory reduction. There were also announcements of leadership changes with Mark Dentinger succeeding Kris as CFO and Todd Lepinski succeeding Carlos Bori as Senior Vice President, Sales and Marketing.

Skyworks delivered revenue of $953 million in fiscal Q2. Mobile revenue was 62% of total revenue. In mobile, there were typical seasonal patterns during the March quarter with new product launches. The diversified businesses showed a steady recovery with five consecutive quarters of sequential revenue growth and two quarters of positive year-over-year comparisons. Edge IoT saw Wi-Fi 7 adoption accelerating, automotive benefited from software-defined vehicles, and there's a long-term opportunity in timing due to AI-driven data center workloads.

For Q3 of fiscal 2025, Skyworks anticipates revenue of $920 million to $960 million. The mobile business is expected to decline low single digits sequentially in line with seasonal patterns. Broad markets are on track for another quarter of sequential growth with year-over-year trends accelerating. Gross margin is projected to be between 46% and 47%. Operating expenses are anticipated in the range of $220 million to $230 million. The effective tax rate is approximately 13%, and at the midpoint of the revenue range of $940 million, diluted earnings per share of $1.24 is intended.

The evolving tariff landscape presents new complexities, and the company will continue to monitor the situation as it is a dynamic environment that could potentially impact operations.

Q: Chris Caso from Wolfe Research asked Phil Brace about initial thoughts on strategy and where he might take the company.

A: Phil Brace mentioned being excited about the core technology and engineers, and looking to build upon core wireless capability and find adjacencies for growth.

Q: Karl Ackerman at BNP Paribus's team asked about tariffs and USMCA import exempt status, and passing down tariff costs.

A: Phil Brace said the tariff environment is dynamic and current guidance reflects current assessment, and Kris Sennesael added there's no major direct impact on the business currently.

Q: Edward Snyder at Charter Equity Research asked about mobile content and CapEx for large modulars.

A: Phil Brace discussed tailwinds in mobile with better products, RF content trends, and Kris Sennesael mentioned they have plenty of capacity in place to absorb potential large upside.

Q: Tom O'Malley at Barclays asked about Android performance in March and June quarters and parsing demand.

A: Kris Sennesael said Android was flat sequentially in March and expected a sizable sequential bump in June, and Phil Brace discussed monitoring order patterns closely.

Q: Harsh Kumar at Piper Sandler asked about new modem at large customer and content.

A: Phil Brace talked about tailwinds in mobile with RF content trends and needing to deliver best parts.

Q: Jamal Cohen for Tim at UBS asked about guidance changes and pricing at largest customer.

A: Phil Brace said current guidance reflects current view, and he wouldn't comment on pricing pressures specifically.

Q: Joseph Moore at Morgan Stanley asked about organic vs inorganic priorities in diversified business.

A: Phil Brace said they have firepower for organic investments and M&A, focusing on strategic priorities.

Q: Peter Peng at JPMorgan asked about discrepancy in customer inventory and broad markets growth.

A: Kris Sennesael said no clear evidence of pull-ins in March quarter and Phil Brace discussed strong growth in Wi-Fi 7, automotive, and infrastructure networking cloud with some work needed in infrastructure.

Q: Nicholas Doyle at Needham asked about size of large customer and gross margins.

A: Kris Sennesael said largest customer in March was ~85% mobile and ~15% broad markets, and gross margins are held steady due to mix benefits.

Q: Liam Farr for Vivek at Bank of America asked about reengaging with Android OEMs and timeline with largest customer.

A: Phil Brace said they take an ROI-based view and engage deeply with customers, focusing on delivering value and executing well.