Skyworks Q1 Earnings Top Estimates: Will 2Q25 Outlook Drag Shares Down?

Core Insights - Skyworks Solutions (SWKS) reported non-GAAP earnings of $1.60 per share for Q1 fiscal 2025, exceeding the Zacks Consensus Estimate by 1.91$1.07 billion, a decline of 11.1% year-over-year, yet surpassing the consensus estimate by 0.31% [2] - Mobile revenues accounted for nearly 67% of total revenues, showing a sequential increase of 6%, driven by successful product launches and the growing adoption of generative AI in smartphones [2] Revenue and Market Performance - The adoption of Wi-Fi 6e and 7 systems has increased demand for Skyworks' RF solutions, contributing to a multi-year upgrade cycle [3] - Broad Markets experienced modest growth, with a year-over-year increase of 2%, supported by demand signals and backlog improvements in automotive electrification, edge IoT, and AI data centers [3] - Skyworks' shares have decreased by 9.7% over the past six months, contrasting with a 19.5% rise in the Zacks Computer and Technology sector [4] Operating and Financial Metrics - Non-GAAP gross margin decreased by 20 basis points year-over-year to 46.5% [5] - Research & development expenses rose by 380 basis points year-over-year to 16.5% of revenues, while selling, general, and administrative expenses increased by 120 basis points to 7.7% [5] - Non-GAAP operating margin contracted by 380 basis points year-over-year to 26.7% [5] Balance Sheet and Cash Flow - As of December 27, 2024, cash and cash equivalents along with marketable securities totaled $1.75 billion, up from$1.57 billion as of September 27, 2024 [6] - Long-term debt remained steady at $994 million, and cash generated by operating activities was$377.2 million, down from $476 million in the previous quarter [6] - Free cash flow was reported at$338.2 million, reflecting a 31.7% free cash flow margin [6] Dividend and Guidance - The company paid dividends amounting to $112 million in the reported quarter [7] - For Q2 fiscal 2025, Skyworks expects revenues between$935 million and $965 million, with non-GAAP diluted earnings projected at$1.20 per share at the midpoint of the revenue range [8] Zacks Rank and Comparables - Skyworks currently holds a Zacks Rank 3 (Hold) [10] - Other stocks in the sector with better rankings include Akamai Technologies (Zacks Rank 2), Bel Fuse (Zacks Rank 2), and Arista Network (Zacks Rank 1) [10]