Skyworks Solutions Reports Mixed Q4 Results Amidst 5G Gains
Skyworks Solutions (SWKS) posted non-GAAP earnings of $1.55 per share for the fourth quarter of fiscal 2024. This figure exceeded the Zacks Consensus Estimate by 1.97% but represented a significant decline of 29.5% compared to the previous year.
Revenue for the quarter totaled $1.02 billion, marking a 15.9% decrease year over year, though it slightly surpassed consensus expectations by 0.31%.
Mobile Segment Drives Growth While Overcoming Challenges
Mobile revenues constituted nearly 65% of total revenues, showing a 21% increase sequentially. This growth stemmed from a return to normal customer orders and inventory levels and supported seasonal product launches.
In its fourth quarter, Skyworks made notable design wins in 5G for premium Android smartphones and grew its Wi-Fi 7 pipeline, collaborating with significant partners like Linksys, Charter, and NETGEAR.
Skyworks also expanded into the automotive sector, focusing on 5G front-end modules, infotainment, and digital isolators, which reflects its increasing momentum in design wins.
Impact of Market Conditions on Performance
Broad markets added nearly 35% to total revenues, increasing by $1 million from the previous quarter. The demand in edge IoT and automotive electrification is stabilizing, aided by a rise in Wi-Fi 6E and Wi-Fi 7 adoption.
Year to date, SWKS’s stock has dropped 22.6%, contrasting sharply with the 39.7% rise in the Zacks Computer and Technology sector.
The company faced challenges from high inventory levels, fluctuating demand across different segments, and subdued global demand in automotive and industrial markets, creating potential headwinds for SWKS’s shares.
Operating Details and Financial Health
In the fourth quarter, the non-GAAP gross margin shrank by 70 basis points to 46.5% year over year. Research & development expenditures rose to 16% of revenues, an increase of 390 basis points from the previous year. Similarly, selling, general, and administrative expenses rose to 7.2%, up by 120 basis points.
SWKS’s non-GAAP operating margin decreased by 600 basis points, landing at 26.7% for the quarter.
Financial Position and Cash Flow Insights
As of September 27, 2024, cash and cash equivalents, along with marketable securities, stood at $1.57 billion. This is an increase from $1.28 billion recorded on June 28, 2024. Long-term debt was $994.3 million, a marginal rise from the previous figure of $994 million.
The company generated $476 million from operating activities in this quarter, a notable uplift from the $273.5 million of the prior quarter. Free cash flow was reported at $393.2 million with a free cash flow margin of 38.4%. Furthermore, Skyworks distributed $112 million in dividends during the quarter.
Looking Ahead: Q1 2025 Projections
For the first quarter of fiscal 2025, Skyworks forecasts revenues between $1.05 billion and $1.08 billion, which indicates a projected 4% increase sequentially at the midpoint. Non-GAAP diluted earnings per share are expected to reach $1.57.
SWKS Market Position and Alternative Investment Choices
Skyworks holds a Zacks Rank #3 (Hold) at present. Investors might want to look at other stocks in the industry, such as Adobe (ADBE), BiliBili (BILI), and NVIDIA (NVDA), all carrying stronger Zacks Rank #2 (Buy).
Shares of Adobe have decreased by 11.7% year to date and are set to announce their fourth-quarter results on December 11. Conversely, Bilibili has seen a robust year-to-date gain of 73.3%, with third-quarter results scheduled for November 14. NVIDIA has surged 199.5% this year, with its third-quarter fiscal results set for November 20.
To explore additional insights, see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
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