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

Skyworks Solutions SWKS reported non-GAAP earnings of $1.60 per share in first-quarter fiscal 2025, beating the Zacks Consensus Estimate by 1.91% and declining 18.8% year over year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Revenues of $1.07 billion dipped 11.1% on a year-over-year basis but surpassed the consensus mark by 0.31%.

Mobile revenues contributed nearly 67% to total revenues and increased 6% sequentially. This growth was primarily driven by multiple successful product launches across top mobile customers. The growing adoption of generative AI in smartphones also contributed to increased RF solution complexity.

The growing adoption of Wi-Fi 6e and 7 systems contributed to increased demand for Skyworks’ RF solutions. These systems support enhanced functionality and higher complexity, driving a multi-year upgrade cycle.

Skyworks Solutions, Inc. Price, Consensus and EPS Surprise

Skyworks Solutions, Inc. price-consensus-eps-surprise-chart | Skyworks Solutions, Inc. Quote

Broad Markets saw modest growth, returning to a year-over-year increase of 2%. Positive momentum in demand signals and backlog improvement helped fuel growth, especially in automotive electrification, edge IoT, and AI data centers.

SWKS’s shares have lost 9.7% against the Zacks Computer and Technology sector’s rise of 19.5% in the trailing six-month period. 

Skyworks was hurt by high inventory levels, uneven demand across segments, and muted global demand in automotive and industrial markets. These factors may put downward pressure on SWKS’s shares.

SWKS Operating Details

Non-GAAP gross margin contracted 20 basis points (bps) on a year-over-year basis to 46.5%.

Research & development expenses, as a percentage of revenues, increased 380 bps year over year to 16.5%.

Selling, general and administrative expenses increased 120 bps to 7.7% in the reported quarter.

Non-GAAP operating margin contracted 380 bps on a year-over-year basis to 26.7% in the reported quarter.

SWKS Balance Sheet & Cash Flow

As of Dec. 27, 2024, cash & cash equivalents and marketable securities were $1.75 billion compared with $1.57 billion as of Sept. 27, 2024.

As of Dec. 27, 2024, the long-term debt remained steady at $994 million, unchanged sequentially.

Cash generated by operating activities was $377.2 million in the quarter under discussion compared with $476 million in the prior quarter.

Free cash flow was $338.2 million, with a 31.7% free cash flow margin.

Skyworks paid dividends worth $112 million in the reported quarter.

SWKS Initiates 2Q25 Guidance

For the second quarter of fiscal 2025, the company expects revenues between $935 million and $965 million.

Non-GAAP diluted shares are expected to be $1.20 per share at the mid-point of the revenue range.

SWKS Zacks Rank & Stocks to Consider

Skyworks currently carries a Zacks Rank #3 (Hold).

Akamai Technologies AKAM, Bel Fuse BELFB and Arista Network ANET are some better-ranked stocks that investors can consider in the broader sector. While ANET sports Zacks Rank #1 (Strong Buy), AKAM and BELFB carry Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Akami Technologies shares have gained 9.3% in the trailing six-month period. AKAM is set to report its fourth-quarter 2024 results on Feb. 20.

Bel Fuse shares have gained 30.7% in the trailing six-month period. BELFB is set to report its fourth-quarter 2024 results on Feb. 18.

Arista Network shares have gained 43% in the trailing six-month period. ANET is set to report its fourth-quarter 2024 results on Feb. 18.

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