Skyworks Earnings: Smartphone Demand Remains Soft, but Skyworks Will Outlast These Headwinds

Narrow-moat Skyworks Solutions SWKS reported predictably soft fiscal third-quarter results and provided investors with a decent outlook for the September quarter. We think the outlook implies that Skyworks will earn a good amount of radio frequency chip content within Apple’s upcoming iPhone 15 series, but with little dollar content growth per device versus last year’s iPhone 14 series. Meanwhile, Android smartphone demand is recovering slightly but still severely depressed overall. We maintain our $155 fair value estimate and view shares as undervalued.

Revenue in the June quarter was $1.07 billion, down 7% sequentially and down 13% from the year-ago quarter, but at the midpoint of guidance. Mobile revenue was $632 million, down 17% year over year again because of dismal RF demand from Android smartphone makers. Broad market revenue was down 7% year over year with some weakness in Internet of Things devices, but we were encouraged that Skyworks saw strong demand from communications infrastructure customers, in contrast to much of its peer group. Lower sales levels and factory underutilization caused adjusted gross margin to fall 250 basis points to 47.5%, but this was in line with guidance.

Skyworks expects September-quarter revenue in the range of $1.19 billion-$1.24 billion, which, at the midpoint, would be down 14% year over year but up 13% sequentially during the seasonally stronger period ahead of the iPhone ramp. Broad market revenue should be down slightly sequentially, again with IoT weakness. We project that mobile revenue will decline about 13% year over year, and project revenue from Apple to be down about 9% year over year.