Skyworks' First Combined Outlook Missed, and the Stock Paid for the Smartphone Slump

Skyworks Solutions guided its first quarter as a combined company with Qorvo well below Wall Street expectations, as smartphone weakness outweighed the deal's promised scale.

Skyworks Solutions, Inc. (NASDAQ: SWKS) is an Irvine, California chipmaker. It builds radio-frequency and mixed-signal parts for smartphones and connected devices. Adjusted figures exclude deal and restructuring costs. GAAP figures follow the standard accounting rules.

The first combined outlook missed

For the December quarter, Skyworks announced revenue guidance of $1.80 billion to $1.90 billion. That is the first quarter reported on a fully combined basis with Qorvo. At the midpoint, about $1.07 billion comes from legacy Skyworks. About $780 million comes from legacy Qorvo.

At the midpoint, Skyworks announced adjusted earnings guidance of about $1.25 a share. The guide assumes about two hundred forty-one million diluted shares. It also includes about $50 million of other expense. That expense is mostly interest on the acquisition financing.

Smartphone revenue is expected to fall in the low teens percent sequentially, Skyworks announced. The company cited seasonality and softness in the premium Android market. Diversified Growth Markets revenue is expected to grow in the low single digits sequentially. That business would represent more than 40 percent of sales.

The standalone quarter, on its own terms

The reported quarter is Skyworks alone, because the Qorvo deal closed after it ended. Standalone revenue fell to $1.05 billion, from $1.1 billion a year earlier. By TickerGrove's calculation, the decline was 5.0%. The combination was completed on October 5, after the quarter ended October 2.

For the full fiscal year, revenue was $3.96 billion, against $4.09 billion. Adjusted earnings were $5.05 a share, against $5.93. GAAP earnings were $1.14 a share for the year.

Profit thinned under deal costs

Adjusted earnings were $1.28 a share in the quarter, down from $1.76. GAAP earnings were $0.15 a share, down from $0.94. The gap between the two measures is mostly deal costs. Restructuring and stock compensation explain much of the rest.

Adjusted gross margin was 44.4%, down from 46.5% a year earlier. GAAP gross margin was 40.9%. Operating income on a GAAP basis fell to $22.3 million. Restructuring, impairment and other charges alone were $82.1 million.

Net income fell to $23.4 million, from $141.4 million. Adjusted net income was $193.3 million, from $263.7 million. Adjusted operating income was $227.2 million, from $264.0 million.

Cash flow turned negative

Operating cash flow was $33.7 million in the quarter, down from $200.0 million. Capital spending was $94.7 million. Free cash flow was therefore negative $61.0 million. Free cash flow is operating cash flow minus capital spending.

A year earlier, free cash flow was positive $144.0 million. For the full year, free cash flow stayed positive at $229.3 million.

What the combination starts from

Combined September-quarter revenue was about $1.98 billion, Skyworks said. Skyworks contributed $1.05 billion and Qorvo contributed $937 million. Qorvo's quarter included an extra week worth about $70 million. From fiscal 2027, Skyworks reports two categories: Smartphone and Diversified Growth Markets.

Chief Executive Phil Brace said the combination brings scale and technology breadth. He pointed to a full radio-frequency front-end portfolio for smartphones. He also named defense, infrastructure, automotive and physical AI as growth markets. Physical AI means intelligence built into machines and devices.

On synergies, Skyworks announced about $150 million of operating-expense savings expected within fiscal 2027. Those savings are weighted to the second half of the year. The company targets $500 million or more of annual cost synergies. It expects to reach that level within 24 to 36 months of the close.

Against expectations

The reported quarter roughly met the one consensus frame. Analysts expected revenue of about $1.04 billion, per Reuters. Reported revenue of $1.05 billion edged past it. By TickerGrove's calculation, the beat was 0.5%.

The outlook missed that same frame by much more. Analysts expected December-quarter revenue of about $1.99 billion, per Reuters. Those estimates were compiled by LSEG. The $1.85 billion guidance midpoint fell short. By TickerGrove's calculation, the revenue guide was 7.0% light.

Analysts expected adjusted earnings of about $1.52 a share. The announced guide is about $1.25 at the midpoint. By TickerGrove's calculation, the profit guide was 17.8% light. That gap is the story the stock traded on.

Shares fell sharply after hours

Shares fell 17.35% in after-hours trading to $70.58 as of 7:59 p.m. ET on Tuesday, according to Nasdaq quote data. The official regular close was $85.40, up 0.27%. That figure is an after-hours snapshot, not a close.

Skyworks had closed Monday at $85.17, the prior close. The stock was nearly flat in the regular session. The after-hours move was the verdict on the guide, on this one snapshot.

What remains unknown

What remains unknown includes how much of the guide reflects demand rather than deal mechanics. The extra week in Qorvo's September quarter flatters the comparison base. Skyworks will not split the two legacy businesses out after this quarter.

Whether the after-hours drop holds on Wednesday is also unknown. After-hours snapshots can fade. The official test is the next regular close. The pace of synergy capture in the first half of fiscal 2027 is likewise unproven.

What to watch next

What to watch is the December-quarter print against the announced ranges. Watch revenue against the announced $1.80 billion to $1.90 billion range. Watch smartphone revenue against the announced low-teens sequential decline.

Watch adjusted earnings against the announced $1.25 midpoint guide. Watch Diversified Growth Markets against the announced growth guide. Watch the next regular close against the after-hours snapshot.