Communications chips maker Qorvo (NASDAQ: QRVO) reported Q1 CY2025 results topping the market’s revenue expectations , but sales fell by 7.6% year on year to $869.5 million. Guidance for next quarter’s revenue was optimistic at $775 million at the midpoint, 2.4% above analysts’ estimates. Its non-GAAP profit of $1.42 per share was 41.6% above analysts’ consensus estimates.
Revenue: $869.5 million vs analyst estimates of $850.9 million (7.6% year-on-year decline, 2.2% beat)
Adjusted EPS: $1.42 vs analyst estimates of $1.00 (41.6% beat)
Adjusted Operating Income: $151.8 million vs analyst estimates of $119.2 million (17.5% margin, 27.4% beat)
Revenue Guidance for Q2 CY2025 is $775 million at the midpoint, above analyst estimates of $756.7 million
Adjusted EPS guidance for Q2 CY2025 is $0.63 at the midpoint, roughly in line with what analysts were expecting
Operating Margin: 3.2%, in line with the same quarter last year
Free Cash Flow Margin: 19.6%, up from 18% in the same quarter last year
Inventory Days Outstanding: 116, up from 114 in the previous quarter
Market Capitalization: $5.96 billion
Bob Bruggeworth, president and chief executive officer of Qorvo, said, “During the March quarter, Qorvo achieved stronger than seasonal sequential revenue while surpassing the midpoint of EPS guidance by 42 cents and expanding gross margin year-over-year. Looking across our business segments, our growth and margin targets are anchored in a multi-year strategy focused on winning content with our largest customer and building on our core RF and power expertise to drive diversification through CSG and HPA. We are on a path to continue to improve our business mix and our manufacturing footprint."
Company Overview
Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Qorvo grew its sales at a sluggish 2.8% compounded annual growth rate. This was below our standards and is a tough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
Qorvo Quarterly Revenue
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Qorvo’s annualized revenue growth of 2.1% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.
Qorvo Year-On-Year Revenue Growth
This quarter, Qorvo’s revenue fell by 7.6% year on year to $869.5 million but beat Wall Street’s estimates by 2.2%. Despite the beat, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 12.6% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 1.5% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Qorvo’s DIO came in at 116, which is one day above its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.
Qorvo Inventory Days Outstanding
Key Takeaways from Qorvo’s Q1 Results
We were impressed by how significantly Qorvo blew past analysts’ revenue, EPS, and adjusted operating income expectations this quarter. We were also excited its full-year revenue guidance topped Wall Street’s estimates. On the other hand, its inventory levels increased. Still, we think this was a good quarter with some key areas of upside. The stock traded up 6.3% to $66.57 immediately after reporting.
