Skyworks Solutions (SWKS) Q4 2026 earnings review
Skyworks' Qorvo deal nearly doubles sales, but per-share profit stalls
Skyworks, which makes the radio chips inside smartphones, spent the quarter finishing its purchase of its rival Qorvo. Sales of $1,046 million fell 5% from a year ago, which had an extra week; without it, sales edged up. Chief executive Phil Brace called execution the job ahead.
| Revenue, against a year-ago quarter that had an extra week | +2.5% -5.0% as reported |
|---|---|
| Profit per share, excluding one-offs | $1.28 $1.76 a year ago |
| Free cash flow | -$61 million +$144 million a year ago |
| December-quarter outlook, first as one company | $1.80-1.90 billion about 3% under September's combined sales excluding the extra week |
⚖️ Verdict: 🟢 Bullish
The story got better, because the deal Skyworks staked its future on closed and Moody's lifted the company to investment grade. One caution: the December plan puts profit per share at $1.25, under the $1.28 Skyworks earned alone in September, since interest on the merger loans and a wider cost base swallow the extra sales.
The question now is whether the two companies together earn more per share than Skyworks did alone. The savings of about $150 million this year and a richer mix say yes; rising input costs and a shrinking phone business say no. The June-quarter report, when most savings should land, answers it.
🐂 Bull Case
Everything Outside Phones Beat Its Own Target
Broad markets is what Skyworks calls everything outside phones: Wi-Fi chips, timing chips that keep data-centre switches in step, power parts and car electronics. Brace wants it to carry growth while phone sales slide.
It delivered about $416 million in the September quarter, far ahead of the roughly 5% annual growth the finance chief had signalled three months earlier. Brace said these markets are "supply constrained and the demand far exceeds our ability to supply them", so output, not appetite, sets the ceiling.
- Sales outside phones: about $416 million, close to 40% of revenue
- Growth from a year ago: 9% in the quarter, about 10% across the fiscal year
- Wi-Fi, data centre and car chips together: growing north of 25%, with data centre up about 90%
These parts earn above-average gross margin, so each point of revenue they take from phones lifts profitability. December looks similar: Carter expects low-single-digit growth from September and more than 40% of sales.
What to watch: the growth rate for diversified growth markets in the February report, the first drawn on a fully combined basis. Carter looks for high single to low double digits from a year ago, and a reading inside that band would show data-centre and defence demand held through the merger.
The Qorvo Deal Closed And Ratings Improved
A year of antitrust review ended on 5 October, when Skyworks completed its purchase of Qorvo. Qorvo's own annual report had pointed to completion early in calendar 2027, so the deal landed ahead of that timetable, and the $100 million fee the buyer owed on a regulatory failure never came due.
Lenders reacted. The release cites "an upgrade to investment grade by Moody's (Baa3)" and a Fitch outlook moved to stable. Skyworks has also "Began realizing synergies, completing the initial consolidation of our management team and HR systems integration", and December sales of $1.80 billion to $1.90 billion are the first figures covering both businesses.
What to watch: the February report, which puts a full quarter of both companies in one income statement. The risk has moved from the regulator to the integration, because Carter places most savings in the second half of fiscal 2027, so the early quarters carry cost before benefit.
Clocks For AI Racks, Gate Drivers For Cars
Timing chips are the metronome inside a network switch: they tell each port when to send. Skyworks won designs in 1.6-terabit switches this quarter and "began shipping high-performance clocks for leading AI hyperscalers' rackscale systems", which puts it inside the racks rather than beside them. In cars it took "an EV traction inverter gate driver win with a German premium automaker".
Qorvo widens the shelf further. Brace counts "Defense and aerospace, approximately $500 million" of combined annual sales, a market the buyer barely served, plus gallium-nitride radio parts and wired broadband. He said he is most excited about that defence business, where customers now ask for power parts to pair with the amplifiers.
What to watch: whether February names revenue for data centre and defence inside the new diversified category. Without those figures, nobody outside the company can tell whether the fastest-growing pieces keep growing once two sets of accounts become one.
🐻 Bear Case
One Customer Takes An Even Bigger Share
Skyworks sells the radio chips that let a phone reach a network, and a single buyer dominates the order book. That buyer, counting the factories that assemble its products, took about 62% of September-quarter revenue including parts outside phones, against roughly 57% three months earlier.
Management presents the Qorvo deal as diversification. Qorvo carries the same dependency: its filings put Apple at half of last fiscal year's revenue, and phones were its largest unit. Brace said combined "smartphone revenue was approximately $4.6 billion in fiscal '26, down approximately 11% year-over-year", close to three-fifths of the pair's sales.
Concentration matters because this customer re-picks suppliers for every model, so one lost socket moves the whole group. Brace said the buyer is "not going to just hand this business" now that the two firms are one. Scale shifts the odds, but it does not retire the risk.
What to watch: the smartphone revenue line in February, the first that merges both phone businesses. Carter looks for a low-teens decline from September, and a deeper fall would say the combined content position did not hold at the premium models Skyworks targets.
Input Costs Took Two Points Of Gross Margin
Gross margin is what a chipmaker keeps from each dollar of sales after production. Excluding one-offs it came to 44.4% in the September quarter, against 46.5% a year earlier. The cost of making the products absorbed the difference: 55.6% of sales, 2.1 percentage points more than last year.
"Input costs remain a headwind to margins, and we expect that to continue," Brace said, and the full fiscal year bears him out at 45.3%, down 1.4 points. Carter explained why prices cannot follow quickly: in phones "it's a little bit more challenging because those are kind of annual contracts", so a rise waits for the next negotiation.
What to watch: December gross margin against the 46-48% Carter laid out. He warned that "the earlier part will have lower margins" in fiscal 2027 because costs land before price rises, so a reading at the bottom of that range would mean the richer product mix is doing all the work.
Cash Went Out Faster Than It Came In
Free cash flow is what remains once the chip plants are paid for. Skyworks used $61 million of it in the September quarter, against $144 million generated a year earlier. Across the fiscal year the figure came to $229 million, about a fifth of the prior year's total.
Two forces drove that. Operating cash nearly dried up, because the group tied money into chips on the shelf, and Brace's team kept buying equipment for the markets it cannot supply.
- Operating cash flow: $34 million, against $200 million a year earlier
- Capital spending: $321 million across the year, up from $195 million
- Inventory: $1.07 billion, about 158 days of production cost against 105 days a year ago
This matters because the balance sheet already carried $2.47 billion of debt before Qorvo's own notes arrived, and Carter puts other expense, mostly interest, near $50 million in the December quarter. Repayment and buybacks need cash from operations, which supplied little for a year.
What to watch: operating cash flow in February, the first quarter to include Qorvo. Should it stay near September's level while interest runs at that rate, Skyworks ends up funding its own deal out of borrowed money.
Risks This Quarter Didn't Answer
Five standing worries got no new numbers, and the merger makes several of them harder to follow. From February the group reports two categories only, so separate figures for each legacy company disappear, as Carter confirmed when he said "this is the last quarter in which we will provide this split".
- Content per phone at the largest customer: Brace again said "we can't really comment on individual SKUs"; the February smartphone line is the only read.
- Consumer devices inside broad markets: still no dollar split, because "I don't think we're going down to that level of detail", Brace said.
- Borrowing: Qorvo's $1.55 billion of notes join Skyworks' own debt, and the February balance sheet shows the combined load for the first time.
- Woburn factory consolidation: no completion statement, and its charges now sit alongside merger costs.
- Securities class action: no update since the court refused to dismiss it; the annual report's legal note is where it will appear.
What to watch: the February statements, which carry the first combined balance sheet and the first smartphone line covering both businesses. Numbers that arrive there would settle three of these five items at once, while continued silence on content per phone would leave the largest single risk unmeasurable.
👓 Other Themes
Cheap Android Phones Keep Getting Worse
Brace blamed memory shortages for the low end of the phone market and said "There's just been a lot of turbulence in that space". Carter put the damage at Qorvo plainly: "the Android business is down over 20% sequentially". He expects it below a tenth of phone revenue, and "it does seem like we could be getting to a bottom in the Android space".
The Savings Plan Now Has Dates
"Our December-quarter outlook reflects only the early stages of synergy realization." Carter put about $150 million of savings inside fiscal 2027, weighted to the second half, and an exit rate of $250 million to $300 million a year. Two-thirds comes from running one set of offices and systems, one-third from fewer factories, and the factory work runs last.
💲 Other KPIs
Engineering costs rose 6.6% across a year when sales fell. In the September quarter the line took 20.4% of revenue, down from 22.2% and 22.5% in the two quarters before it, because seasonal phone sales lifted the denominator. Carter said the group keeps funding key engineering programmes while holding other spending tight.
Money owed by customers fell 17.3% over the year, far more than the 5.0% drop in sales. Receivables are invoices not yet paid, so a faster fall usually means earlier collection or a different customer mix. It is the one working-capital line that helped the cash position this year.
The balance nearly doubled from $1,388.4 million because the group drew roughly $2.0 billion of loans before the Qorvo close rather than because it earned the money. Carter wants to keep part of it: he said the finance team will build a cash balance alongside repayment and purchases of shares.
Buying resumed after nine months of nothing, at an average $66.27 a share, which works out near 1.6 million shares. The board declared no dividend, against $105.6 million a year earlier, and replaced the payout with a $2 billion repurchase authorisation. Carter described a "bias towards share buybacks" from here.
🔮 Guidance
New. The first plan for the merged group covers the December quarter. Its middle sits about 7% below what the two companies sold in September together, or roughly 3% once you strip the extra week in Qorvo's September quarter. Legacy Skyworks supplies about $1.07 billion of that, a little above the same period last year by our math, and Carter said this is the final quarter with that split.
New. The plan puts profit per share excluding one-offs at $1.25. That sits under the $1.28 Skyworks earned on its own in September, even though sales almost double. Interest on the merger loans accounts for most of a $50 million charge below the operating line, and the share count climbs to about 241 million. By our math the financing alone costs about 19 cents.
New. The range lands about 2.6 points above September by our math, and Carter credited "a favorable mix shift towards diversified growth markets, including higher-margin defense and infrastructure". He also said input costs persist, so the step up comes from what the group sells rather than from what it pays. Prices agreed with phone customers only change at the next annual negotiation.
New. Running both companies costs far more than the $237 million Skyworks spent alone. By our math the middle of the range equals 26% of sales against 23% in September, so operating margin excluding one-offs eases to about 21%. Carter expects this line to fall every quarter through fiscal 2027, merit pay rises included, as savings arrive.
New. Phone sales drop by low-teens percent sequentially. Carter named three causes: the usual fall after autumn launches, continued weakness in Android, and the extra week inside Qorvo's September quarter, which was worth about $70 million. Android at Qorvo alone fell more than 20% from the previous quarter, and he expects that business to settle under a tenth of phone revenue.
New. The non-phone half keeps growing while phones fall, "representing more than 40 percent of sales, led by data center and defense". Carter pointed out that the September base included Qorvo's extra week, so the sequential comparison understates the underlying step. This is the half of the group that carries above-average gross margin, which is why December margin improves.
New. Carter dated the first savings for the first time: about $150 million of lower operating expenses inside fiscal 2027. The exit rate should reach $250 million to $300 million a year. By our math that exit rate implies quarterly spending near $416 million next September, before merit pay rises, against the $485 million the December plan carries at its middle.
Unchanged. Brace repeated the target of "$500 million or more of annual cost synergies", two-thirds from operating expenses and one-third from the cost of making the chips. The company has now stated that figure in four straight quarters, and the clock started at the October close. Factory consolidation carries most of the production savings and runs last.
Unchanged, and now dated 24 to 36 months after the close. The destination has moved before: a 50-53% gross margin set for fiscal 2026 became a combined-company goal, and the year just ended at 45.3%. Carter also targets mid- to high single-digit sales growth, with the non-phone half growing faster than phones.
❓ Key Questions
What does fiscal 2027 revenue look like in total?
Skyworks offered no figure for the full year, its first as one company. Without a revenue base, nobody can judge whether the savings target lifts earnings or merely offsets a shrinking phone business.
How big is the consumer part of broad markets?
Wi-Fi, data centre and car chips grow north of 25%, yet the whole segment grew 9%, so the rest is falling fast. Brace again refused a dollar split. The shrinking piece sets the segment's real pace.
When does free cash flow turn positive again?
Cash spending exceeded cash earned in three of the last four quarters while inventory rose 42%. With interest now running at tens of millions a quarter, the date cash turns matters more than the savings target.
What will the combined debt cost each year?
Qorvo's $1.55 billion of notes join Skyworks' own borrowings, but the September balance sheet predates the close. The company gave one quarter of other expense and no annual interest figure for the merged group.
Is the Woburn factory consolidation finished?
Restructuring, impairment and other charges reached $82.1 million in the quarter, and the release did not separate the Massachusetts closure from merger costs. Investors need to know which charges stop and which continue.