Qorvo, Inc. (QRVO) Q3 2026 Earnings Call Transcript
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Overview
The earnings call highlights positive developments like improved gross margins and strong cash flow, but also reveals challenges such as declining Android revenue and flat Apple revenue projections. The Q&A session indicates strategic exits from lower-margin businesses and concerns about dual sourcing and content loss. Overall, the mixed signals and lack of clear guidance on certain issues suggest a neutral market reaction, with no significant catalysts for a strong positive or negative movement.
Key Financial Performance
Revenue $993 million, a mid-single-digit decline year-over-year, attributed to a strategic pivot from lower-margin mass tier Android and normal seasonal decline at the largest customer.
Non-GAAP Gross Margin 49.1%, an increase of approximately 260 basis points year-over-year, driven by portfolio management, pricing strategies, growth in defense and aerospace (D&A), divestitures of margin-dilutive businesses, and aggressive factory cost management.
Non-GAAP Diluted Earnings Per Share (EPS) $2.17, compared favorably to guidance, reflecting improved gross margins and operational efficiencies.
Largest Customer Revenue Contribution 53% of total revenue, supported by content gains on ramping platforms, though offset by lower share in ultra-high-band pad for upcoming phone models.
Net Inventory Balance $530 million, a sequential reduction of $75 million and a decrease of $111 million compared to the end of the last fiscal year, due to inventory management efforts.
Operating Cash Flow $265 million, reflecting strong cash generation capabilities.
Capital Expenditures $28 million, resulting in free cash flow of $237 million.
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Operating Highlights
Smartphone OEM Support: Qorvo is supporting leading smartphone OEMs with products for flagship and premium devices.
Automotive Ultra-Wideband Program: Received first production orders for automotive ultra-wideband program, spanning multiple years and OEMs.
WiFi 8 Solutions: Delivered first WiFi 8 samples, with increasing customer engagement.
High-Band Pad for iPads: Secured placement in cellular-enabled iPads, marking a product and technology milestone.
Defense and Aerospace: Growing in defense and aerospace markets with multiyear tailwinds and increased RF content demand.
Infrastructure Markets: Positioned as a leader in broadband amplifiers for DOCSIS 4.0 and RF components for 5G and satellite communications.
Restructuring Actions: Closed Costa Rica facility ahead of schedule and transitioned to external partners. Transferred SAW filter production to Texas.
Android Business Resizing: Reduced exposure to low-margin Android segments, improving product mix and gross margins.
Divestment of MEMS Business: Divested MEMS-based sensing solutions business to improve profitability.
Portfolio Shift: Strategic resizing of Android business and growth in defense and aerospace, leading to a more profitable mix.
Operational Efficiency: Consolidated manufacturing footprint and managed factory costs aggressively.
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Risk or Challenges
Restructuring Actions: The company is executing restructuring actions to optimize profitability and reduce capital intensity, including the closure of the Costa Rica facility and transitioning SAW filter production from Greensboro, North Carolina, to Richardson, Texas. These actions may pose operational risks during the transition period.
Revenue Decline in Android Segment: The company expects Android revenue to decline by approximately $300 million in fiscal '27 due to reduced exposure to lower-margin segments and the impact of memory pricing and availability on mass-tier Android build plans. This poses a financial risk to the company's overall revenue.
Lower Share in Ultra-High Band Pad: The company received lower share in the ultra-high band pad for upcoming phone models compared to last year, leading to an expected year-over-year revenue decline in this segment. This could impact the company's competitive positioning and revenue.
Divestment of MEMS-Based Sensing Solutions Business: The divestment of the MEMS-based sensing solutions business represents a headwind to year-over-year growth in the CSG segment, potentially impacting the company's financial performance.
Seasonal Decline in Revenue: The company anticipates a seasonal decline in revenue at its largest customer in the March quarter, which could affect short-term financial performance.
Strategic Resizing of Android Business: The strategic resizing of the Android business, while aimed at improving margins, results in a mid-single-digit decline in full-year revenue for fiscal '27, posing a risk to overall growth.
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Guidance & Outlook
Revenue Expectations: For fiscal '27, the company expects a mid-single-digit decline in full-year revenue due to declines in ACG and flat performance in CSG, while HPA continues its double-digit growth. Revenue at the largest customer is expected to be approximately flat for the upcoming fiscal year.
Margin Projections: Gross margins for fiscal '27 are expected to exceed 50%, supported by a structurally improved portfolio mix and operational efficiencies. Operating margins in ACG are expected to expand due to a healthier revenue mix and ongoing operating expense reduction efforts.
Capital Expenditures: Capital expenditures for the March quarter are projected to be $28 million, with continued focus on optimizing manufacturing footprint and reducing capital intensity.
Business Segment Performance: ACG revenue is expected to decline in fiscal '27 due to a $300 million reduction in Android revenue, driven by reduced exposure to lower-margin segments and memory pricing impacts. HPA is expected to grow in double digits, with defense and aerospace becoming larger than the Android business by fiscal '27. CSG is expected to remain approximately flat, with restructuring actions and divestitures improving profitability.
Market Trends: The company anticipates multiyear tailwinds in defense, aerospace, data power, and infrastructure markets. Growth in defense spending and adoption of RF building blocks in adjacent applications like drones and satellite communications are expected to drive future performance.
Strategic Plans: The company is focusing on high-margin businesses, divesting underperforming segments, and expanding its presence in high-growth areas like WiFi 8, automotive ultra-wideband technology, and enterprise SSD platforms. It also plans to leverage its leadership in DOCSIS 4.0 and 5G infrastructure markets.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the content roadmap on a go-forward basis, particularly regarding highband and mid-highband on the iPad?
A:Robert Bruggeworth stated that they do not comment on future generations or architectures but see opportunities to grow their footprint. He noted that while there was previously sole sourcing, there appears to be more dual sourcing in the future, and they are investing in R&D to grow their largest customer.
Q:What does 'Android will be down more than seasonal' mean for the March quarter?
A:Robert Bruggeworth clarified that Android is typically up in the March quarter, but due to their strategic exit from lower-margin business and reduced participation in Android ramps, Android will be down quarter-over-quarter this year.
Q:Why is the Android business exit accelerating, and what is the expected revenue run rate after the exit?
A:Grant Brown explained that the exit is a multiyear event, with $150-$200 million expected to exit in fiscal '26 and $300 million in fiscal '27. The acceleration is due to strategic exits and memory pricing/availability constraints impacting customer build plans.
Q:What is the margin profile outlook for fiscal '27?
A:Grant Brown stated that the biggest driver for margin improvement is business mix, with HPA becoming a larger percentage of the total and product mix changes within segments. Strategic exits from lower-tier Android business and operational cost reductions also contribute to margin improvements.
Q:What is the revenue expectation for Apple in fiscal '27, and what are the volume assumptions for iPhone units?
A:Robert Bruggeworth stated that revenue for Apple is expected to be flat in fiscal '27, with some content loss in the iPhone 18. However, they did not comment on Apple's volume expectations.
Q:What is the year-over-year revenue decrease in the fourth quarter, and what are the contributing factors?
A:Grant Brown explained that the $70 million year-over-year revenue decrease is primarily Android-related, with a smaller impact from business divestitures.
Q:What is the outlook for integrated modules and dual sourcing?
A:Robert Bruggeworth clarified that ultra-highband has been dual-sourced for many years, and they have less content this year. However, dual sourcing in highband has helped them gain traction in areas they were not previously present.
Q:How will the Android sales decline and memory pricing impact the business?
A:David Fullwood explained that the $300 million Android sales decline is due to the ongoing resizing of the Android business and memory pricing/availability issues. OEMs are prioritizing higher-end devices, accelerating their strategy but not changing the end result.
Q:Are there any changes in customer inventory levels?
A:David Fullwood stated that there are no abnormal changes in inventory levels, but customers are adjusting build plans due to memory pricing issues.
Q:What is the impact of lower share in highband and ultra-highband on revenue?
A:Frank Stewart noted that while they gained a highband pad win, they lost share in ultra-highband. Together with other factors, this results in flat revenue year-over-year.
Q:Are there any underutilization charges, and how is utilization expected to improve?
A:Grant Brown stated that there were no specific underutilization charges in the quarter. Utilization is not at desired levels, but operational cost management and strategic actions are helping improve the situation.
Q:Review of Unclear Management Responses
A:Management avoided directly answering questions about Apple's volume assumptions for iPhone units and provided limited details on the impact of content loss in ultra-highband. Additionally, they used vague language when discussing future generations and architectures, as well as the specific impact of dual sourcing on revenue.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ACG CSG
ACG line
ACG reduction
ACG world
Android HPA
Android action
Android build
Android digit
Android exposure
Android resizing
Android shift
DA
ETP mix
RF content
SAW
Tier
availability
band pad
capital intensity
class
combination
customer demand
digit decline
engagement
exposure margin
fighter
flagship premium
flagship smartphones
infrastructure market
margin segment
memory pricing
modem
network
placement
power infrastructure
premium tier
resizing Android
satellite communication
smartphone OEMs
website irqorvocom
QRVO Transcript
Qorvo, Inc. (QRVO) Q3 2026 Earnings Call Transcript
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The earnings call highlights positive developments like improved gross margins and strong cash flow, but also reveals challenges such as declining Android revenue and flat Apple revenue projections. The Q&A session indicates strategic exits from lower-margin businesses and concerns about dual sourcing and content loss. Overall, the mixed signals and lack of clear guidance on certain issues suggest a neutral market reaction, with no significant catalysts for a strong positive or negative movement.
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The earnings call presents a mixed outlook. Positive aspects include strong defense and aerospace growth, DOCSIS 4.0 transition, and improved gross margins. However, the exit from low-margin Android business creates a $200 million headwind, and management's reluctance to provide specific guidance or updates raises concerns. The absence of underutilization charges and a healthy inventory situation are positives, but the lack of clarity on future growth and restructuring impacts tempers enthusiasm, resulting in a neutral sentiment.
Qorvo, Inc. (QRVO) Q1 2026 Earnings Call Transcript
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The earnings call presents a mixed picture: strong financial metrics, operational efficiencies, and growth in defense and aerospace are positive. However, declining Android business in China, lack of full-year guidance, and tariff-related buffering pose concerns. The Q&A reveals cautious optimism but also highlights uncertainties. Overall, the sentiment is balanced, leading to a neutral stock price movement prediction.
Earnings call transcript: Qorvo Q4 2025 earnings beat expectations, stock surges
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The earnings call presents a mixed outlook. Financial performance shows strong EPS and gross margin improvements, but revenue remains flat. Strategic initiatives like workforce reduction and divestiture aim to boost margins, yet Android revenue decline and regulatory uncertainties pose risks. Shareholder returns through buybacks and debt retirement are positive, but Q&A reveals evasive management responses and concerns about tariffs. Overall, the sentiment is balanced, suggesting a neutral stock price movement.
QRVO Report
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