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Skyworks and Qorvo: Bleak Short-Term Revenue Outlook



Skyworks and Qorvo’s revenues

The connectivity chip market has strong long-term growth potential. The advent of 5G will connect more devices to the Internet. However, the market is in a short-term downturn. Weak smartphone demand has impacted sales. Qorvo (QRVO) and Skyworks (SWKS) reported weak earnings and guidance. Apple (AAPL) reported lower iPhone sales, especially from China.

In the third quarter of fiscal 2019, Qorvo’s revenues fell 6% sequentially and 1.7% YoY (year-over-year) to $832 million, which beat analysts’ estimate of $820 million. In the first quarter of fiscal 2019, Skyworks’ revenues fell 4% sequentially and 7.6% YoY to $972 million, which missed analysts’ estimate of $1.05 billion. Skyworks’ sequential revenues were comparatively better. The weakness in the company’s mobile business was partially offset by double-digit growth in the IoT (Internet-of-Things) and automotive markets.

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Skyworks and Qorvo’s weak revenue guidance

Skyworks expects its second-quarter revenues to fall 17% sequentially to $810 million at the midpoint, which would miss analysts’ estimates of $851.5 million. Even Qorvo expects its fourth-quarter revenues to fall 19% sequentially to 670 million, which would miss analysts’ estimate of $728 million. The magnitude of Qorvo’s revenue estimate miss made investors and analysts bearish on the stock.

Since the two companies have different fiscal years, we have taken calendar years for the annual revenue estimates to make the two figures comparable. For calendar 2019, analysts expect Skyworks’ revenues to fall 4.4% YoY to $3.6 billion. Qorvo’s revenues are expected to rise 1.7% YoY to $3.1 billion. The weak revenue guidance followed demand weakness in the smartphone market.

However, analysts expect the growth to resume in 2020 when 5G rolls out. They expect Skyworks and Qorvo’s revenues to rise 7.7% and 5%, respectively, in calendar 2020.


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