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Communications chips maker Qorvo (NASDAQ: NASDAQ:QRVO) reported Q2 CY2024 results topping analysts' expectations, with revenue up 36.2% year on year to $886.7 million. On the other hand, next quarter's revenue guidance of $1.03 million was less impressive, coming in 99.9% below analysts' estimates. It made a non-GAAP profit of $0.87 per share, improving from its profit of $0.34 per share in the same quarter last year.
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Qorvo (QRVO) Q2 CY2024 Highlights:
- Revenue: $886.7 million vs analyst estimates of $852.1 million (4.1% beat)
- EPS (non-GAAP): $0.87 vs analyst estimates of $0.71 (21.9% beat)
- Revenue Guidance for Q3 CY2024 is $1.03 million at the midpoint, below analyst estimates of $1.02 billion
- Gross Margin (GAAP): 37.5%, down from 38.1% in the same quarter last year
- Inventory Days Outstanding: 119, up from 116 in the previous quarter
- Free Cash Flow of $42.9 million, down 74.7% from the previous quarter
- Market Capitalization: $11.64 billion
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.
Processors and Graphics ChipsThe biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales GrowthQorvo's revenue growth over the last three years has been unimpressive, averaging 1.9% annually. But as you can see below, this was a strong quarter for the company, with revenue growing from $651.2 million in the same quarter last year to $886.7 million. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Qorvo had a strong quarter as its revenue grew 36.2% year on year, topping analysts' estimates by 4.1%. This marks 3 straight quarters of growth, suggesting that Qorvo is in the middle of its cycle, as a typical upcycle generally lasts 8-10 quarters.
Qorvo's revenue is projected to contract next quarter, with the company guiding to a 99.9% year-on-year decline. On the other hand, analysts seem to disagree and forecast 0.2% revenue growth over the next 12 months.
Product Demand & Outstanding InventoryDays 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 119, which is 6 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Qorvo's Q2 Results Qorvo beat analysts' revenue and EPS expectations this quarter. Yet, its revenue guidance for next quarter missed analysts' expectations which likely drove the stock down. Zooming out, we think this was still a decent, albeit mixed, quarter. The market was likely expecting more, and the stock traded down 5.4% to $113 immediately after reporting.
