Skyworks Solutions (SWKS)

Wireless chips maker Skyworks Solutions (NASDAQ: SWKS) announced better-than-expected revenue in Q3 CY2025, with sales up 7.3% year on year to $1.1 billion. On top of that, next quarter’s revenue guidance ($1 trillion at the midpoint) was surprisingly good and 101,179% above what analysts were expecting. Its non-GAAP profit of $1.76 per share was 15.3% above analysts’ consensus estimates.

Company Overview

Result of a merger of Alpha Industries and the wireless communications division of Conexant, Skyworks Solutions (NASDAQ: SWKS) is a designer and manufacturer of chips used in smartphones, autos, and industrial applications to amplify, filter, and process wireless signals.

Longer manufacturing duration allows analog chip makers to generate greater efficiencies, leading to structurally higher gross margins than their fabless digital peers. The downside of vertical integration is that cyclicality can be more pronounced for analog chipmakers, as capacity utilization upsides work in reverse during down periods. Read More. The semiconductor industry is broadly divided into analog and digital semiconductors. Digital chips are what most people think of as the brains of almost every electronic device. Their primary purpose is to either store (memory chips) or process (CPUs/GPUs) data. By comparison, analog chips regulate real world signals, such as temperature, speed, sound, or electrical current, converting them into a stream of digital data that can be processed by digital semiconductors. Analog semiconductors are also used to manage power in any electronic device; they convert, store and distribute the electrical energy that comes from a battery or wall plug. Analog chips are found everywhere from household appliances like refrigerators or washing machines, to smartphones, cars and factory production lines.

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Skyworks Solutions’s sales grew at a mediocre 4% compounded annual growth rate over the last five years. This fell short of our benchmark for the semiconductor sector and is a poor baseline 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.

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. Skyworks Solutions’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 7.5% annually.

This quarter, Skyworks Solutions reported year-on-year revenue growth of 7.3%, and its $1.1 billion of revenue exceeded Wall Street’s estimates by 5.4%. Company management is currently guiding for a 93,489% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to decline by 10.8% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.

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, Skyworks Solutions’s DIO came in at 105, which is 23 days below its five-year average. At the moment, these numbers show no indication of an excessive inventory buildup.

In the semiconductor industry, a company’s gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

Skyworks Solutions’s gross margin is well below other semiconductor companies, indicating a lack of pricing power and a competitive market. As you can see below, it averaged a 41.2% gross margin over the last two years. Said differently, Skyworks Solutions had to pay a chunky $58.83 to its suppliers for every $100 in revenue.

This quarter, Skyworks Solutions’s gross profit margin was 40.7%, marking a 1.2 percentage point decrease from 41.9% in the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Skyworks Solutions was profitable over the last two years but held back by its large cost base. Its average operating margin of 13.8% was weak for a semiconductor business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Skyworks Solutions’s operating margin decreased by 19.3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Skyworks Solutions’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q3, Skyworks Solutions generated an operating margin profit margin of 10.1%, up 4.3 percentage points year on year. The increase was encouraging, and because its gross margin actually decreased, we can assume it was more efficient because its operating expenses like marketing, R&D, and administrative overhead grew slower than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Skyworks Solutions’s flat EPS over the last five years was below its 4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of Skyworks Solutions’s earnings can give us a better understanding of its performance. As we mentioned earlier, Skyworks Solutions’s operating margin expanded this quarter but declined by 19.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Skyworks Solutions reported adjusted EPS of $1.76, up from $1.55 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Skyworks Solutions’s full-year EPS of $5.93 to shrink by 27.4%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Skyworks Solutions has shown terrific cash profitability, and if sustainable, puts it in an advantageous position to invest in new products, return capital to investors, and consolidate the market during industry downturns. The company’s free cash flow margin was among the best in the semiconductor sector, averaging an eye-popping 33.6% over the last two years.

Taking a step back, we can see that Skyworks Solutions’s margin expanded by 4.9 percentage points over the last five years. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Skyworks Solutions’s free cash flow clocked in at $144 million in Q3, equivalent to a 13.1% margin. The company’s cash profitability regressed as it was 25.3 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Skyworks Solutions’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 17.3%, slightly better than typical semiconductor business.

Companies with more cash than debt have lower bankruptcy risk.

Skyworks Solutions is a profitable, well-capitalized company with $1.39 billion of cash and $995.8 million of debt on its balance sheet. This $392.6 million net cash position is 3.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see Skyworks Solutions beat analysts’ EPS expectations this quarter. We were also glad its revenue guidance for next quarter trumped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock traded up 1.3% to $72.84 immediately following the results.

Updated: December 4, 2025 at 9:18 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Skyworks Solutions.

Skyworks Solutions doesn’t pass our quality test. For starters, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its powerful free cash flow generation enables it to stay ahead of the competition through consistent reinvestment of profits, the downside is its projected EPS for the next year is lacking. On top of that, its declining operating margin shows the business has become less efficient.

Skyworks Solutions’s P/E ratio based on the next 12 months is 15.7x. At this valuation, there’s a lot of good news priced in - we think there are better opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $83.63 on the company (compared to the current share price of $68.91).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.