Skyworks CEO Says Its Largest Customer Won't 'Just Hand Us Business' After Qorvo Deal
Phil Brace says the merged company must keep earning its top account, while input costs press margins and supply caps growth.
Skyworks CEO Phil Brace said on the company's earnings call that its largest customer "is not going to just hand us business because all of a sudden we're combined," a day-one reality check for the newly closed merger with Corvo. Skyworks, which designs analog and mixed-signal chips for wireless signals, power and timing, closed the deal on October 5 and guided the combined company to $1.8 billion to $1.9 billion of December-quarter revenue.
No change to the award process
Asked by a TD Cowen analyst whether the larger scale would alter how the largest customer awards content, Brace said he does not expect the award process to change. Skyworks is now a larger provider for that customer, he said, but the market "remains to be a highly competitive market" and the company must keep executing.
Pressed later about the customer's recent long-term agreement with a competitor, Brace said the competitive landscape has changed a little in the number of suppliers. He added: "We earn it every single day," with thousands of people working on it.
CFO Philip Carter said that on a standalone basis the largest customer accounted for approximately 62% of September-quarter revenue, including non-smartphone products. Carter said Skyworks is tracking to its earlier expectations for that customer this quarter and sees sequential growth. Skyworks generally guides only one quarter at a time, he said.
Android shrinks, smartphone sales slip
On a pro forma combined basis, smartphone revenue was approximately $4.6 billion in fiscal 2026, down approximately 11% year over year, Brace said, reflecting the expected Android decline and content dynamics at the largest customer. The company expects December-quarter smartphone revenue to fall in the low teens percent sequentially.
Answering an RBC Capital Markets analyst, Carter said Corvo's revenue was guided down 17% sequentially, or 10% without the extra week, with Android down more than 20% sequentially. Android could be nearing a bottom in fiscal 2027, he said, and should be under 10% of the smartphone business.
Diversified growth markets, which include data center, defense and automotive, totaled approximately $2.9 billion on a combined basis in fiscal 2026, up approximately 12%. Brace said those businesses are supply constrained, with demand far exceeding what the company can make.
Costs squeeze margins
Skyworks' standalone September-quarter revenue was $1.05 billion, with non-GAAP (adjusted) earnings of $1.28 a share. The company expects adjusted gross margin of 46% to 48% in December and adjusted earnings of $1.25 a share at the revenue midpoint.
Input costs remain a drag, Brace said. Carter said cost increases are easier to pass on in diversified markets than in smartphones, where contracts run a year or two. The company has made deposits and prepayments with vendors to lock in costs and capacity.
Management remains committed to $500 million or more of annual cost synergies, about two-thirds from operating expenses. It expects roughly $150 million in operating-expense synergies in fiscal 2027, exiting the year at an annualized $250 million to $300 million.
Beginning with its February call, Skyworks will report only on a combined basis, split into smartphone and diversified growth markets.
