Key Points

  • Revenue at $3.13 billion, meeting midpoint guidance.
  • GAAP gross margin at 57.3%, at the high end of guidance.
  • Automotive segment revenue down 7% year-over-year.

NXP Semiconductors (NXPI -0.59%), known for its leadership in the automotive semiconductor market, released its Q2 2024 earnings on July 22. The company reported revenue of $3.13 billion, meeting guidance of $3.025 billion to $3.225 billion. The results were mixed, with the company achieving its revenue and gross margin targets but facing challenges in maintaining year-over-year revenue growth. The gross profit under generally accepted accounting procedures (GAAP) was $1.79 billion with a gross margin of 57.3%, near the center of the expected range of 56.7% to 57.8%. The automotive segment showed a 7% sales decline year-over-year, impacting overall performance.

NXP Semiconductors: Business overview

NXP Semiconductors emphasizes the automotine, industrial, mobile, and industrial Internet of Things (IoT) end markets to capitalize on the growing demand for semiconductor content in various applications, from autonomous driving to 5G infrastructure.

Recently, NXP has focused on expanding its product and technology portfolio, including significant investments in new product development. Its success factors include robust innovation, strategic partnerships, and effective supply chain management. For example, the introduction of the S32N55 processor for vehicle super-integration underscores its commitment to advancing automotive technology.

Quarterly highlights and performance

NXP's Q2 revenue aligned with the midpoint of its guidance. However, this figure represents a 5% decline compared to $3.30 billion in the year-ago period. The GAAP gross profit was $1.79 billion, achieving a slight gross margin improvement to 57.3%, up from the previous year's 57.0%.

The automotive segment, which consistently accounts for more than half of NXP's total sales, reported $1.73 billion in revenue, down 7% year-over-year. This decline reflects ongoing softness in the automotive market.

In contrast, industrial IoT revenue saw a year-over-year growth of 6.6%, highlighting some resilience in diversified markets. Mobile and communication infrastructure segments also reported mixed results, with mobile revenue increasing by 21.5% year-over-year while communication infrastructure revenue fell by 23.3%.

NXP's operating income for the quarter was $896 million, translating to a GAAP operating margin of 28.7%. This compares to the previous year's Q2 operating income of $1.09 billion, or a 34.3% non-GAAP operating margin, slightly below expectations.

Material one-time events this quarter included NXP's joint venture with Vanguard International Semiconductor (VIS) to build a semiconductor wafer facility in Singapore, targeting automotive and mobile markets. VIS will carry some of the associated costs, contributing to NXP's strategic investment and future growth prospects.

Further down the cash flow statement,Shareholder returns included $260 million in dividends and $310 million in share repurchases, aligning with NXP's capital return policy.

Looking Ahead: Financial Outlook

NXP's forward guidance for Q3 2024 indicates expected revenue between $3.15 billion and $3.35 billion, reflecting sequential growth of 1% to 7%. The projected GAAP operating margin should land between 28.8% and 30.9%, while the non-GAAP operating margin is anticipated to be between 34.2% and 36.0%.

Management's cautious optimism during the cyclical downturn highlights their strategic focus on maintaining profitability and earnings. Investors should watch for developments in the automotive segment and the execution of strategic partnerships, which are expected to drive long-term growth.

Key areas to monitor include the adoption and performance of new products, particularly in automotive and industrial IoT, as well as any further shifts in the company's end markets.