News
Qorvo (NASDAQ:QRVO) Surprises With Q4 Sales, Stock Jumps 14.9%
Communications chips maker Qorvo (NASDAQ: QRVO) announced better-than-expected revenue in Q4 CY2024, but sales fell by 14.7% year on year to $916.3 million. Guidance for next quarter’s revenue was better than expected at $850 million at the midpoint, 1.2% above analysts’ estimates. Its non-GAAP profit of $1.61 per share was 33.2% above analysts’ consensus estimates.
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Qorvo (QRVO) Q4 CY2024 Highlights:
Bob Bruggeworth, president and chief executive officer of Qorvo, said, “Qorvo is executing on a broad set of strategic initiatives to expand margin, generate strong free cash flow, and increase shareholder value. During the December quarter, we continued to successfully support our largest customer, who represented approximately 50% of sales. Within our Android 5G product portfolio, we are narrowing our focus to the higher-value flagship and premium tiers, where customers value Qorvo’s differentiated products. In HPA, we had record Defense & Aerospace quarterly revenue and expect continued strength in the March quarter. As we continue to execute on our growth and diversification strategy, we expect HPA and CSG to deliver double-digit growth in fiscal 2025 and next fiscal year.”
Company Overview
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 Chips
The 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 Growth
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Unfortunately, Qorvo’s 3.9% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the semiconductor sector and is a tough starting point 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.
Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. Qorvo’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 3.9% annually.
This quarter, Qorvo’s revenue fell by 14.7% year on year to $916.3 million but beat Wall Street’s estimates by 1.4%. Company management is currently guiding for a 9.7% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 2.1% over the next 12 months. While this projection is better than its two-year trend, it's hard to get excited about a company that is struggling with demand.
Software is eating the world and there is virtually no industry left that has been untouched by it. That drives increasing demand for tools helping software developers do their jobs, whether it be monitoring critical cloud infrastructure, integrating audio and video functionality, or ensuring smooth content streaming. .
Product Demand & Outstanding Inventory
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, Qorvo’s DIO came in at 114, which is one day below its five-year average. These numbers show that despite the recent increase, there’s no indication of an excessive inventory buildup.
Key Takeaways from Qorvo’s Q4 Results
We were impressed by how significantly Qorvo blew past analysts’ EPS expectations this quarter on a small revenue beat. We were also excited its adjusted operating income outperformed Wall Street’s estimates by a wide margin. Looking ahead, both revenue and EOS guidance for Q1 2025 came in above expectations. Overall, this was a near-perfect quarter for a company operating in an industry that has seen some end market weakness in the last half year. The stock traded up 14.9% to $98.57 immediately following the results.
Qorvo had an encouraging quarter, but one earnings result doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free .