Q4 revenue and guidance both exceeded expectations, automotive business lagged, NXP Semiconductors stock fell over 6% in after-hours trading | Earnings Report Insights

NXP Semiconductors N.V. announced its fourth-quarter financial report after the market closed on Monday, showing that the company's fourth-quarter revenue was $3.34 billion, exceeding analysts' expectations of $3.3 billion based on previous guidance. It expects first-quarter revenue to be between $3.05 billion and $3.25 billion, while analysts expect $3.09 billion. However, the company's growth in the automotive market was slightly below previous expectations, and its stock price fell more than 6% in after-hours trading following the report.

Here are the key points from NXP's fourth-quarter financial report:

Key Financial Data:

Revenue: Fourth-quarter revenue for 2025 was $3.34 billion, a year-on-year increase of 7%, higher than analysts' expectations of $3.3 billion.

Gross Margin: Under GAAP, the gross margin was 54.2%; under non-GAAP, the gross margin was 57.4%.

Operating Margin: Under GAAP, the operating margin was 22.3%; under non-GAAP, the operating margin was 34.6%.

Earnings Per Share: Under GAAP, diluted earnings per share were $1.79; under non-GAAP, diluted earnings per share were $3.35, exceeding analysts' expectations of $3.31.

Operating Cash Flow: Operating cash flow from activities in the fourth quarter was $891 million, with net capital expenditures of $98 million, corresponding to non-GAAP free cash flow of $793 million, accounting for 23.8% of the quarter's revenue.

2025 Full-Year Performance:

Revenue: Full-year revenue for 2025 was $12.27 billion, a year-on-year decrease of 3%;

Gross Margin: Under GAAP, the gross margin was 54.7%; under non-GAAP, the gross margin was 56.8%.

Operating Margin: Under GAAP, the operating margin was 24.8%; under non-GAAP, the operating margin was 33.1%.

Earnings Per Share: Under GAAP, diluted earnings per share were $7.95; under non-GAAP, diluted earnings per share were $11.81.

Operating Cash Flow: Full-year operating cash flow was $2.82 billion, with net capital expenditures of $395 million, corresponding to non-GAAP free cash flow of $2.425 billion, accounting for 19.8% of full-year revenue.

Segment Data:

Automotive Business: Fourth-quarter revenue from the automotive business was $1.876 billion, below analysts' expectations of $1.89 billion. The third quarter was $1.837 billion, and the same period last year was $1.790 billion, with a quarter-on-quarter growth of 2% and a year-on-year growth of 5%; full-year automotive revenue was $7.116 billion, with $7.151 billion expected for 2024.

Industrial and IoT: Fourth-quarter revenue from the industrial and IoT business was $640 million, with the third quarter at $579 million and the same period last year at $516 million, showing a quarter-on-quarter growth of 11% and a year-on-year growth of 24%; full-year revenue was $2.273 billion, with $2.269 billion expected for 2024

Mobile Business: Revenue from mobile business in the fourth quarter was $485 million, compared to $430 million in the third quarter and $396 million in the same period last year, with a quarter-on-quarter growth of 13% and a year-on-year growth of 22%; total for the year was $1.584 billion, with a forecast of $1.497 billion for 2024, representing a year-on-year growth of 6%.

Communication Infrastructure and Others: Revenue from communication infrastructure and other businesses in the fourth quarter was $334 million, compared to $327 million in the third quarter and $409 million in the same period last year, with a quarter-on-quarter growth of 2% and a year-on-year decline of 18%; total for the year was $1.296 billion, with a forecast of $1.697 billion for 2024, representing a year-on-year decline of 24%.

First Quarter Performance Guidance:

Revenue: Revenue is expected to be in the range of $3.05 billion to $3.25 billion, with a midpoint of $3.15 billion, exceeding analysts' expectations of $3.09 billion. This represents a quarter-on-quarter decline of 3% to 9% and a year-on-year growth of 8% to 15%.

Gross Margin: GAAP gross profit is expected to be between $1.685 billion and $1.831 billion, corresponding to a gross margin of 55.2% to 56.3%; non-GAAP gross profit is expected to be between $1.723 billion and $1.869 billion, corresponding to a gross margin of 56.5% to 57.5%.

Operating Margin: GAAP operating profit is expected to be between $1.395 billion and $1.521 billion, corresponding to an operating margin of 45.7% to 46.8%; non-GAAP operating profit is expected to be between $966 million and $1.092 billion, corresponding to an operating margin of 31.7% to 33.6%.

Earnings Per Share: GAAP diluted earnings per share are expected to be between $4.01 and $4.41; non-GAAP diluted earnings per share are expected to be between $2.77 and $3.17, with the midpoint exceeding analysts' expectations by $0.02.

NXP Semiconductors President and CEO Rafael Sotomayor stated

NXP's performance across all end markets improved quarter-on-quarter in the fourth quarter. For the full year 2025, despite a challenging operating environment in the first half, the company continues to execute strongly, maintaining operational discipline while advancing its strategic focus on software-defined vehicles and physical AI.

Through a series of strategic acquisitions, NXP has further strengthened its product portfolio, consolidating its leading position in edge intelligent systems in automotive, industrial, and IoT sectors. These initiatives, combined with a gradual improvement in the demand environment, provide the foundation for the company to achieve profitable revenue growth.

The company will continue to adhere to prudent investments, margin enhancement, and product portfolio optimization to create sustainable long-term value for shareholders.

After the earnings report was released, NXP's stock price fell more than 6% in after-hours trading on Monday. As of the previous close, the stock had risen approximately 6.5% year-to-date.

NXP Semiconductors announced on Monday that it has completed the previously announced sale of its MEMS sensor business, with a transaction amount of $900 million in cash, plus up to $50 million in contingent consideration depending on the achievement of related milestones.

In addition, NXP completed the acquisition of Aviva Links and Kinara in October last year.

Still Waiting for Automotive Business Recovery

Despite the company's overall optimistic sales guidance, market concerns about the speed of NXP's recovery overshadowed this positive news. The company stated that first-quarter revenue is expected to be between $3.05 billion and $3.25 billion, with the midpoint exceeding analysts' average expectation of $3.09 billion.

NXP's chips primarily supply the automotive industry, with the automotive business accounting for more than half of the company's revenue. Its processors use more mature process technologies and are mainly used for functions such as driving safety, vehicle connectivity, and in-vehicle infotainment systems.

Media reports indicate that NXP, like its peers STMicroelectronics and Texas Instruments, has been affected by the post-pandemic chip supply surplus. During the pandemic, due to chip shortages, automotive and consumer electronics customers stockpiled chips, which they have been slowly digesting since then. Additionally, former President Trump's tariff threats further slowed the industry's recovery process.

NXP stated last year that the chip surplus situation may finally be nearing its end and noted that its automotive business is experiencing "significant" acceleration in growth. CEO Rafael Sotomayor, who took office in October last year, also mentioned that he has seen "signs of cyclical recovery."

NXP reported total revenue of $3.34 billion for the fourth quarter of 2025, which is basically in line with market expectations. During the same period, the company's adjusted operating profit margin was 34.6%, slightly below analysts' expectations of 34.7%.

Last week, STMicroelectronics, which supplies chips to Apple, provided a first-quarter revenue guidance that exceeded analysts' expectations, driven by a recovery in demand. However, due to its financial report showing an uneven recovery across different end markets, the stock price of this analog chip manufacturer still fell after the earnings release. STMicroelectronics CEO Jean-Marc Chery stated in a conference call with analysts that the automotive market "has not yet stabilized."