NXP Q2 Auto Chip Revenue Falls 7%, Stock Drops 8%!

On July 22nd, NXP Semiconductors, a leading automotive chip manufacturer, released its financial results for the second quarter of the fiscal year 2024, which ended on June 30, 2024. While the results were in line with expectations, the forecast for the current quarter fell short of analyst predictions. This, coupled with weak demand from automotive customers and geopolitical uncertainties, led to an almost 8% drop in after-hours trading.

NXP's Q2 revenue decreased by 5% year-over-year to $3.13 billion, matching forecasts. Adjusted earnings per share were $3.20, slightly below the analyst estimate of $3.21.

Detailed segment performance for Q2 is as follows:

· Automotive chip revenue declined by 7% year-over-year (down 4% quarter-over-quarter) to $1.728 billion.

· Industrial and IoT chip revenue increased by 7% year-over-year (up 7% quarter-over-quarter) to $616 million.

· Mobile chip revenue rose by 21% year-over-year (down 1% quarter-over-quarter) to $345 million.

· Communication infrastructure and other products revenue fell by 23% year-over-year (up 10% quarter-over-quarter) to $438 million.

According to LSEG data, the decline in automotive chip revenue was the largest in three years, primarily due to major automotive customers delaying orders in response to weak demand, hoping for improved conditions following interest rate cuts.

For Q3, NXP forecasts revenue between $3.15 billion and $3.35 billion, below the analyst consensus of $3.36 billion. The company expects an adjusted gross profit margin of 58%-59%, compared to analysts' expectation of 58.5%. Adjusted operating profit is projected to be between $1.08 billion and $1.21 billion, versus the $1.17 billion analyst forecast. Adjusted earnings per share are expected to range from $3.21 to $3.63, with the midpoint falling short of the analyst average of $3.61.

The disappointing Q3 outlook, significant decline in automotive chip revenue, and tensions in US, Europe, and China trade relations have led to widespread skepticism about NXP's future performance. According to a Reuters report from early July, tightening export restrictions to China have prompted Chinese companies to invest heavily in expanding traditional chip production, intensifying competition that could impact NXP's sales in China. The Chinese market accounted for 33% of NXP's total revenue in 2023.