Infineon Q1 Revenue Drops 8%, Raises FY2025 Outlook

On February 4, 2025, Infineon Technologies, a leading automotive semiconductor manufacturer, reported its financial results for the first quarter of fiscal year 2025, ending December 31, 2024. Despite an 8% year-over-year and 13% quarter-over-quarter decline in revenue due to reduced demand in the automotive and industrial sectors, the company still exceeded market expectations and raised its overall performance outlook for fiscal year 2025.

Infineon's first-quarter revenue amounted to €3.424 billion, a decrease of 13% compared to the previous quarter and 8% lower than the same period last year. However, this result was better than the analyst forecast of €3.23 billion. The gross margin stood at 39.2%, down from 41.41% in the previous quarter, while the adjusted gross margin reached 41.1%, lower than the 43.31% achieved in the prior quarter. Operating profit was €318 million, compared to €473 million in the previous quarter.

The decline in revenue was attributed to weaker demand in four key market segments: Automotive (ATV), Green Industrial Power (GIP), Power and Sensor Systems (PSS), and Connected Security Systems (CSS).

The automotive segment generated €1.919 billion in revenue, an 11% decline from the previous quarter, largely due to inventory adjustments expected by customers. The segment’s operating profit was €363 million, down from €551 million last quarter, and the operating margin dropped to 18.9% from 25.6% in the previous quarter.

The green industrial power segment posted revenue of €340 million, a 32% decline from the previous quarter. This was primarily due to ongoing inventory adjustments, especially in industrial drives and renewable energy sectors, compounded by a weak overall market environment. Operating profit fell to €34 million, a significant decrease from €111 million in the previous quarter. The segment’s operating margin dropped to 10.0% from 22.1% in the prior quarter.

Power and Sensor Systems reported revenue of €820 million, down 5% from €861 million in the previous quarter. While revenue from server and data center products, particularly those related to artificial intelligence, showed a positive trend, other areas of the business experienced stable or slightly declining sales.

The Connected Security Systems segment saw revenue of €344 million, a 15% decrease from the previous quarter, driven by a decline in revenue from payment cards and certain consumer applications. Operating profit fell to €30 million from €62 million last quarter, with the operating margin decreasing from 15.3% to 8.7%.

Overall, Infineon's core business segments reported a decline in performance, with total operating profit falling to €573 million, compared to €832 million in the previous quarter. This included compensation payments from one customer amounting to double-digit millions of euros. The operating margin for these segments also decreased to 16.7% from 21.2%.

Non-core business segments incurred a net loss of €255 million, an improvement from the €359 million loss in the previous quarter. This loss included €64 million in sales-related costs, €18 million in R&D expenses, and €56 million in sales, general, and administrative expenses, in addition to €117 million in other operating costs. During its process of restructuring production processes and portfolio as part of its "Step Up" program, the company recognized an impairment loss of €101 million and set aside €12 million in expected loss provisions for the first quarter of fiscal year 2025.

The company's profit from continuing operations was €243 million, down from €384 million in the previous quarter. Due to delayed tax impacts, the result for discontinued operations was a profit of €3 million, compared to a €468 million loss from discontinued operations in the previous quarter, related to a settlement with the bankruptcy administrator of a former partner.

Infineon's earnings per share (EPS) from continuing operations for the first quarter of fiscal year 2025 were €0.18, compared to €0.29 per share for the previous quarter. Adjusted EPS (diluted) for the first quarter was €0.33, down from €0.49 in the previous quarter.

For the second quarter of fiscal year 2025, Infineon expects revenue of approximately €3.6 billion, assuming an exchange rate of 1.05 USD to EUR. The ATV segment is expected to grow at the group’s average rate, while the GIP segment's revenue growth is expected to outpace the group average. PSS and CSS revenues are anticipated to remain relatively stable.

Infineon has upgraded its full-year forecast for fiscal year 2025, with expected revenue now projected to remain flat or slightly increase compared to the previous year, up from the prior forecast of a slight decline. This revised forecast is primarily due to an expected strengthening of the US dollar.

For fiscal year 2025, Infineon anticipates an investment plan of around €2.5 billion, primarily for real estate, plants, equipment, intangible assets, and capitalized development costs. Depreciation and amortization are expected to be approximately €2 billion, with around €400 million allocated for the amortization of purchase price allocations related to the acquisition of Cypress Semiconductor.

Adjusted free cash flow is expected to be around €1.7 billion, while reported free cash flow should be around €900 million for the year.