Communications chips maker Qorvo (NASDAQ: QRVO) reported Q3 CY2024 results beating Wall Street’s revenue expectations , but sales fell 5.2% year on year to $1.05 billion. On the other hand, next quarter’s revenue guidance of $900 million was less impressive, coming in 14.6% below analysts’ estimates. Its non-GAAP profit of $1.88 per share was also 1.7% above analysts’ consensus estimates.

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Qorvo (QRVO) Q3 CY2024 Highlights:

• Revenue: $1.05 billion vs analyst estimates of $1.03 billion (1.8% beat)

• Adjusted EPS: $1.88 vs analyst estimates of $1.85 (1.7% beat)

• Adjusted Operating Income: $212.2 million vs analyst estimates of $198.9 million (6.7% beat)

• Revenue Guidance for Q4 CY2024 is $900 million at the midpoint, below analyst estimates of $1.05 billion

• Adjusted EPS guidance for Q4 CY2024 is $1.20 at the midpoint, below analyst estimates of $1.94

• Inventory Days Outstanding: 60, down from 119 in the previous quarter

• Operating Margin: 0.9%, down from 13.7% in the same quarter last year

• Free Cash Flow Margin: 9.1%, up from 5.8% in the same quarter last year

• Market Capitalization: $9.51 billion

Bob Bruggeworth, president and chief executive officer of Qorvo, said, “In the September quarter, ACG successfully supported our largest customer’s seasonal smartphone ramp. In HPA, we expanded our D&A business while building a broad-based business in power management. In CSG, we maintained our leadership in Wi-Fi applications while investing to grow in diverse businesses including automotive solutions and SoCs for ultra-wideband and Matter. HPA and CSG are on pace to achieve mid-teen year-over-year growth in fiscal 2025.”

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 can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Qorvo’s sales grew at a tepid 5% compounded annual growth rate over the last five years. This shows it failed to expand in any major way, a rough 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.