NXP Semiconductors (NASDAQ:NXPI) reported fourth-quarter 2025 results that management characterized as “solid,” with revenue, operating margin and earnings per share landing above or in line with guidance as demand improved across end markets. Executives also used the call to outline strategic portfolio shifts, including the decision to stop new product development in RF Power and the completion of the MEMS sensor business divestiture.
Fourth-quarter results exceed guidance midpoint
CEO Rafael Sotomayor said NXP posted fourth-quarter revenue of $3.34 billion, up 7% year over year and up 5% sequentially, finishing $35 million above the midpoint of the company’s outlook. Non-GAAP operating margin was about 35%, about 40 basis points higher than the year-ago period and in line with guidance, while non-GAAP earnings per share were $3.35, $0.07 better than guidance.
On channel metrics, Sotomayor said distribution inventory ended the quarter at 10 weeks, consistent with guidance. He emphasized a continued focus on “channel health,” prioritizing sell-through of high-demand products rather than broad-based restocking.
2025 performance: a “tale of two halves”
Sotomayor described 2025 as split between a weaker first half and an accelerating second half as customer inventory digestion eased. By end market:
- Automotive: $7.1 billion, flat year over year, which management attributed to slower inventory digestion at direct customers in the first half. Sotomayor said the second-half performance aligned with NXP’s 8% to 12% long-term outlook, supported by content growth initiatives tied to software-defined vehicles (SDVs), including S32 vehicle compute and zonal processing families and automotive Ethernet.
- Industrial & IoT: $2.3 billion, flat year over year, though management said second-half growth was materially above its long-term growth outlook. Sotomayor highlighted “physical AI” opportunities, pointing to the combination of NXP’s i.MX processors with the acquired Kinara NPU for edge AI applications.
- Mobile: $1.6 billion, up 6% year over year, with stronger demand and content gains in premium devices. Sotomayor said NXP remains a “specialty supplier” centered on secure mobile transactions.
- Communications infrastructure: $1.3 billion, down 24% year over year. Sotomayor reiterated expectations for flat longer-term growth as Digital Networking and RF Power decelerate, offset by growth in Secure Car, including UCODE RFID tagging solutions.
Q1 2026 outlook improves versus 90 days ago
Management said its first-quarter 2026 forecast was better than expected, with year-over-year growth anticipated across all regions and end markets. NXP guided to first-quarter revenue of $3.15 billion (±$100 million), up 11% year over year and down 6% sequentially. Sotomayor said the outlook reflects inventory normalization at auto tier-ones, broader strength across industrial and consumer IoT, and seasonal program ramps in premium mobile. He stressed the guide does not assume broad-based restocking.
At the midpoint, management outlined the following Q1 trends:
- Automotive: up mid-single digits year over year; down mid-single digits sequentially. Sotomayor noted the revenue guidance includes only about $25 million (roughly one month) from the MEMS sensor business.
- Industrial & IoT: up low-20% range year over year; down mid-single digits sequentially.
- Mobile: up mid-teen percent year over year; down about 20% sequentially.
- Communications infrastructure & other: up mid-teen percent year over year; up 10% sequentially.
Betz guided to non-GAAP gross margin of 57% (±50 basis points) and operating expenses of $765 million (±$10 million), resulting in a non-GAAP operating margin of 32.7% at the midpoint. He said NXP’s model assumes low single-digit price declines, partially offset by operational efficiencies, and noted front-end utilization was in the high 70s in Q4 and expected to remain in the high 70s in Q1.
Based on the company’s guidance, first-quarter non-GAAP EPS is expected to be $2.97 at the midpoint.
Portfolio actions: RF Power development halted; MEMS divestiture closes
Betz said NXP concluded its RF Power business “no longer aligns” with its long-term strategy. The company will stop new product development and has taken an approximately $90 million restructuring charge reflected in fourth-quarter GAAP results. He said resources will be redirected toward SDVs and physical AI.
Management also discussed the MEMS sensor business divestiture. Betz said STMicroelectronics announced the closing of the transaction after market close, with NXP receiving $900 million in gross proceeds and an additional $50 million contingent on certain closing conditions. NXP expects to recognize a one-time gain of approximately $630 million in first-quarter GAAP guidance. On the call, Betz said the sensors business ran around $300 million per year and was below corporate margins, estimating a 10 to 20 basis point gross margin improvement from the sale.
Cash flow, balance sheet, and capital returns
NXP generated cash flow from operations of $891 million in Q4 and reported net CapEx of $98 million, resulting in non-GAAP free cash flow of $793 million, or 24% of revenue. The company ended Q4 with $12.2 billion of total debt and $3.3 billion in cash, with net debt of $8.96 billion and net debt to adjusted EBITDA of 1.9x.
NXP returned $338 million through buybacks and $254 million in dividends during Q4. Betz said the company repurchased another $36 million after quarter-end under a 10b5-1 program and redeemed $500 million of March 2026 notes on Jan. 5 using cash on hand. He also reiterated that NXP’s capital allocation framework is unchanged, and said the company remains comfortable buying back stock while below a 2x net leverage ratio.
On manufacturing strategy, Betz said NXP is about 50% through planned investments in VSMC and ESMC, having invested about $1.7 billion of $3.4 billion, with most remaining investments expected in 2026. He also reiterated longer-term expectations that the hybrid manufacturing strategy could lift company gross margins by another 200 basis points when VSMC is fully loaded in 2028.
Management also said NXP will shift geographic revenue reporting to a headquarters-based region approach rather than ship-to, stating it better reflects how the company manages customer engagement and design-win activity.
About NXP Semiconductors (NASDAQ:NXPI)
NXP Semiconductors N.V. is a global semiconductor company headquartered in Eindhoven, the Netherlands, that designs and supplies mixed-signal and standard product solutions for a broad range of end markets. The company focuses on enabling secure connections and infrastructure for embedded applications, developing technologies used across automotive, industrial and Internet of Things (IoT), mobile, and communication infrastructure segments. NXP’s offerings target customers that require reliable, secure, and high-performance semiconductor components for connected devices and systems.
Product lines include microcontrollers and application processors, secure elements and authentication technologies, RF and high-power analog components, connectivity solutions, and vehicle networking and infotainment systems.
