NXP Semiconductors N.V. (NXPI) Earnings & Analysis

Latest quarter

NXP reported Q2 FY2026 revenue of $3.5 billion, up 19.5% from $2.9 billion a year earlier. The company’s $3.61 adjusted EPS, as the consensus counts it, exceeded the $3.54 consensus by 1.98%, while revenue exceeded the consensus by 0.78%.

Rafael Sotomayor said all end markets and regions grew from the prior year. He said automotive revenue was $1.94 billion, up 12% year over year; Industrial & IoT revenue was $755 million, up 38%; communications infrastructure revenue was $452 million, up 41%; and mobile revenue was $351 million, up 6%.

NXP reported gross margin of 57.3%, compared with 53.4% a year earlier, and operating margin of 30.6%, compared with 23.5%. The company reported free cash flow of $754.0 million, compared with $659.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Rafael Sotomayor said demand improved across all end markets in the second quarter, with company-specific growth drivers growing in the mid-20% range year over year and representing roughly one-third of revenue. He said automotive growth was driven primarily by software-defined vehicles, electrification and connectivity, while communications infrastructure growth reflected digital-networking exposure to data centers and ramps in RFID products.

Sotomayor said NXP expected data-center revenue to exceed $500 million in 2026, following approximately $200 million in 2025. He said the company’s data-center position centered on control-plane functions, including top-of-rack switching, smart network control, monitoring, cooling and security. Sotomayor also said AI-enabled processors would represent approximately 15% of Industrial & IoT processor revenue in 2026.

When analysts asked about demand conditions, Bill Betz said backlog continued to grow across the next several quarters, distribution backlogs showed similar patterns, and the book-to-bill ratio was above one and above the prior quarter. Betz said customer escalations doubled sequentially as lead times extended. He also said NXP had not seen restocking among Western automotive Tier 1 customers and was shipping to real end demand.

On pricing, Sotomayor said NXP’s first response to inflationary pressure was operating efficiency and that it made selective rather than across-the-board price adjustments. He said the Q2 effect was essentially neutral and the Q3 outlook incorporated an estimate. Jeff Palmer said NXP would face higher wafer prices outside agreed supply envelopes with foundry partners and would pass those prices to customers.

Betz attributed non-GAAP gross-margin performance to product mix, factory utilization and higher revenue. He said NXP’s cumulative investment in VSMC and ESMC was approximately $2.4 billion, or about 70% of the planned commitment. Asked for Q4 and 2027 guidance, Sotomayor said NXP guides one quarter at a time and did not provide a Q4 figure.

Guidance

For Q3 FY2026, NXP expects revenue of $3.75 billion plus or minus $100 million, non-GAAP gross margin of 58.5% plus or minus 50 basis points, and non-GAAP operating margin of 36.9% at the midpoint. Bill Betz said the company expects non-GAAP EPS of $4.11 at the midpoint, a non-GAAP tax rate of 18%, and capital expenditures of approximately 3% of revenue. Sotomayor said NXP expects automotive revenue to rise in the low-double-digit percentage range year over year, Industrial & IoT revenue to rise in the high-30% range, communications infrastructure and other revenue to rise about 50%, and mobile revenue to decline in the mid-single-digit percentage range.