Qorvo's Margins Keep Climbing as Revenue Keeps Falling
Qorvo posted its fourth straight quarter of sequential revenue decline even as non-GAAP gross margin expanded to 52.8%, up 880 basis points from a year earlier.
Qorvo (QRVO) reported fiscal first-quarter revenue of $784.8 million, down 2.9% from $808.3 million in the fourth quarter and down 4.2% from $818.8 million a year earlier, extending a slide that has now stretched four consecutive quarters since revenue peaked at $1.06 billion in the second quarter of fiscal 2024.
The decline in revenue has not stopped Qorvo's profitability from improving. Non-GAAP gross margin rose to 52.8%, up 880 basis points from 44.0% a year ago, the fourth straight quarter of year-over-year gross-margin expansion after gains of 270, 260 and 670 basis points in the three prior quarters. GAAP gross margin followed the same path, climbing to 51.1% from 40.5% a year earlier.
Non-GAAP diluted earnings were $1.64 a share, up 78% from $0.92 in the year-ago quarter but down 5 cents from $1.69 in the fourth quarter. GAAP operating income jumped to $96.8 million from $31.5 million in the fourth quarter and $30.1 million a year earlier, lifting operating margin to 12.3% of revenue from single digits in both comparison periods. Non-GAAP operating income moved the opposite direction, slipping to $177.6 million from $190.2 million in the fourth quarter. The gap reflects an $82.4 million goodwill and intangible impairment that had weighed on the prior quarter's GAAP results, plus a new $14.9 million merger-related cost line this quarter, up from $8.1 million in the fourth quarter and just $0.5 million a year ago.
Segment results diverged sharply. High Performance Analog revenue rose 50.1% to $206.3 million with a 33.9% operating margin, up from 15.7% a year earlier though slightly below the fourth quarter's 34.7%. Connectivity and Sensors swung to a $3.0 million operating profit, a 2.9% margin, after three straight quarters of losses including a 7.4% negative margin in the fourth quarter. Advanced Cellular revenue fell 16.6% year-over-year and 7.0% sequentially to $476.6 million, yet held operating margin near 22.8%, consistent with a pivot toward higher-value placements rather than unit volume.
Qorvo gave no forward guidance and held no conference call, continuing a disclosure change first made with the fourth-quarter release tied to its pending merger with Skyworks Solutions. The company had issued explicit quarterly revenue, margin and EPS ranges as recently as the second and third quarters of fiscal 2024.
Even without quarterly guidance, Qorvo raised its full-year outlook language, moving its non-GAAP earnings target from "approaching $7.00" a share to "above $7.00," while holding its gross-margin guidance at "above 50%".
Diluted shares outstanding fell to 89.4 million from 93.8 million a year earlier, largely reflecting the $400 million buyback, roughly 5% of shares outstanding, completed in the fourth quarter. Qorvo repurchased no stock in the first quarter, compared with $49.9 million bought back in the same period last year, leaving buybacks paused as the Skyworks deal's merger-related costs continue to climb.