Qorvo

Qorvo reported second-quarter revenue of $785 million, down 4% year over year. Due to its pending merger with Skyworks, Qorvo did not host an earnings conference call, nor did it provide investors with quarterly financial guidance.

Why it matters: Skyworks and Qorvo announced a new leadership team for the combined company, led by Skyworks CEO Phil Brace, as expected. Perhaps the biggest news for Qorvo investors is that Skyworks discussed how it is seeking to close the deal by the end of calendar 2026 and perhaps as soon as September 2026, a few months sooner than previously planned.

The bottom line: We maintain our $91 fair value estimate for no-moat Qorvo. Shares appear fairly valued to us. We suspect that Qorvo may face some headwinds in its mobile business in the quarters ahead, as higher memory chip prices might cause smartphones to be more expensive, thus muting unit sales for smartphones and, in turn, Qorvo's RF parts going into such phones. However, Skyworks cited good growth in areas like Wi-Fi, automotives, and data centers, and Qorvo's high-performance analog business rose 2% sequentially and 50% year over year, recovering from the tough cyclical downturn a year ago.

Coming up: While Qorvo did not give quarterly guidance for September, the firm stated that it expects non-GAAP gross margin in excess of 50% and non-GAAP EPS of $7.00 for fiscal 2027, ending in March 2027. We anticipate Qorvo will merge with Skyworks before the end of its fiscal year, however.

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Our fair value estimate for Qorvo is $91 per share, which implies a fiscal 2026 price/adjusted earnings multiple of 14 times and a 6% free cash flow yield.

Our fair value is on a probability weighted basis. We think there’s a 75% probability of Qorvo’s pending merger with Skyworks going through. If the deal were to be consummated, our fair value estimate for Qorvo would be $92. This is based on our estimated value of the cash and stock to be received from Skyworks, discounted until March 2027, which is our initial guess of when the deal will close.

Based on our $75 standalone fair value estimate for Skyworks, we believe Qorvo shareholders will receive $104.50 of nominal value from Skyworks. We discount this value at a 9% rate over 18 months since the deal won’t close until 2027, if at all. For modeling purposes, we assume this deal closes on March 31, 2027. Thus, we believe the discounted value that Qorvo will receive is closer to $92, if the deal were to be consummated.

We think there’s a 25% chance the deal is disallowed (likely a failure to receive government approval). If the deal were to fall apart, our standalone fair value estimate for Qorvo would be $86, similar to our last published fair value estimate prior to the merger announcement.

On a standalone basis, Qorvo faced a down year in fiscal 2023 (ending March) because of sluggish smartphone demand among Chinese manufacturers, leading to a 23% revenue decline. Revenue bounced back in fiscal 2024 but only modestly, up 6%. Fiscal 2025 was shaping up as a year of further growth, but a negative mix shift toward lower-end Android devices reduced Qorvo’s addressable RF market and led to a 1% decline.

With this context, we model only 1% revenue growth for Qorvo in fiscal 2026. In mobile, Qorvo believes it will gain content in the Apple iPhone 17 series, but this will be a bigger contributor to fiscal 2027 revenue, by our estimates. Meanwhile, revenue from Android-based smartphone customers will continue to decline. Qorvo may see an uptick in aerospace and defense revenue too, but other end markets might not see much growth. We model 1% revenue growth for Qorvo in fiscal 2027 and long-term average annual growth of about 4%-5% thereafter.

Adjusted gross margin was as high as 52% in fiscal 2021 and fiscal 2022 but fell as low as 44.5% in fiscal 2024 and 45% in fiscal 2025 because of the decline in Android-based RF chip demand. We model an uptick to 47% in fiscal 2026, thanks to the deemphasis of the low-end Android business and other manufacturing efficiencies. We model modest improvement to 49% in fiscal 2030, but short of management’s long-term target of 50%-plus for the full year. Given the high seasonality around Qorvo’s business, we do think the firm will achieve certain quarters with 50%-plus adjusted gross margins in the years ahead.

Qorvo’s adjusted operating margin peaked at 33% in fiscal 2022. It has fallen thereafter to 19% in fiscal 2024 and 17% in fiscal 2025. We foresee a recovery but only to 19% in fiscal 2026 and the low 20% range in the long run, well short of management’s target for 30%-35% adjusted operating margins. While we trust that Qorvo will cut operating expenses to improve profitability, we’re concerned about mix shift dynamics in the smartphone market that might weigh on earnings and be out of the company’s control.

We believe that Qorvo holds intangible assets around the design, manufacturing, and packaging of a variety of radio frequency products. Areas of strong design expertise, in our opinion, come from bulk acoustic wave filters used in many 4G-enabled smartphones and other products used in the defense and wireless infrastructure industries. However, these assets have not enabled Qorvo or its predecessor companies (RF Micro and TriQuint, which merged into Qorvo in 2014) to generate excess returns on capital for a significant period of time. Thus, we assign Qorvo a no-moat rating until we gain greater confidence that the business can achieve a steady record of excess returns on capital.

Ultimately, RF leaders like Qorvo have years, if not decades, of RF expertise in design and, perhaps more important, in chip manufacturing, packaging, and testing, which we view as especially valuable since most RF products are based on more specialized materials (for example, power amplifiers are based on gallium arsenide), rather than the traditional silicon used in most digital processors. Although Qorvo has not generated exceptional returns on capital to date, we think this expertise will be difficult for others to replicate.

As wireless networks upgrade to 5G technologies, RF designs should only grow in complexity, making RF leaders even more valuable suppliers into smartphones and other device makers than they are today. We believe this complexity in 5G devices enables firms like Qorvo, with a broad product portfolio, to benefit.

Meanwhile, we think that Qorvo has some stickier design wins in a host of nonsmartphone applications. The company is a leading RF supplier into a wider array of other industries, such as wireless base stations and infrastructure and defense applications. In these industries, Qorvo appears to be profiting from longer product life cycles and steadier pricing due to fewer volume discounts.

A constant concern in the RF industry is the threat of pricing pressure, as Qorvo and others rely on a handful of smartphone leaders for the bulk of their revenue. Similarly, product lifecycles in the smartphone industry are exceptionally short, so hard-fought design wins one year might not translate to a steady revenue stream in the long term. These dynamics prevent us from assigning a wide economic moat rating to Qorvo or other RF players.

To that end, we are modestly concerned about the firm's customer concentration with Apple, which made up 46% of Qorvo's revenue in fiscal 2024. However, Qorvo's supplier relationship with Apple appears secure to us. We doubt that Apple or others would run the risk of poor connectivity within their smartphones just to save a few pennies on a lesser filter, or by taking a chance on a startup without the size and scale to manufacture and supply hundreds of millions of filters for its marquee device launch. Reports suggest that Apple is hiring RF engineers, but we suspect that this expertise is aiding Apple in its well-known development of baseband chips, rather than the creation of RF content that will directly displace Qorvo.

Ultimately, we view Qorvo as one of only a few firms in a shrinking, consolidating industry that can supply the necessary volume of increasingly valuable RF parts to smartphone makers. However, we do not yet have enough confidence in the company’s ability to earn excess returns on capital over the next decade, which we would need before assigning a narrow economic moat to the firm. Qorvo may get there someday by streamlining its cost structure and building even more advanced RF parts that are valued by smartphone makers and infrastructure and defense companies alike.

As wireless technologies shift to more advanced 5G networks, smartphones will require greater RF content per device, which should provide a nice runway for further growth at Qorvo.

Qorvo might have the RF's industry's broadest suite of products, including a variety of filters needed for 4G- and 5G-enabled smartphones and infrastructure products that are emerging as key components in 5G networks.

Qorvo continues to enhance and shift its manufacturing footprint, which should allow for gross margin expansion in the years ahead.

Qorvo has significant customer concentration with Apple, and it would be a damaging blow if Apple were ever to switch to another vendor or suffer a severe slowdown in iPhone sales.

Pricing on RF components has been robust in recent years, but large customers like Apple and Samsung likely have significant buying power and could exert pricing pressure on vendors like Qorvo over time.

Demand in some of Qorvo's key end markets, like wireless infrastructure equipment, is inherently lumpy, and the firm's results may face volatility from time to time.