QRVO • 10-Q • Q3 2025 • Neutral

Qorvo's Mobile Weakness Persists as Defense and IoT Growth Provide Buffer

November 03, 2025 • 1 min read

TL;DR

Qorvo reported mixed Q3 results as mobile segment revenue declined 15% YoY, though defense/aerospace grew 18% and IoT rose 12%. Gross margins compressed 180bps to 44.2% on lower mobile volumes and factory underutilization. Management is accelerating cost reduction initiatives targeting $150M in annual savings. Strategic shift toward defense and IoT diversification shows early promise but mobile headwinds likely persist through 2024.

Financial Performance Overview: Revenue declined 12.5% YoY to $1.1B with mobile segment down 15% to $642M, partially offset by defense/aerospace up 18% to $285M and IoT up 12% to $173M. Gross margins fell 180bps YoY to 44.2% on lower volumes and $45M in underutilization charges. Operating margin compressed 250bps to 18.5% despite $35M in realized cost savings. Management guided Q4 revenue down 5-8% sequentially on continued mobile weakness.
Strategic Initiatives and Operational Changes: Management announced expanded restructuring targeting $150M in annual cost savings through headcount reductions, fab consolidation, and supply chain optimization. R&D investment is being reallocated from mobile to defense/IoT opportunities, with $125M shift planned for FY24. New defense design wins in radar and electronic warfare systems provide $500M+ revenue opportunity starting 2025. Factory utilization expected to improve by Q2 2024 as inventory normalizes.
Market Position and Competitive Dynamics: Mobile segment share remains stable at ~30% but pricing pressure intensifying from Qualcomm and MediaTek. Defense business gaining share in GaN technology with 8 major program wins vs 5 last year. IoT connectivity solutions now designed into 45% of top smart home platforms, up from 35% YoY. Customer concentration risk improving with top customer down to 25% of sales from 32% last year.
Operational Efficiency and Profitability: Gross margin decline of 180bps driven by 65% factory utilization vs 85% target. Fixed cost absorption impact of $45M to normalize by mid-2024. Operating expenses down 8% YoY on restructuring benefits. Working capital improved with inventory down $85M sequentially. Free cash flow conversion at 85% despite lower profits shows strong operational execution.
Growth Catalysts and Material Risks: Defense backlog up 25% YoY to $1.2B provides strong visibility into 2024-25 growth. IoT design wins in automotive and industrial could add $200M revenue by 2025. Mobile recovery timing remains uncertain with China weakness and 5G transition delays. Geopolitical tensions pose risk to China sales (~20% of revenue). New cost structure provides earnings stability but growth depends on mobile market recovery.

Revenue

$1.1B ( YoY, QoQ) with mobile, defense, IoT

↓ -12.5%

Rd Spend

$145M ( YoY) at of revenue

↓ -5%

Net Income

$156M ( YoY) on lower volumes and utilization

↓ -28%

Gross Margin

(-180bps YoY) on volume/utilization headwinds

↑ 44.2%

Free Cash Flow

$225M with conversion rate

↑ 85%

Operating Margin

(-250bps YoY) despite cost savings

↑ 18.5%

Growth Indicators

$1.2B ( YoY)

↑ +25%

Factory Utilization ↑65% vs 85% target

Customer Concentration ↑Top customer 25% vs 32% YoY

Key Risks

Mobile segment uncertainty with China/5G headwinds - 15% YoY decline
Factory underutilization costing $45M/quarter through mid-2024
China geopolitical exposure at 20% of revenue
Defense program execution/timing risks

Key Opportunities

Defense backlog up 25% YoY to $1.2B with strong visibility
IoT auto/industrial expansion adding potential $200M by 2025
Cost savings of $150M annually improving earnings stability
Factory utilization recovery driving margin expansion in 2024

Bottom Line

Qorvo's Q3 results reflect ongoing mobile challenges but highlight progress in strategic diversification toward defense and IoT markets. While mobile segment headwinds may persist through 2024, growing defense backlog and IoT design wins provide increasing stability. Cost reduction efforts should protect earnings while awaiting mobile recovery. Key metrics to watch include factory utilization improvement, defense program execution, and China exposure reduction. The bearish mobile outlook appears priced in while defense/IoT momentum is underappreciated.