Q1 revenue guidance exceeds expectations but cannot offset weak automotive business recovery NXP(NXPI.US) drops after hours

NXP Semiconductors (NXPI.US) announced better-than-expected revenue guidance for Q1 2026, but due to slightly lower growth in the automotive market, the stock fell nearly 5% in after-hours trading on Monday.

The earnings report showed that NXP’s Q4 revenue increased 7% year-over-year to $3.34 billion, beating the analyst average estimate of $3.3 billion. Under Non-GAAP accounting standards, gross profit rose 7% YoY to $1.91 billion, with a gross margin of 57.4%; operating profit increased 8% YoY to $1.15 billion, with an operating margin of 34.6%; diluted earnings per share were $3.35, surpassing the analyst average estimate of $3.31.

By business segment, automotive revenue grew 5% YoY to $1.88 billion, below the analyst average expectation of $1.89 billion, with some analysts forecasting as high as $1.97 billion; industrial and IoT revenue increased 24% YoY to $640 million; mobile revenue grew 22% YoY to $490 million; communication infrastructure and other business revenue declined 18% YoY to $330 million.

NXP primarily supplies chips to the automotive industry, which accounts for more than half of the company’s revenue. Its chips use mature process technology and are widely used in driver safety, vehicle connectivity, and in-vehicle infotainment systems.

Like peers such as STMicroelectronics (STM.US) and Texas Instruments (TXN.US), NXP has been affected by the post-pandemic chip oversupply. Automotive and consumer electronics customers who stockpiled chips during shortages are slowly working through their inventories. U.S. President Trump’s tariff threats further delayed the recovery process.

Last year, NXP indicated that the oversupply was finally nearing an end and noted that its automotive business was “significantly” accelerating. CEO Rafael Soto Mayol, who took office in October last year, also said he saw signs of a “cyclical recovery.”

Last week, STMicroelectronics, which supplies Apple (AAPL.US), provided a Q1 revenue guidance above analyst expectations due to a rebound in consumer electronics demand. However, because the company’s earnings report showed uneven recovery across different end markets, its stock still declined. STMicroelectronics CEO Jean-Marc Chery stated during a conference call with analysts that the automotive market “has not yet stabilized.”

Looking ahead, NXP expects Q1 2026 revenue to be between $3.05 billion and $3.25 billion, with a midpoint forecast of $3.15 billion, better than the analyst average expectation of $3.09 billion; it also expects Non-GAAP diluted EPS to be between $2.77 and $3.17, with a midpoint forecast of $2.97, slightly above the analyst average estimate of $2.95.