Skyworks Solutions Stock

Okay. Good afternoon, everybody. Welcome to the Goldman Sachs Communacopia & Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome Skyworks and CEO, Phil Brace to the stage. Welcome, Phil.

Thanks, Jim. Thanks for having us. Always a pleasure to be here.

Great. Phil, you're in the final stages of closing your proposed merger with Qorvo. This is something investors have been very focused on as a landmark event for the industry. I know you expect the transition to close relatively soon here. You completed the financing to permit the disclosure. Where do we stand today in terms of finalizing close any remaining conditions?

Yes. Thanks for the question. Pretty consistent with what we said in the last earnings call. Certainly, we are very confident that we're going to close this calendar year. We're preparing to close this fiscal year. And then subsequent to the earnings call, we talked about the fact we kind of issued an 8-K said that we -- the HSR waiting periods and the waiting periods for the U.S. FTC had expired without further action.

We then also went out and raised the debt and actually what turned out to be pretty good interest rates since we raised it since then. I wish to say that was with foresight, but sometimes it's better to be lucky than good. And we're just waiting right now, I would say. These things are never certain. And we're kind of -- we're around the airport just waiting for permission to land. So hopefully, it comes soon, and we're chomping at the bit, ready to go.

I think [indiscernible], I guess.

Yes.

Nice. So stepping back for a moment, what does success look like, say, 2 to 3 years after the close of the transaction? More importantly, more tactically, what are sort of the key milestones investors should be tracking to evaluate the success along the way?

Yes, it's great. Look, I really think this is a transformative deal for both the company and the industry. We talked about -- you mentioned it in your opening remarks. I mean this company coming together really does 2 things. It has a scale play and a diversification play. And the scale play really gets us significantly more revenue, and then we're able to really financially do $500 million of synergies, which we get there. So we should have, I think of around a roughly $5.5 billion mobile business and then a $2.5 billion, $2.6 billion nonmobile business.

The mobile business should be -- have higher stability, better mix because inside the mobile business, we're going to be skewing towards more of the tiers, the premium tier side. And then on the nonmobile side, we have super attractive segments like aerospace and defense, which I'm really excited about. As a matter of fact, that one could be the grabbing the tiger by the tail from that side. So 2, 3 years from now, you'd expect us to see kind of certainly getting to our business model target, 50%, 55% gross margin, 30%, 35% operating margin, 35% to 40% EBITDA margins, very attractive capital structure, large and growing markets.

And milestones to look along the way. We're obviously getting to close will be one thing. OpEx synergies, how are we doing on that? We talked about $500 million total, 24 to 36 months, probably front-end loaded OpEx side. The factory consolidation will take a little more time to go do that. So right, are we able to close, right? Are we able to start implementing some of these synergies? Is the Broad Markets growing faster than the mobile side? Are we generating some stability on the mobile business? And then ultimately, what are we -- are we delivering the financial performance we talked about. I mean it's an unbelievable transformative opportunity, and I just can't wait to get started.

Yes. Now from a product and technology perspective, what are the things that the combined company can do they couldn't have done as independent stand-alone companies in terms of -- and what does it mean for the product portfolio going forward?

Yes. I think that's a really important question and something that we really haven't underwritten at all. I mean when we looked at the deal and how we put it together, we're really just focused on the synergies and one of the synergies we get. We haven't really talked about anything at all of what we can do at the 1 plus 1 equals 2 scenario. Some of that is because we still need to get under the covers and figure that us out.

But I'll give you an example. Like if we just look at the handset side today, right, Qorvo, the product lines are barely overlapping, right? They have antenna tuning, envelope tracking and PMIC. We don't have any of those technologies. And so when you think from the receiver all the way to the antenna, you might believe that bringing thousands of RF engineers might allow us to do things differently. And we know there are certain customers today where we have 100% of the RF front end, and we know we can do things differently. So I'm excited about that opportunity.

The other one is that I'm equally excited about or more excited about really is some of the GaN technology because today, our technology kind of caps out at about 12 gigahertz. And with GaN, both Power GaN and RF GaN, we get up to 20, 25 gigahertz, which gets us into a lot of the radar and a lot of the defense space that we don't have today. And you might imagine there's some cross-selling opportunities that we could have with timing products and power products in the defense space that we haven't even explored. So to me, there's just a tremendous runway of just opportunities, both on the cost synergy side, but also as we bring the companies together to look for new innovation, new capabilities that we haven't even explored.

Yes. Now you previously outlined the cost synergies. What about the revenue synergy side of things? What is that short term and long-term?

Yes. I mean, look, we've been -- I've been cautious about doing that because I guess, Jim, I'm a meat and potatoes kind of guy, do what I say we're going to do and deliver that, and I think it was very quantifiable to do the cost synergies. The revenue synergies are something we need to work towards. I mean I -- the magic of this is that we're bringing together thousands of RF engineers that are super hard to get, very talented people. And I'm just excited about that opportunity.

I mentioned some of them. Can we expand our defense business? Can we really expand the combination? Are there additional things we can do on the RF side, both on the WiFi and handset side now that we've got all the way out to the antenna tuners. Are there -- is there new capabilities we can do with our BAW filters and other capabilities as well. And then you've got the manufacturing and the assembly and test. What can we do with new advanced packaging and other technology that we haven't been able to do before.

So I mean, I barely scratched the surface. I can't wait to get our PhD engineers out talking about things and what we can do. And it's exciting. I mean at the end of the day, there's a lot of excitement about data centers, and I love our data center business as well. But it is a wireless world and all that data center data has to get out to somewhere, and that somewhere is going to be done wirelessly. And I think we're going to be in a really good spot for that.

Yes. So now I ask you about product portfolio, but competitively, how does the merger change your position versus Qualcomm, Broadcom, Murata, et cetera?

Yes. Look, I think this is always going to be a super competitive market, right? Our customers are not just going to hand us business. But clearly, this results in a different competitive landscape and the landscape is changing, right? And it's changing. Certainly at our largest customers has changed with respect to, right, our position vis-a-vis Qualcomm and others, right? And I think that competitive landscape is changing, and that should benefit us.

But it still is a situation where we have to execute and deliver, right? No one is going to just give us a pass just because we've consolidated with Qorvo. I do think that the improved technology base should allow us to compete. And I think that one of the things that I would say that I'm going to look to do is future technology development. Today, I probably don't spend as much as I'd like to on some future technology development. And so one of the things I'm hoping to do is you might imagine that how can I take some of the synergies that I'm going to get and actually further develop the road map further out in time. And so we'll be looking to do things like that.

Yes. Okay. So data centers has emerged as one of your fastest-growing end markets along with many others. What specific problems are you solving to position the company to participate better in AI infrastructure spend?

Yes. So we've got 2 major -- you're right, that's one of our fastest growing. We said we're growing at least 50% year-over-year. And actually, those businesses are supply constrained right now. We could be shipping a lot more. The book-to-bill is greater than 1 on that. 2 particular areas where we've got 1 of those on data center power, and this is really around power isolation. So when you think about backplane changes going from 400-volt to 800-volt, you want to make sure that power is isolated from your very expensive GPUs, and we have specific technology to do that.

That really comes from the heritage of the Silicon Labs acquisition we made many years ago, and they've got a long history of doing safety-related power devices. And so they've got a good track record there, and that seems to be going quite well. The other one is on the timing side, which are super high performance, very low jitter and jitter means how much does the clock move around, clocks, which is super important for high-performance things.

And so when you think about some of the technology here, it's like black magic, right, femtoseconds, which is light travels at a foot or something like this, is some crazy, crazy thing. And those are really geared towards the optical 400, 800 gig to 1.6 terabit kind of transitions. And some of the big customers there are some of the big optical networking guys. So those are the few spots we've got. I wish the biggest businesses were bigger. They're growing really nicely. They're great. We just got to continue to grow them.

How big can it be in 3 to 5 years?

Well, I mean, I think the future continues to be pretty bright. We talked about that being growing greater than 50% year-over-year. We're ahead of that. I don't expect that to be slowing down anytime soon. So you kind of continue to grow at that space. And I think when you take that, some of those businesses, combined with some of the aerospace defense business, combined with some of the auto, some of the WiFi, you can really see how we can end up in a situation where we're getting into that zone where we got 50%, 55% gross margin growing nicely and good operating income. And that's going to be part of the strategy for how we get our blended mix up.

Okay. Excellent. 10 minutes in, and we haven't talked about smartphones yet, we'll do that. That's a pretty large business -- part of your business today. Talk about some of the dynamics you saw in smartphones in the first half of the year, how you think that plays out into year-end?

Yes. Look, I think that -- it's funny to say at the beginning part of the year, I think I'll probably always remember the CES of 2026. It was kind of that was the day that the memory -- all the memory issues came to its head. And I think I've been dealing with memory issues ever since that time. And every quarter, we've done nothing but beat expectations and continue to guide ahead of plan.

We've been fortunate. If you look at where we play mostly, it's in the premium handset space. And I think our largest customer has done a really good job of actually, frankly, gaining share versus Android in that space. And that actually should benefit us in the long-term. The more devices that are in the iOS ecosystem, the better it is long-term for us because you think there's probably 1.2 billion to 1.5 billion devices out there and the refresh rate is anywhere 4-ish years. Well, any sort of shrink of that refresh rate just results in lots more units that we can refresh. So that one has been going pretty well.

And I think that our guide reflects that continued strength. So for us, we haven't seen some of the other turbulence that other people have, primarily because our exposure is the premium segment.

Yes. In past wireless cycles, every several years, there's usually a moment where RF content sort of spikes upward. Do you think an on-device AI could be that inflection point, some place where upload complexity and bill of materials start to step up again?

Yes. And we have seen it. And this is one thing that's important to note. I think in the past call, I talked about a multigenerational design win with a large U.S. Android provider that takes us through 2030, probably products that will ship in 2031. That was significant for a couple of reasons. One, the customer had belief in our technology through that time; two, we had partnership with another baseband provider, which demonstrates that collaboration that we have; three, we have visibility through that; and then four, we see that RF increase. And we see it today. We see it with increased filters, increased transmit power, more uplink channels, direct to satellite links, and then that's not even before you get to increased power levels in PC2 and 6G. So we're seeing it today. So for the first time in many years, we're seeing increased RF complexity driven by some of the things you talked about.

Yes. If your largest customer continues to use a larger share of internal modems on their products in the coming quarters, what does that mean for you on content on the margin more or less?

Yes. Like generally, that's a tailwind because when they use external modem, there was a certain products that were bundled with them. And so generally, it's a tailwind to do that. But once they transition completely off that, then that effect -- that relative tailwind is behind us, right? But I think for us, when we look at what we're trying to do in the Mobile segment, it's really continue to focus on the premium tier. So we'll have Android continue to win off. Our largest customer, right, the more that they use their internal modem, the better it is for us. And then the more technology that they put in there in terms of transmit capability and all those things should be a tailwind for us as well.

Got it. I mean you sort of addressed this before, but if you take that kind of multigenerational design win you mentioned ramping fiscal '28 to '30, talked about $1 billion opportunity there. What does that win tell you about your portfolio and about content trends in the premium market?

Yes. I think it tells us a lot. I mean, first off, I would say that one particular customer is Astute in that they recognize that they -- there's opportunity costs that some of their partners have for their engineers and their capabilities and their talent. So for them, this is also about securing a partnership with us for a long period of time. So it's a mutually beneficial relationship, and we work really, really hard at it. In many ways, their products are excellent products. And so we've been working closely with them. I think it says a lot about our technology, our capabilities and what we want to do, and I think it bodes well for us.

And so if we set aside any one individual platform, sort of what are the structural drivers of content growth at the premium segment over the next sort of few cycles, especially in terms of like the modes of wireless communication you see kind of playing out and especially if we kind of really finally do get AI at the edge?

Yes. I mean I think that what we see -- one of the biggest things that we see is much more transmit capability coming. And I think that's due to a couple of reasons. One, more things are being uploaded to the cloud, right, or to the AI work models or other things like that. The other thing we're happening is it looks like it turns out that for those that aren't familiar with this technology, the transmit side on the phone is actually what determines how far you can stay away from the tower.

When you think about microphones and speakers as analogies, microphones on the receive side, you don't need a lot of power and you can have pretty sensitive microphones with not a lot of power. The speakers are the things that communicate to the tower, and those take up a lot of power. And so figuring out how to improve the transmit efficiency really defines how much bandwidth you can get back and forth to the tower. And so there's a lot of focus on that. And I think that that's one of the technology drivers we see that certainly is tied to AI at the edge and workloads and things like that, right? The more complex workloads, the more upload you're doing, the better it is for us.

Yes. Okay. Broad markets, your diversified analog business. That's been a pretty solid outperformer over the past several quarters.

Yes.

To sort of level set people, can you just break down that business in terms of the largest buckets of revenue in that business and sort of what they constitute? And maybe how your portfolio may be different from some of your analog peers that are more kind of like even broad-based than that?

Yes. I think our last quarter, the Broad business is about 43% of our business. So it's a meaningful part of the business. 2/3 of that are what I would call strategic growth engines, 1/3 of it today is kind of more consumer IoT-focused stuff, which is a little bit a drag on the growth today. But it's okay for us to be diversified there. Inside the growth areas, we've got WiFi, which is a big business there. WiFi tends to be in waves, right, with the WiFi 7, WiFi 8. Today, we're in the middle stages of the WiFi 7 ramp, seeing very good adoption. And what drives that technology is things like dual band, tri-band, quad-band, more power, things like that. So we see that to be a good tailwind.

Automotive, we play in like the infotainment space and vehicle-to-vehicle connectivity, which is kind of a sweet spot. We're not huge in autos from the grand scheme of things. But when you think autos -- do you think autos will have more connectivity as time goes on? Yes. Do I think they'll look more like computers as time goes on? Yes. So that seems to be going well. And then we've got the data center side, which is power and timing I talked about. And then the combination of Qorvo that gives us the defense side, which I think for me could be grabbing the tiger by the tail, so I'm excited about that one.

Yes. So of those subsegments, where do you see the most upside? Or is it kind of too early to say? And like obviously, data center and automotive have done pretty well, but do you expect that kind of...?

Yes, the data center is going to continue to grow. I think for me is how to get that one bigger. And I think that we'll continue to invest there to grow that. I think that, that business comes from a heritage of Silicon Labs that was mostly focused on the industrial side. And up until about a year ago, we shifted all the R&D towards the data center side. So we really haven't yet seen the payback for some of those investments. So I'm looking for that one to continue to grow.

The combination with Qorvo, right, I'm definitely most excited about the defense space. I think that one is -- just opens up a whole new segment for us that is growing like crazy. And as I said, I think we could grab the tiger by the tail on that one.

Yes. So you mentioned aerospace and defense, obviously, very strong growth area for everybody, especially for Qorvo. So I mean, how are you thinking about that business in terms of the combined portfolio? Specifically there, are there areas where you could actually accelerate the organic product portfolio? And I guess, maybe talk about kind of any incremental kind of like additional M&A that you could do to kickstart that portfolio?

Yes. I think it's early days, right? But that's an area we haven't done integration planning. So we haven't yet got into the whole details yet. But you might imagine, I mean, we just talked about some of the power products and some of the timing products we have that Qorvo today doesn't have. Well, gee, is there something -- I mean, those customers need power products and they need timing products and maybe there's something we can or should do there.

We have unique BAW capability, differentiated BAW capability. Maybe there's some interesting filter capabilities that we can do there. They bring some of the GaN technology that we don't have that opens up frequency bands that we don't have. So I'm most excited about bringing those thousands of engineers together to see what we can do. I mean that's -- that's where some of the magic is.

Yes. Okay. Final part on the Broad Markets business. You mentioned WiFi. Where are we in sort of the WiFi 7 upgrade cycle? What's kind of like the right content uplift from 6 to 7? And how do you think about the competitive environment in WiFi specifically?

We're probably in the middle innings sort of a 9-inning baseball game. We're probably in inning 5 or 6 middle innings of that. I think that's been going well. The content uplift has been meaningful double digits per access point, primarily because when you think about just going from 2 bands to 3 bands and then more power. And so as we look to WiFi 8, I think we're going to have additional content uplifts from there. So that was good. The competitive dynamic there, we partner -- well, we are basically the front ends for Broadcom and Qualcomm and MediaTek is kind of how we work. And so we partner with them. It's a very competitive environment, but I think certainly, the combination of Qorvo, I think the competitive landscape changes a little bit. And so we're looking forward to that.

Great. Maybe a few numbers questions to close out. I was wondering if you can maybe recap the financial model you laid out when you announced the transaction, sitting here just under a year after you announced it. Help us understand, first of all, the long-term growth rate you think that you can achieve given the business mix across mobile and Broad Markets?

Yes. So we laid out at the top level, we laid out a business that's growing mid- to high single digits, and we've got 2 major segments. We'll have the Mobile segment that we had single -- low to mid-single digits, relatively low, modest growth rate. What are we assuming there? We're assuming nominal unit growth rate. We're assuming decent content uplift, offset by ASP pressures and Android decline. Kind of what we're assuming in that range that can go plus or minus, but it's not a heroic assumption.

On the Broad Market side, we're assuming kind of low double digits, and that's assuming good growth in the core growth areas and then offset by some of the more consumer-oriented that I talked about. And you end up with kind of a mid-single-digit kind of grower, 50%, 55% gross margin, 30%, 35% operating margin and 35% to 40% EBITDA margin, very favorable capital structure, throws off a lot of cash. And I think we're going to be in a really good spot. It should really result in really good EPS growth over time.

Yes. And I think Qorvo reported gross margins of 52.8% last quarter.

Yes.

I mean, how does that bridge to the 50% to 55% you just talked about for the combined company, tailwinds and headwinds from here, variable cost, input costs, et cetera?

Yes. So I mean, if you look at -- obviously, I don't -- Qorvo is still an independent company. I just got to look at their public financials. But I think what they've talked about is the Android business is going down, right, which is very low margin, and it's kind of been swapped out with high-margin defense business, which is a trade I'll make every single day, right? So I think that, that mix alone should help us. You point out -- I mean, so when we think about gross margin mix inside the mobile side, which is structurally lower than the gross margin side. But inside the mobile side, we're going to have a mix shift there towards the premium side.

And then on the Broad Market side, we're going to add on defense and aerospace, which also should bring the mix up there as well. So we've got some mix-related items. And then we've got the growth of the Broad Markets business, which should expand, grow past the cellphone business. Headwinds, good you asked. I think one of the headwinds certainly has been input costs, right? That's been something that's been pressuring our gross margins.

I've been actually really proud of the team the way we've handled that. And we've done a lot of different mitigation things. We've got to do that, including price increases where we can, expedite fees and longer lead time stuff. But that's just a headwind that we probably didn't expect from a year ago. And our go-forward model kind of assumes that, that will continue to be, and we're just going to need to work. That's something we're just going to need to battle every single day.

Yes. Now overall, I think you pointed a picture where you expect it to be the transaction to be accretive to gross margins, op margins and earnings. You talked about $500 million in planned cost synergies. What has changed from a synergy perspective since you announced it revenue or costs as you've kind of sharpened your pencil and work through the proposed integration details?

Yes. I think my confidence in the synergies has gone up, right? I think I really believe that we've got, right, a really good opportunity to meet those. And you might imagine I've got some internal targets on that, but I'm a meat and potatoes kind of guy. I'm just going to do what I say we're going to do. And as soon as we get in there, we'll start delivering the numbers and then see where we go from there. But my confidence has gone up a lot.

And I think some of the other, right, structural things we talk about, about them even before we started. But both of us have already started doing some, we'll call it, pre-synergizing work such that when we hit the ground running, we're already going to be at a run rate where we should be better than either company was previously when you add them together. So I think I feel good about that. And we'll just have to stay tuned, measure us on how we've done our results.

Exactly. Capital allocation. You announced recently a new framework for that for the combined company, $2 billion of new share repurchases, but the decision not to declare a quarterly dividend going forward. Maybe help us understand the Board's thinking on that point and how you weigh share repurchases, deleveraging and M&A from here? And specifically, should we expect more kind of diversifying M&A in the Broad Market?

Yes. That was -- that's a good question. That was something I personally spent a lot of time on. We had external advisers to give us advice on. It was a recommendation I made to the Board and the Board supported my recommendation. Part of it was -- it was a multifaceted evaluation of where I think we needed to go. And I think one of it came back to -- for me, it just became very, very clear that it's much more accretive. And if I did nothing but just buy back my stock with the dividend money, it's way more accretive.

And in fact, I went back and looked at older material. And I think if you just did the math, even through the ups and downs, it would be way more accretive to do that. We were trading at a dividend yield, something like 4.75% or something like that, like something approaching Chevron dividend yields, which just wasn't there. And so when I looked at the capital allocation, I think we are going to be biasing towards -- certainly towards buyback. And then for M&A, look, both companies, both Qorvo and Skyworks have been in the same cul-de-sac for a decade or more, right? There are several companies that look like us 15 years ago. And I think that we would be better off looking for accretive M&A that will help us to continue to grow the gross margins and diversify our base, right?

Keep in mind that I'm not going to be -- I'm going to be very focused on doing things in a disciplined fashion, measured fashion. And I think that should we deliver these synergies we talked about here, I think we're going to get investor support. And I think the stock price post that decision is kind of reflective of us getting some support from some major long-only. So I feel good about it.

Okay. Excellent. So last question, very big picture. If we're sitting here on stage 5 years from now, investors look back, what's the one thing that you'll be surprised about?

They wish they bought more stock today.

Okay.

I don't know, many things...

Maybe some of them will be very happy.

Yes. Well, that's the idea, right? I'm not here to keep things the same. I am singularly focused. I think one of the things that surprised me, I guess, coming in, I started on this particular transaction, if you look at some of the changes we made in 18 months, right? 6 quarters in a row beat and raise and the biggest deal the company has ever done, transformative deal, changed the capital allocation of the company. We -- I am singularly focused on growing the stock price. I wasn't brought here to do anything else. And I'm just not going to sit still. So -- and I'm just going to execute and deliver 1 step at a time. You're not going to try -- you're not going to see me chase butterflies and I'm not one of these hyperbole guys, but I'm just going to show up and deliver and do the work every single day. And that's what we're going to do.

Excellent. I think we're looking forward to see what's next for the company.

Yes. That's great.

Thanks, Phil, for being here.

Thank you so much.

Thank you.

Thank you.

Good afternoon, and welcome to Skyworks Third Quarter 2026 Earnings Conference Call. This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' Third Fiscal Quarter 2026 Conference Call. With me today for our prepared remarks are Phil Brace, our Chief Executive Officer and President; and Philip Carter, Chief Financial Officer and Senior Vice President of Skyworks. This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements.

Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. Additionally, today's discussion will include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP. With that, I'll turn the call over to Phil Brace.

Thanks, Raji, and good afternoon, everyone. Today, alongside our June quarter results, we're making several important announcements related to the Qorvo combination. One, an update on regulatory process; two, our financing plans; three, the expected leadership team for the combined company; and four, a new capital allocation framework. Let me take these first. The regulatory process continues to move forward. In China, the review has advanced to Phase III with SAMR, and we are working constructively with regulators in all remaining jurisdictions. We are now optimistic that we can close within the calendar year, and we will be preparing to close as early as within this fiscal year. As always, the transaction remains subject to regulatory approvals and customary closing conditions.

In connection with the transaction, we anticipate raising approximately $2 billion of debt financing in the near term, subject to market and other conditions. Philip Carter will cover the details, including what's already reflected in our September guidance. We're also announcing the expected leadership team for the combined company. Philip Carter, Chief Financial Officer and Senior Vice President; Philip Chesley, Senior Vice President and President of High Performance Analog; Kari Durham, Senior Vice President, Human Resources; J.K. Givens, Senior Vice President and General Counsel, Secretary; Yusuf Jamal, Senior Vice President and General Manager of RF and Mixed-Signal Intelligence Solutions; Reza Kasnavi, Executive Vice President, Chief Operations and Technology Officer; Joel King, Senior Vice President and General Manager of Mobile Solutions Business; Todd Lepinski, Senior Vice President, Sales and Marketing; Frank Stewart, Senior Vice President and President of Advanced Cellular. Bob Bruggeworth, President and Chief Executive Officer of Qorvo, is expected to join the Board of Directors of the combined company.

This team brings together proven leaders from both organizations and the work that we've done to identify these leaders now means we're ready to execute from day 1. Finally, our Board has approved a new capital allocation framework for the combined company. Let me first remind you why we're in a position to do this. We deliberately structured the transaction so the combined company starts with a favorable capital structure with modest net leverage. And as we said in October, we expect it to be immediately and meaningfully accretive to non-GAAP EPS post close. That financial strength is the foundation for the framework. This combination creates a company with robust free cash flow and adjusted EBITDA generation, and we intend to put that capital to work wherever it creates the greatest long-term value, repurchasing shares, delevering the balance sheet and pursuing strategic and accretive M&A.

We expect stock repurchases to be a key vehicle for returning capital to shareholders and to support that, the Board has replaced our repurchase authorization expiring in February 2027 with a new $2 billion stock repurchase program expiring in January of 2029. As part of this framework, we have decided not to declare a quarterly dividend going forward, redirecting that capital toward these higher return uses. Taken together, we believe this framework returns more value to shareholders over time with far greater flexibility. Stepping back, the strategic logic of this combination is simple, scale and diversification. In mobile, we're creating a best-in-class RF portfolio with complementary capabilities that expands our reach across platforms and drives greater revenue stability. In broad markets, we're building a larger, more diversified business across defense and aerospace, edge IoT, AI data center and automotive, a key growth platform for the combined company.

The same scale is what drives our cost opportunity, and we continue to make good progress in integration planning and remain confident in our ability to realize the anticipated synergies of $500 million or more. A lot of important news, all pointing in one direction. With that update on the transaction and consistent with prior practice, we won't be discussing it in any further detail on today's call and we will focus on our third fiscal quarter results and September quarter outlook. Now let me turn to the June quarter, where the business performed well. We delivered solid results with both revenue and earnings above the midpoint of our guidance, revenue of $935 million and non-GAAP diluted earnings per share of $1.08, $0.05 above the midpoint. Let me touch on the demand environment. What we see across our business is steady. Channel inventories are lean, demand in mobile remains solid as we head into the fall launch cycle and in parts of broad markets, demand is running ahead of what we can supply.

On memory, I know it remains front of mind for many investors. We're not a buyer of memory, so I'll speak to what we can see directly. Our demand signals have remained stable, and our September guidance reflects what we see today, consistent with what we said in the past couple of quarters. We recognize these dynamics are still playing out across the industry, and we're staying close to our customers and monitoring order patterns as we move through the second half. Our content sits predominantly in premium high-complexity platforms, which have historically been the most resilient part of the market. In mobile, we executed well in what is seasonally a lighter quarter with revenue slightly ahead of our expectations, supported by healthy demand at our largest customer and successful new product ramps at our largest Android customer. Looking ahead, we're well positioned for the fall season. And over the long term, the demands placed on RF front end continue to expand, which is why we're confident in our growth thesis.

Let me spend a moment on those drivers. Uplink is becoming as important as downlink. Real-time applications like video, cloud AI and live translation demand higher transmit power and more sophisticated power amplification. Receive paths are multiplying to carry more simultaneous data streams and satellite connectivity is going mainstream, requiring entirely new bands and components. All of this adds RF complexity to every device and complexity is what we do best. Turning to broad markets. Revenue of approximately $403 million, up 8% year-over-year. Our 3 growth engines, Wi-Fi, data center and automotive, again represented nearly 2/3 of our broad markets business and collectively grew 15% year-over-year. Demand for these products continues to run well ahead of what we can currently supply, and we are actively working to close that gap.

Wi-Fi. Wi-Fi 7 adoption continues as AI workloads move toward the endpoint. Design engagement is strong, backlog is solid and our early collaboration with customers on Wi-Fi 8 positions us well. Automotive. The connected car and infotainment are driving growth today with power and connectivity expanding our footprint over time. We are engaged with global OEMs and Tier 1 suppliers on multiyear vehicle platforms. AI data center, our fastest-growing business, is tracking ahead of the 50% annual growth we outlined last quarter, even with supply constraints. We're engaged with leading customers on 2 fronts: high-speed connectivity as the industry moves to 800-gig and 1.6 terabit platforms and power as it shifts to 400 volt and 800 volt HVDC architectures. Rising data rates and rack density are driving demand for our precision timing and advanced power delivery solutions.

Together, these engines are reshaping the mix of our broad markets business and validating the diversification strategy we've been executing. To summarize, we delivered another solid quarter of execution, revenue and earnings above the midpoint of guidance with continued traction in broad markets. The Qorvo combination is advancing. Regulatory reviews are progressing, and we are optimistic that we can close within the calendar year, and we will be preparing to close as early as within the fiscal year. We are preparing the combined company to execute from day 1 with our financing plan set, the expected leadership team announced and a new capital allocation framework in place centered on balance sheet flexibility.

Demand is healthy and channel inventories are lean. And the long-term setup is compelling, more endpoints, more content per device, AI at the edge and growing exposure to secular growth markets, including data center, automotive, defense and aerospace. With that, let me turn the call over to Philip to take you through our third quarter results and fourth quarter outlook.

Thanks, Bill. Skyworks delivered revenue of $935 million, above the midpoint of our guidance range. Mobile represented 57% of total revenue, supported by healthy sell-through at our largest mobile customer and strong execution of new product ramps at our largest Android customer. Our largest customer accounted for approximately 57% of total revenue. Broad markets represented 43% of sales and grew 8% year-over-year, led by strong double-digit growth in data center and automotive. Gross profit was $420 million with gross margin of approximately 45%, in line with our guidance. Input costs remained a headwind in the quarter, consistent with what we discussed last quarter, and we continue to work toward containing these pressures through disciplined cost controls and selective pricing actions.

Operating expenses were $238 million, slightly below the midpoint of our guidance as we continue to fund high-return R&D programs while maintaining tight control over discretionary spending. Operating income was $182 million, translating to an operating margin of 19.4%. Other income and expense was roughly neutral and our effective tax rate was 10%, resulting in net income of $164 million and non-GAAP diluted earnings per share of $1.08, $0.05 above the midpoint of our guidance. Turning to the balance sheet. We ended the quarter with approximately $814 million in cash and investments and $497 million of debt, having retired $500 million of notes that came due during the quarter.

The balance sheet is well positioned to support the Qorvo transaction. In connection with the transaction, we anticipate raising approximately $2 billion of debt financing in the near term, subject to market and other conditions in preparation for an earlier close. Now to our outlook. For the fourth quarter of fiscal 2026, we expect revenue in the range of $1.010 billion to $1.060 billion. We expect mobile to grow sequentially in the high teens range, supported by the seasonal ramp of new product launches at our largest customer, while broad markets is expected to grow approximately 5% year-over-year, representing approximately 39% of total sales. We expect gross margin in the range of 44% to 45%. This reflects the seasonal shift in mix towards mobile as new product ramps reach full volume.

In addition, we noted last quarter, input costs continue to rise, and we expect that dynamic to persist. We are working to offset this through cost reductions and selective pricing adjustments. We expect operating expenses of $235 million to $245 million as we continue to invest in our key technology road maps. Below the line, we anticipate approximately $6 million in other expense, which includes approximately $5 million of incremental net interest expense, reflecting a partial quarter of financing costs for the Qorvo transaction. We expect an effective tax rate of approximately 10% and a diluted share count of 152 million shares. At the midpoint of our revenue outlook of $1.035 billion, this equates to expected non-GAAP diluted earnings per share of $1.27. With that, I'll turn it back to Phil for closing remarks.

Thank you, Philip. Before we open the line, I want to thank our employees, customers and partners for another quarter of outstanding execution. And to the Qorvo team, the closer we get, the more energized we are by what we can build together. Your dedication sets the stage for continued leadership and growth. Operator, let's open the line for questions.

[Operator Instructions] Our first question coming from the line of Ruben Roy with Stifel.

Phil, I understand sort of the commentary on memory pricing, and Skyworks is not a buyer of memory. But in May, you said you hadn't seen pricing pushback. I'm wondering if you could just kind of give us within the context of your guidance for the September quarter, how pricing has held up through the sort of the fiscal '27 negotiation cycle? And it sounds like there's still potentially some moving parts. Is that sort of the way to read into your comments on at least mobile at your largest customer?

No. Thanks for the question. No, I just want to -- typically, what happens is you go through a negotiation and it's negotiated at the time of down selection. There typically is not any price negotiation that happens post that. That's kind of part of the whole package that you win. So there's no in-cycle negotiation on that. Now the flip side of that is we don't have the ability to adjust when input costs go up as well. So what you're seeing there is a little bit of pressure on the gross margin side, primarily driven by input cost increases that have been difficult. We've been working to offset some of that with our own cost reductions and selective pricing improvements elsewhere, but that's where we see that. On the memory dynamics, look, we've been just watching this every quarter. We've been keeping our inventories low and the demand reflects what we believe to be reflective of that in the current quarter.

Okay. Helpful. And then as a follow-up on the broad markets. I hate to sound picky here with the 3 growth engines happening, but with the kind of the guidance into September, you mentioned the demand versus supply. There is a little bit of deceleration. Is there a way to think about sort of what you're shipping against what the gap is between sort of demand against what I guess on the supply side and any specifics on components that are hard to come by?

Yes. I can't really get into specifics hard to come by. I would just say -- I would say the demand has accelerated from the prior quarter, particularly our data center demand is higher than the 50% we talked about last quarter. We've seen definitely, I would say, tightness across the board in some of those products that are growing faster. Offset that, we've seen some, I'd say, softness in more of the consumer exposed areas of the broad markets business, which is kind of causing a little bit of what you see there. But our growth engines continue to be strong. Supply shortages are pretty much across the board, what you read in the news, and we're kind of working to get more supply to supply our customers' demand at this point.

Our next question in queue coming from the line of Karl Ackerman with BNP Paribas.

One of your competitors in mobile intra-quarter announced a long-term supply agreement with your largest customer. How do you see the -- how do you see their long-term supply agreement impacting your ability, if at all, to regain content opportunities within mobile? And I have a follow-up, please.

Yes. Thanks for the question. Obviously, we can't really comment on peers or terms of agreement between our customers and third parties, frankly, we can't comment because we don't know the details. So that's number one. Number two, I want to observe, right, just from what you can get disclosed. So this seems to be consistent with similar multiyear agreements that they've had in the past. Our position has earned design win by design win, platform by platform. And frankly, our engagement and design win pipeline with that customer remain unchanged.

So I think what I can say as a combined company, we're going to have the broadest RF portfolio. I think nobody has shipped more RF components across the board than we have, and we're going to continue to invest in that. And I think that, that breadth gives us a wider range of platforms that we'll be able to compete for. And frankly, some more improved revenue stability that I think is going to be important for us going forward as well.

Yes. I appreciate that. For my follow-up, as you indicated, one of the ways in which you regain content, we believe, is for the mix of the internal baseline modem share to increase over time, which we believe to be at 20% this cycle and 70% in devices as a whole. Do you still anticipate Skyworks' content to be relatively flat this year? And then as you address that question, if you could also just talk about any additional timing or incremental commentary with respect to the $1 billion plus Android win that you have mentioned previously through 2030?

Yes, I'll take the first one. Obviously, what we said is we expect kind of blended content to be roughly flat. We're sticking with that. Obviously, the -- we can't really comment on particular SKUs, particular timing, any of those sort of things. A, we don't know; and B, we don't know what's going to sell. So our guidance really reflects what we believe to be the best view of what we have in the quarter, inclusive of where phones are going to shift to ramp our content, all the rest of that kind of stuff. With respect to the Android win, this is -- continues to be a very strong customer of ours. It's an existing customer of ours that we've had to date. It extends an agreement or an engagement we've had through 2030. And I think it's really demonstrative of our strong RF position and what we see there going forward. I think it gives an indication of kind of platform and capability that we have.

Our next question in queue coming from the line of Krish Sankar with TD Cowen.

This is Steven calling on behalf of Krish. Actually, first question for Philip on the new capital returns program. Just kind of curious like in terms of some of the assumptions that are baked into the new program, does it assume in terms of the mobile market that the end market returns to growth next year? Or are you calibrating the program based on current conditions, first of all?

No. I mean let's just make a comment. This is Phil Brace. I'll take this and then PhiI Carter can get into specific details. Look, when we looked at the capital allocation framework for the company, we feel very strongly that the combined company is an incredibly strong position. And we looked at the uses of capital, and we believe that this is the most accretive thing that we can do and do this, both buying back shares, delevering the company and looking for M&A to continue to diversify and expand the business.

We're going to be disciplined and thoughtful about how we approach that. And it really was not reflective of any short-term dynamics, but represents kind of a longer-term framework for the combined company. And the new framework of $2 billion really gives us the opportunity to take advantage of dislocations we see in time. So it was not a short-term kind of view of any statement around that. It was a reflection of how we want to position the company going forward and the most effective use of capital to deliver value to the shareholders over the long term.

Understood. And as for my quick follow-up, just kind of curious on the selective price increases, a portion of the commentary earlier. I was wondering, is that more applicable to the mobile side of the business with the broad markets? And any additional specifics would be helpful.

Honestly, we're trying to do it everywhere we can. I mean we are trying to do our best to engage with all the customers and all the suppliers to make sure we do that, but to kind of minimize the impact the best we can. But we haven't undertaken price increases where the cost -- where we just simply can't absorb the cost anymore. We're trying to do our best to try and mitigate these price increases with other actions we take amongst ourselves, cost reduction efforts and the like. And we've been trying to do that. In certain cases, we just can't absorb them anymore. So we're working with our customers to pass some of those costs along.

Yes. And just to add to that, yes, so it's mostly on the broad market side. As Phil mentioned earlier in the call, right, our mobile business, we set prices pretty much annually. And so it's really focused on those long-life products that have long tails. And there's some selective price increases there. Some of them haven't taken effect yet, so they're kind of in the future as well.

Our next question in queue coming from the line of Srini Pajjuri with RBC Capital Markets.

My first question is on broad markets. I think, Phil, you addressed it a little bit, but I'm looking for a bit more detail. You talked about consumer being a little softer. That makes sense. I'm just curious as to how big consumer market is. Any additional detail because even for the outlook, you're guiding for about 5% despite the fact that your data center and auto seem to be growing in the mid-teens. I'm just trying to understand how much of a headwind that is going forward.

I don't think we break too much of that -- much more detail down on that, Srini. I think the way that I kind of think about that is like our growth engines, our data center business is growing faster than what we guided before. Overall gross engines are growing at 15% year-over-year. That is actually supply constrained at that point, and the headwind really represents some more of the IoT consumer-related devices where we're seeing some softness. So that's about kind of the level of breakout we're giving at this point.

Okay. Fair enough. And then on the acquisition closure, I understand there are sensitivities about additional details here, Phil, but you sound definitely much more confident than 3 months ago. So I'm just trying to understand what changed in the past couple of months that's giving you this confidence. You did talk about Phase III being completed. I guess just to give us some pointers as to what are the next steps and how many more phases, if any, are there in terms of the SAMR approvals. Any additional color, I think, would be really helpful.

Yes. Thanks. I think as everyone knows, the regulatory process is inherently uncertain, right? So you're not really kind of going through that. But we have -- we continue to move forward. The Phase III of SAMR is, in fact, the final stage of that process. And we are working actively and constructively with the 2 remaining jurisdictions. And I think that based on the discussions we're having with them and based on the progress with SAMR leads us to believe an increased closing is possible. And frankly, we're preparing to close as early as this fiscal year.

Our next question in queue coming from the line of Tom O'Malley with Barclays.

This is Kyle Bleustein, on for Tom O'Malley. So in Mobile, June and September are both coming in seasonally. Just when I think long term about the industry, given all the memory -- what's going on with memory and the different voice of customer build plans, is there anything that you can kind of comment on long term, if anything has changed in your view on either build plans or normal seasonality?

No, this is. I don't think there's anything -- I mean, we just guide one quarter at a time, and we've been -- I think the memory topic has been one that's been coming to the forefront of investors' mind probably starting in CES of this year, and we've just been kind of keeping a close eye on it. We've been trying to guide one quarter in advance. And I think some of our customers are -- if you look at certainly our largest customer, I think they've been doing ahead of some of the projections from that side. So we're guiding to the best of our ability like we've done in the past couple of quarters, and that's keeping a close eye on inventory and side of the customers and just watching it as often as we can.

Yes. And just to add to that, I guess, as we look at kind of sequentially, mobile is up high teens. Our largest customer is growing well above the blended rate on the seasonal ramp. We do see that partially offset by our Android customer, which was very strong in Q3. But to Phil's point, our demand signals seems steady. Our book-to-bill is above 1. Inventory in the channel remains lean. So we're keeping a close eye, but we don't see anything at this point that would change our kind of go-forward consensus rate.

That's helpful. And just for a follow-up, you talked about adding more AI uplink to the phone. In the past, you guys have talked about AI being more on device and that needing more complex RF signals and shrinking some of the parts. So when I just think about the combination of that or in whichever shape or form it takes, can you kind of help me think about what the RF TAM CAGR could grow or the content CAGR could grow over the next couple of years?

Yes. I think the way that we're trying to think about it, I'd say that our ability to monetize that is going to be our ability to deliver the parts and pricing competitively doing all the like. But what we do see and when I talk about that is when we look out in time, what we see, and we have some visibility in the industry out many years, as you might imagine. What we see is increased RF content over time. How that actually plays out in terms of ASP and content like is still a chapter in the book to be written. But -- what's in the rearview mirror is content shrinking over time. What's in the headlights in the windshield now is RF content growth.

And I think we see that as a change from what's been happening in the past, and that's what we're getting excited about. And we see a lot of that change coming around, as I talked about in the prepared remarks, multiple bands, satellite bands, transmit complexity. For the first time in many years, we're seeing an increase in RF complexity, which should lead to kind of increased content.

Our next question coming from the line of Joseph Moore with Morgan Stanley.

You just mentioned Android being strong in the quarter. Can you talk about the Android prospects in the second half? And is there -- what's different about that versus your biggest customer?

Yes. So this is Phil Carter. In terms of our Android business, we announced the design win last quarter. And this quarter, we saw a great strength. And some of that is just the typical seasonality with our largest U.S. customer. On the flip side, in our kind of Asia Android business, we are seeing that come down this quarter as well as next quarter again, but that's being mostly offset by strength in the U.S. Android customer. So we are still seeing strength. This quarter was somewhat of an anomaly based on their own seasonal patterns. So it won't repeat next quarter, but we are seeing an offset by the rest of the mobile space and that sequential growth there.

Great. And then separately, just kind of curious how you're thinking long term about M&A. Obviously, you're going to close this deal. What's the time frame to sort of integrate that? And do you still -- is sort of diversification M&A still part of your long-term objective?

Yes, it's a good question. Thanks for asking. Look, right now, we are laser-focused on getting this deal closed, integrating it and delivering the benefits with respect to that and proving to ourselves and to our stakeholders that we can deliver value from that. I think long term, when we look at capital allocation framework, we talked about the fact share repurchases, delevering and frankly, strategic M&A. We're going to continue to work to diversify the company and bring some more stability there, and that's going to be an important part of our playbook going forward. So that's kind of our priority. Get the deal closed, integrate, start showing the value and then look where we go from there.

Our next question in queue coming from the line of Edward Snyder with Charter Equity Research.

I just want to check on. You mentioned that Mobile was up 57% of revenue, but then you said your largest customer was [57%] of revenue, which makes sense given how large it is in September. Given that, it's down, what, 12% year-over-year, which was expected given all that's going on with the miles and modems and ships and all that. But I wanted to ask you, of that decline because you're coming off a weak March also, of that decline, what -- how should we read into that? How much of that is content shifts that we've been played with in the past? How much of that is maybe just a different unit build, et cetera.

So I'm just trying to get my arms around how to think about your decline. And your guidance for next quarter kind of suggests more of the same. I mean, the way you've guided Mobile comes out to about $625 million last year in September, Apple was $737 million in the September period. And again, this is expected, but I just want to be very clear how much of this is content, how much of this is just the cadence of how it's all going to be built?

Yes. This is Phil Carter. In terms of the specifics of content and whatnot, we're not going to go into details of specific SKUs or anything like that. But what I can say is in February, when we announced initially the content loss, we were indicating 20%, 25% decline. Now we're looking at somewhere in the low teens. And so we are seeing some strength in units to offset that. Separately, on the compare, when we look at the current quarter as well as the next quarter, if you recall from the prior year, we were -- the prior year was benefiting from a higher, richer mix of legacy SKUs that were driving up the numbers.

And if you recall, we actually outperformed the high end of our revenue guidance and a lot of that driven by the largest customer unit sales. And so as we look at the current quarter and the next quarter, we're comparing against some tough compares in the prior year and low teens does not seem overly significant in light of that. As you also look at the next quarter guide, there was a 14th week in the prior year. So that's roughly $80 million for the prior year quarter. That puts us roughly above in a year-over-year growth situation for our guide at about 1% when you take that into consideration.

Okay. Great. And then you've mentioned it, so I want to dig into this a little bit more. We've been tracking pretty closely what the standards are doing and what people are looking at in terms of the 2- to 3-year road map for phones. AI is obviously a big topic, but it seems to be, in our opinion, a farce to believe that AI in the phone is going to be significant versus interface to the cloud. And if that turns out to be true, and you seem to be suggesting that's the case, the connectivity between the phone and the cloud is going to be significantly more important than what maybe had been previously expected.

So I'm just trying to get a feel for the things that you mentioned, like more transmit diversity receive, which is a very big issue, satellites kind of ancillary point, but then also download. Of those areas, Skyworks has typically been very, very strong in the diversity side of the business. There was some upset about share loss to Avago previously. But if that is, in fact, the case that transmit diversity receive is going to be a big issue, I think it is and power. Why shouldn't we expect that in the next year or so, the content win is going to be at your back as we move to more -- especially large customers trying to move to more AI in their phone?

I think it could be. I don't think your thesis is necessarily incorrect, Ed. I think that's what we see. We need to execute and deliver on that. But I certainly -- I don't think you're necessarily wrong.

Our next question in queue coming from the line of Christopher Rolland with Susquehanna.

And perhaps just adding on to an earlier question on M&A. Do you guys have some sort of end market or just broad product category that you would be considering that is most desirable strategically for you guys? And perhaps if you could talk about valuations, whether you're comfortable with valuations out there as well.

Yes. Look, this is Phil Brace. Our #1 goal is close this transaction as quick as we can, get started on delivering the synergies and prove to ourselves, our customers, our stakeholders that we can deliver value from that transaction. When you zoom back out, I do think that continuing to grow and diversify our business and doing so strategically and accretively is going to be an important playbook of that. We're not setting any time line. We're not drawing any particular guardrails around it. I think you should expect me to be a disciplined allocator of capital. I've done that since I've been CEO here. This transaction should be immediately accretive and the things we'll look for, you might expect it to be gross margin accretive, operating margin accretive, EPS accretive and those kind of things, right? So we're not going to get into any specifics beyond that at this point.

Excellent. And then perhaps to balance sheet or cash flow questions. CapEx was a little bit higher. I don't know if this is a new level or not and whether it's related to some of the supply constraints you talked about. And then lastly, DOI is also high. I know you have the seasonal ramp, but it's even higher than prior years. Anything to read into there?

Yes. So this is Phil Carter. Yes, to your point, it is mostly related to the planned inventory build ahead of the September mobile ramp for our largest customer. If you look at the last year, our inventory levels ran a little lower than we would have liked and provided less flexibility. And we have had some kind of stockouts and shortages that we've been dealing with as well as moving -- having to move more towards our third-party manufacturers. And so to your point, increasing internal capacity is definitely some of the increase in CapEx.

And with that, we do have an inventory build as well. I think if you look at more of a longer average, $1 billion is not out of the norm, especially in this period of the cycle and year. So yes, we are also monitoring the channel inventory, and we do see that, that's relatively lean. So as those numbers go down in the channel, we do maintain a little bit more buffer stock on our balance sheet to mitigate that risk. And we've seen more kind of mix changes, I'd say, more recently as companies move their product lines around. So we have to have enough inventory to offset that risk as well.

Our next question in queue coming from the line of Cody Acree with The Benchmark.

I was just curious, given that your prior dividend yield is at the highest end of the industry, I was just curious as to your thought process to eliminate that completely. And have you gotten any pushback from those shareholder base that relies on that dividend?

Phil Brace. Obviously, a lot of discussions went in with my Board -- about our Board about that. We spent a lot of time thinking about it. I personally spent a lot of time thinking about it, as you know, since I've been CEO returned at least $800 million of capital in terms of share buybacks plus the dividend plus authorizing Qorvo to buy back $400 million of their own stock. I think you've seen me to be a very disciplined allocator of capital.

When I look for the strategic framework in terms of the combined company going forward and I look for the best opportunities to deliver value for the shareholder, it was done in conjunction with the Board. A lot of analysis went into the discussion, and we determined that we would allocate the kind of that capital towards both share repurchases, delevering the balance sheet and strategic opportunistic M&A to help continue to diversify the businesses. And that's how we looked about that. It was just kind of a framework that we're using to deliver value to shareholders, and we think this is a much more accretive way to do it.

All right. And then lastly, just any puts and takes into your gross margin assumptions quarter-to-quarter, knowing that you've got some of your higher input costs, but it does sound like you've got some price increases and utilization rates should be trending higher, some positive offsets as well.

Yes. This is Phil Carter. Yes, I would agree with that. We do have some positive offsets. Every year, we set out to reduce cost, increase efficiency and every ramp cycle, we look to reduce costs, right? We set our prices essentially at the beginning of the year, and then we go into a new ramp where we have to ramp new technologies, new products, and we look to get efficiencies to bring up our gross margin. As we look right now, the input costs have been going up faster than we're able to save on other areas. In terms of mix, looking quarter-to-quarter, if that's what you're looking at, we do see a higher mix of Mobile in Q4, where 61% of revenue versus 57%, but yes, I think we're always looking to have more cost savings.

The other 40% of our business, broad markets where we have more opportunity to increase prices, there have been some price increases already, and we are looking at other areas where we could take action and selectively increase those prices as well to pass on the costs that we're incurring on the other side. So yes, longer term, just we are sticking with our 50% to 55% combined company longer term, and we're really focused on that as a combined organization, how we can achieve these cost synergies as a combined org, so...

And that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Phil Brace for any closing comments.

Great. Thank you. Thank you for everyone attending the call. I look forward to seeing you in the coming quarter at the conferences and out there in the market. So thank you very much.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

Good afternoon, and welcome to Skyworks' Second Quarter 2026 Earnings Conference Call. This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks Second Fiscal Quarter 2026 Conference Call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President; and Philip Carter, Chief Financial Officer and Senior Vice President for Skyworks. This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com.

In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, today's discussion will include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

With that, I'll turn the call over to Phil Brace.

Thanks, Raji, and welcome, everyone. Let me begin by highlighting a few key developments. One, we secured a significant multigenerational design win with a leading Android OEM expected to generate over $1 billion in revenue through 2030. This win reflects our expanding footprint in premium AI-enabled devices, validating our RF content platform and our technology differentiation.

Two, we introduced a range of new product innovations, including BAW filters targeting early 6G FR3 spectrum and next-generation RF front-end solutions supporting frequencies above 7 gigahertz. We also expanded our timing portfolio with new clock buffers addressing data center, wireless infrastructure and PCIe Gen 7 applications.

Moreover, we're actively engaged with customers on early WiFi 8 programs, positioning us well for the next upgrade cycle. Three, regarding the Qorvo combination, regulatory reviews are progressing as expected. We have entered Phase 2 of the China SAMR review and are maintaining constructive dialogue with the relevant antitrust authorities.

While our formal guidance remains an expected closing early in calendar 2027, we are increasingly hopeful that we could close in late 2026. We continue to make good progress in our integration planning and remain confident in our ability to realize the anticipated synergies of $500 million or more.

Finally, in accordance with our operating covenants in our merger agreement, we supported Qorvo's $400 million share repurchase during the quarter, reflecting what we believe to be a prudent and efficient deployment of capital. Our confidence in the strategic and financial logic of this combination remains as strong as ever, and we look forward to closing and delivering its full value to shareholders and customers.

With that, and consistent with prior practice, we won't be discussing the transaction further on today's call, and we'll focus on our second fiscal quarter results and June quarter outlook. Skyworks delivered strong results, driven by upsides in both mobile and broad markets. We posted revenue of $944 million, roughly $20 million above the high end of our guidance range, delivered earnings per share of $1.15, $0.05 above the high end of our guidance range, and paid $107 million in quarterly dividends.

We continue to see solid demand across the portfolio with strength spanning mobile, WiFi, data center and automotive. We're mindful of the ongoing industry discussion around memory supply and pricing. Consistent with what we observed last quarter, we have not seen an impact on our business to date. Demand across mobile and broad markets has remained solid. Channel inventories are lean, and our portfolio is weighted towards premium high-complexity solutions where demand tends to be more resilient.

We'll continue to monitor the environment closely, but our current outlook remains supported by what we're seeing across the customer base today. In mobile, we again outperformed expectations, supported by healthy sell-through and strong execution on new product launches at our key customers. We remain bullish on the long-term RF content opportunity.

Stronger unit backdrop and potential for increasing RF complexity driven by AI workloads continue to support our growth outlook. Stepping back, the long-term driver of this business is the steady expansion of a more connected wireless world with physical AI emerging as the next wave of growth. Future growth is going to be driven by 4 converging forces: one, more units. The installed base of wireless devices continues to expand globally.

Two, more RF content per device. Next-generation standards, including 6G, WiFi 7 and beyond and satellite connectivity will drive more bands, more antennas and more filters into every endpoint.

Three, AI-driven workloads. Edge inference is placing higher demands on wireless performance, particularly uplink, latency and power; and finally, 4 new form factors, robotics, autonomous platforms and edge AI devices are emerging as a new generation of connected endpoints.

Turning to broad markets. Nine consecutive quarters of growth, approximately $400 million in quarterly revenue and double-digit year-over-year growth. Our three growth engines, WiFi, data center and automotive, accounted for nearly 2/3 of our broad markets business and collectively grew 30% year-over-year.

Let me briefly talk about these 3 growth engines. One, WiFi. WiFi 7 adoption is accelerating as AI workloads push towards the endpoint. Strong design engagement, solid backlog and early collaboration with customers on WiFi 8 position us well for continued growth into the next cycle. Two, automotive. The connected car and infotainment are driving growth today with power and connectivity expanding our footprint further into FY '27.

We're engaged with global OEMs and Tier 1 suppliers on multiyear vehicle programs. Three, AI data center. While still modest in absolute terms, this segment is expected to grow nearly 50% this year. The structural shift to higher data rates and rack density is driving demand for precision timing and advanced power delivery.

Skyworks is well positioned across 800-gig and 1.6 terabit platforms with leading hyperscalers, global ODMs and infrastructure OEMs as the industry transitions to 400-volt and 800-volt HVDC architectures. Together, these 3 engines are reshaping the mix of our broad markets business and driving the diversification thesis we've been executing on.

In summary, strong quarterly execution, broad-based performance across both mobile and broad markets with 9 consecutive quarters of growth in broad markets and double-digit year-over-year gains. Our outlook remains solid. Customer demand is healthy, channel inventory is lean, and our portfolio is positioned in segments with structural tailwinds. The Qorvo transaction is proceeding as expected. Regulatory process is on track, and we are confident in delivering the shareholder value.

Finally, the long-term setup is compelling, more endpoints, more content per device, AI at the edge and exposure to secular growth areas like data center, WiFi, satellites and more, we believe we are well positioned for what comes next.

With that, let me turn the call over to Philip for a discussion of last quarter's performance and outlook for Q3 of fiscal '26.

Thanks, Phil. Skyworks delivered revenue of $944 million, exceeding the high end of our guidance range. During the quarter, our largest customer accounted for approximately 60% of revenue. Mobile represented 58% of total revenue and came in higher than our expectations, driven by healthy sell-through at our top customer and product execution.

Broad markets also outperformed expectations, representing 42% of sales and grew 10% year-over-year, driven by growth across WiFi, data center and automotive. Gross profit was $425 million with gross margin of 45%, in line with the midpoint of guidance. Input costs remain a modest headwind to gross margin, but we continue to do a good job of containing those pressures through cost controls and selective price adjustments.

Operating expenses were $236 million, in line with the midpoint of our guidance range. Operating income was $189 million, translating to an operating margin of 20%. Other income was $3 million, and our effective tax rate was 10%, resulting in net income of $173 million and diluted earnings per share of $1.15, $0.11 above the midpoint of our guidance.

We ended the quarter with approximately $1.4 billion in cash and investments and $1 billion in debt, maintaining a strong balance sheet and ample flexibility to support our strategic and financial priorities. Looking ahead to the third quarter of fiscal 2026, we expect revenue to range between $900 million to $950 million. We anticipate mobile to decline approximately low single digits sequentially, consistent with normal seasonality.

We expect broad markets to be up modestly sequentially, representing 43% of sales and up high single digits year-over-year. Gross margin is projected to be approximately 44.5% to 45.5%, flat sequentially, reflecting seasonally lower volume and higher input costs. We expect operating expenses to be between $235 million and $245 million as we continue to fund key R&D initiatives while maintaining tight control over discretionary spending.

Below the line, we anticipate approximately $4 million in other expenses, an effective tax rate of 10% and a diluted share count of 151 million shares. At the midpoint of our revenue outlook of $925 million, this equates to expected diluted earnings per share of $1.03.

With that, I'll turn it back to Phil for closing remarks.

Thank you, Philip. Before we wrap up, a heartfelt thank you to our employees, customers and partners. And as the Qorvo team, we deeply respect what you've built, and we're energized by the opportunity ahead of us. Your dedication fuels our success and sets the stage for continued leadership and growth. Operator, let's open the line for questions.

[Operator Instructions] First question coming from the line of Timothy Arcuri with UBS.

So I wonder, can you talk a little bit about your content trajectory at your largest customer? I know you talked about this big Android win, and you've talked in the past about feeling like content would be pretty flat on a blended basis this fall. How do you feel about content looking into next year with this win? Does this bode well for your content at your largest customer?

Yes. Look, I think we talked about in our last call -- by the way, thank you for the question. In our last call, we talked about generally holding serve where we need to serve -- need to hold serve. I mean, in general, when we look at our content position there, we feel good about it. I think that we're not seeing any -- there's been some industry chatter around different seasonality and things.

We're not seeing anything unusual with respect to that. We feel good about our content. And I think the win at the premium Android segment really emphasizes our technology play and the value proposition we can offer. So I think it bodes really well. I'm excited about it. I'm proud of the team for what they did and looking forward to the future.

And I guess just as a quick follow-up. So September is typically -- it's up usually like 13% to 14%, but the market had been a little weak last year. So are there any puts and takes where you would call out for the third calendar quarter that it would be any different than the usual up like 12%, 13%, 14% sequentially?

We're only really guiding, as you know, 1 quarter in advance. But what we see so far, I mean, book-to-bill remains above 1. Our inventories are lean. We're keeping a close eye on it. We hear lots of chatter about it. But right now, I mean, we don't see anything that wouldn't expect to be otherwise seasonal for the back half of the year, and we'll continue to monitor it closely.

Our next question coming from the line of Chris Caso with Wolfe Research.

The first question would be with regard to this Android win. If you could give us a little more color behind what this means? And would you expect that this represents share gain for Skyworks? Is it something that's a follow-on of the existing platform you have? Or would you consider this to be incremental?

Yes, it's a good question. I'm going to just be careful to answer given the confidential nature of it. I mean, it obviously is a customer we've been working with in the past. I do think it represents incremental business for us going forward. It's in the premium part of the segment, and we think the gross margins will reflect that.

And I think it represents a really good technology statement for us across multiple generations. And I think it's really a testament to the technology we have, but also collaboration with the customer, right? They wouldn't have done that if we don't think that we could deliver sustained value generation over generation, and that's really what we've done here.

As a follow-up with regard to gross margins, I guess with the assumption from your prior answer, we're kind of seasonal in the back half of the year. We've got some continued momentum in broad markets. What do we see as the gross margin trajectory in the back half of the year, recognizing that you probably don't want to guide specifically?

Yes, this is Carter here. Yes. So as we look at the back half of the year, typically, our gross margin is down from Q2 to Q3 on average, 70 basis points over the last 5 years, and we're guiding flat. We are seeing some input costs increase as we're kind of going through the current quarter, incurring expedite fees, looking at gold prices, things like that.

But we're actively pursuing cost reductions where we can, fab optimization, utilization rates. And so looking for that. We do see a slight increase in broad markets, and that does help a little bit as well as we look into the next quarter.

Our next question coming from the line of Edward Snyder with Charter Equity Research.

Okay. So you've got an incremental Android win that's going to be $1 billion between here and 2030, which means it's not Apple. And you played with Google before, and it sounds like you're winning there. And everything you described suggests that maybe that's a win. In the past, they have -- I wouldn't say they're really sticky. The balance between you and Qorvo in the past. I'm just trying to get a handle on how sticky this is.

I guess the 2030 guidance gives you some answer to that. But do you expect, especially given your merger with the only real competitor there that that's why the guidance is $4 billion over 2030 because there's not going to be many other choices once this gets done? Or even if the merger didn't go through, you'd still think you'd have $1 billion there?

Yes, it really has absolutely nothing to do with the merge, the opportunity in front of us with Qorvo. I really can't comment much more on that other than kind of what I said before. It's a multigenerational design win, significant RF content. It's a really great opportunity for us, and that's really all about I can say the stickiness of it, we've kind of -- I wouldn't say otherwise, I wouldn't say anything out to 2030 unless I was confident about the stickiness of it.

Very good job there. And then my follow-up, -- so you guys have done a very good job. Memory isn't affecting you. We've seen it through the entire industry. So good job there. But obviously, that's because you decided years ago to exit the China market and focus on your largest customer, and they're not as affected by it.

Is there anything out there that would suggest that you would change that strategy? I mean, obviously, it's gotten much worse since your decision to leave China, and I guess it was 2019 or so, and you're not playing a big role in Samsung for a reason. I mean I don't think it's competitive. I think you've decided not to be there because of the pricing problems at Samsung.

So I'm just asking you, Phil, if you're looking out there, is there any reason why you would change that strategy of maybe reentering maybe high end in China or trying to compete for the Galaxy more aggressively at Samsung after the merger with Qorvo?

Yes. Look, I think in general, like our strategy needs to be to continue to grow our business and do so in a way that grows our business profitably. And so really, it's around can we deliver products to any customers via Android, iOS or others in a way that customers are willing to pay for our value proposition, and we get compensated accordingly.

And that's kind of what we'll continue to look at. I mean it's our strategic and financial best interest to do so. What's not in our best interest to do so is to engage in designs that are extremely dilutive, in some cases, negative. And so we'll continue to be prudent about how we allocate our resources to maximize the return and benefit for our customers and our shareholders.

And our next question coming from the line of Tom O'Malley with Barclays.

The first one is a follow-up on content. So I think when you guys gave a little guidance earlier, you talked about phone gen over phone gen. Can you give us an update on how content has trended since then? I think traditionally, you have some early design wins late in the year and then the board really gets set around April.

Has anything changed since we last talked at earnings? And then the follow-up is, it seems like you're pointing to normal seasonality for September and December. Historically, when you look at larger customers, you get a yearly forecast, but then as you get a little bit closer, those things change. Could you maybe talk about what type of lead times you have on the changes in order patterns there just so that people get comfortable around the idea that you wouldn't see any sort of changes as we got closer?

Yes. Look, on the content, I think kind of we're going to go back to what we said before, right? I think that we feel good about our content position. I think that we can't really comment and front run our customers. And frankly, we don't really know, right, what models they're going to sell and how that's going to work. I just think we feel good about our content position. And I think we'll see how that plays out.

But we don't see anything today that would suggest anything other than abnormal seasonality. Our lead times are actually quite long. But our customers change the forecast all along. We're kind of dealing with some of that now. But I would say that, in general, we don't see anything that suggests abnormal seasonality.

Our book-to-bill is above 1. Our inventory is low, and we continue to get strong demand signals from pretty much across our customer base at this point. It's something we're keeping an eye on. But at this point, we feel really good about it.

Our next question coming from the line of Christopher Rolland with Susquehanna.

Yes, just maybe following on, on that last question about supply, about lead times. Maybe if you could elaborate there and also how it might play into pricing. I think you guys, in your prepared remarks, talked about select pricing adjustments. If you could talk about that, what that might mean actually for gross margin as well, that would be great.

Yes. I mean I'll make some high-level comments, and I'll pass it over to Carter for any particular details. I mean, I think we talked about -- we're dealing with a very dynamic environment. As a matter of fact, if I look back over the past 12 months, you think about the number of black swan events that we've all been managing, it's been pretty challenging and the current supply environment is just challenging.

And so we are definitely seeing effects of input price increases pretty much across the board, you name it. I think our team has done a good job of trying to figure out ways to keep those costs down and manage other things. And we are certainly doing where we can, sharing some of the price increases with our customers and trying to be a balanced and disciplined way to help offset some of these price increases that we're seeing.

So it tends to be targeted, and we're trying to manage both the short-term volatility of that as well as the long-term sustainability of the business. So we're taking a prudent approach to how to do it.

Yes. No, just to add to that, yes, some of the long-life products that we're able to increase price and pass those costs on. In the longer term, we are sticking with our long-term model of 50%, 55% post combination of the merger with Qorvo in terms of gross margin. So we do see a path to gross margin expansion in terms of favorable mix shift, lower cost structure through fab optimization, higher utilization. So yes, we're still excited about the future and the road map and margin improvement.

Excellent. And perhaps a follow-up on the Android win, if you could maybe talk about -- I know there's some sensitivity here, but talk about how you got that win, how this product is differentiated in terms of getting the pricing that you want or wanted? And does this make you rethink the Android opportunity longer term? Or is this more of a one-off opportunity rather than category?

Yes. I guess just let me zoom back and make a comment a little bit. I mean what we were able to do is offer a technology advantage solution that we believe will enable our customer to make a very competitive product. And by having kind of a multiple generation design win with that particular one, it enables us to basically focus some of this opportunity cost to the engineers so we continue to focus and deliver that generation over generation. And we think that's very competitive.

And I think the customer supported that. And so that's really how that worked. With respect to longer-term opportunities, I'll kind of reiterate, I think Ed asked the question earlier. It's in our strategic best interest to continue to grow the business we can. We're an expert in the field of RF wireless communications. And to the extent that we can develop solutions and products that customers want to buy at economics that make sense for both of us, and we're going to continue to do that.

We get into situations where the economics are upside down, and that's when it doesn't work. And so we just continue to be financially disciplined about allocating our resources, our R&D, our technology and our capability around things that are going to provide benefit to the customer and deliver financial return for us and our shareholders.

[Operator Instructions] Our next question in the queue coming from the line of Krish Sankar, TD Cowen.

I had 2 of them. One is what is your total China revenues roughly this year? And within that, is the China handset revenues like really small, like less than $10 million a year right now?

Yes. I would say looking at China, our overall business is less than -- annually would be less than $200 million and in handset, it would be less than $20 million.

Got it. And then as a quick follow-up on the broad market side, if I remember right, your data center revenues is still under $100 million and your auto revenues are probably like $250 million a year. Is that still the right ballpark? And how do you expect that to grow as we look forward into the future?

Yes. Those are about right from a number standpoint. We do see really good growth, as Phil mentioned in the prepared remarks around those areas. I think in terms of ranking those data centers growing a lot stronger than our automotive business, but it's a great healthy business that we are getting good design win traction within. So yes, we're excited about those businesses, and we do see good bookings in those areas.

Our next question coming from the line of Peter Peng with JPMorgan.

When you think about that Android customer, that $1 billion over the next 4 or 5 years, is -- should we kind of think about it as being linear in terms of revenue opportunity? Or is it kind of rising over each year from gen over gen? Maybe some color on how we should think about when we factor that into the model.

Yes, we expect it to be rising year-over-year. We expect that to be a tailwind to growth from now through 2030.

Got it. Okay. And then just on RF content per device at your largest customer, I think it's been kind of stagnant for a number of years now. Just given when you look out the next couple of years, and you talked about some of the drivers like AI at the edge driving higher demand. Maybe you can talk about RF content potentially accelerating and growing.

Yes, absolutely. I mean I think I've said in the past couple of times, if you look at what we said, I think the -- as we look at next year, we expect the blended content to be roughly flat, right? Some potential for some tailwinds there as they migrate towards the internal modem, which opens up some new opportunities for us. It's obviously difficult to predict different models and how that's going to work. But generally speaking, we feel good about our content.

Going forward, we are absolutely seeing more RF complexity driven by increased number of bands, increased MIMO capability, increased power requirements, smaller devices. So we are absolutely seeing that pretty much across the board. And I think that should be a tailwind for us for content.

And so as we kind of look out as we zoom out and we look at the mobile business in general, we talk about having just in general, more units out there. The more units get put out there now, the more come up for refresh when they eventually get done. There's more RF content that's going to come down and then we get into 6G. Then we've got also new form factors and shortening refresh cycles. So I think we've got a lot of tailwind here that we're pretty excited about. And we'll just keep monitoring that and keep executing in our playbook.

Ladies and gentlemen, that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Phil Brace for any closing comments.

Great. Thanks, everybody, for joining the call today, and we look forward to seeing you at upcoming conferences throughout the quarter.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation, and you may now disconnect.

Everybody. I'm Joe Moore. Happy to have Phil Brace from Skyworks. So I'm supposed to read real quickly safe harbor. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So that out of the way.

So Phil, it's great to have you here. You were here last year, I think, was your first presentation as the CEO of Skyworks. And I was really impressed at the time how candid you were about everything, and we talked about Qorvo and M&A and all the things that are sort of happening now. So I appreciate that. And I think you sort of talked about having a culture of accountability and not blaming customers for sockets that you lose and things like that. And I liked all that. So maybe you could just talk about that last year, just any big overview comments, and then we'll go into Q&A.

Yes. It's been a remarkable year. I think it was about a year ago. This is my first conference I came to as CEO. And you kind of look at what's happened over the past year, and it's kind of been -- it's been amazing. I would say I'm pleased but not satisfied. If you look over the past 4 years, I think we've done a good job of continuing to do what we say we're going to do. I think we've got 4 consecutive quarters of beat and raise. So I think I feel good about how we've managed the business, how we've done that. I think we changed the trajectory of content at our largest customer, which was a major overhang on the stock. I think we've taken some steps to consolidate some of the factories in there should help give us some gross margin side. I brought in some new leadership from that side. And then not least not which certainly the biggest acquisition in the company's history and created a very compelling opportunity to create some value.

So I think it's been a good year or so. But then you have the overhang of, okay, who would have thought there would be a war in the Middle East? Who would have thought there would be tariff day, who would have thought there would be memory apocalypse and SaaS apocalypse and all the other things. But we're just trying to put one foot in front of the other, deliver great products and have -- I really believe that being at the center of wireless technology, the world is wireless. We're going to build great products with great technology, just focus on that and the rest will take care of itself.

I want to get to the apocalypses, but just from a bigger picture standpoint, RF as a growth driver, there's been a persistent drive to diversify the business for you, for Skyworks as well. But you also feel like RF is a good growth driver. It's just customer concentration and things like that are a reason to think differently. Can you talk about that? Do you still believe that there's solid growth in the smartphone space as well as in the?

Yes. I probably believe it more now than I did a year ago. And let me tell you why. First, you really look and you go, okay, the world is a wireless place. The earth will not be covered in data centers. And the way that this information is going to get out is going to be wireless. And I look at all the technology that we have coming down the pipe that we can see through 2030, not including 6G, not including some of the power space, not in that. And I love the specialized technology we have. The combination with Qorvo gives us gallium nitride, GaN, which brings us power side, RF side. I mean I just think we're in a really great spot. And I think we'll just play our cards and drive that out. And I think that's going to be a great spot to be.

Great. Well, maybe if we could talk about the smartphone space in the short term, maybe starting with the memory apocalypse that you mentioned. It seems like so far, we're all pretty consistent that there's been some turbulence in China where you guys don't play as much, but Qualcomm highlighted that. And other parts of the market are okay. What's your line of sight there? Do your customers have enough DRAM? Will they have enough DRAM 6 months from now?

Yes. It's something -- I think we all still have the scars from the COVID time where we had all these double and triple ordering and things like that. And so I think we are being cautious. We're taking a very close eye on it. I will say, as I mentioned on my earnings call, we have not seen that. Certainly, our largest customer, if you look at their earnings call and what they did, they actually had very strong unit demand and continue to drive that. We think they're actually gaining share in some of the spots. The CEO of that company is the supply chain individual. So you might imagine they're using that to their advantage. We have not seen it. And even in our broad market space, we continue to see really strong.

Now are we -- is there some scenario that we don't? Yes. Okay. Well, we're keeping our inventory low. We're watching the book-to-bill carefully. We're managing as best we can. And so far, we've been okay.

Yes. And your focus on the premium tier should buffer you to some degree. I mean I feel like if we do see builds getting cut, it will be there.

Yes, there was some news -- in Las Vegas time, right, where a lot of the cell phone guys, particularly in the emerging markets in China, took their builds down by a lot. If you look at what our largest customer has done and where we've got other exposure, right, it's in the premium tiers, and we haven't seen that.

And does it come back to you in the sense of the smartphone guys asking you for price concessions to sort of make room for memory?

No. For better or worse, particularly for our largest customers, right, we negotiate the pricing yearly. I mean what I joke about that is if you're a car manufacturer and the price of transmission doubles, it's hard to ask the spark plug guys to give their spark plugs away for free, right? I mean that's kind of what you're talking about. There's no chance we could, in any way, offset any of that.

Now where we do see some of, I'll say, inflationary pressure is on the input cost side, right? Similarly, we don't -- once we negotiate it, we don't have an opportunity to raise a discount, but it's also difficult for us to pass through. In some ways, I feel really good if you look at our gross margin guidance because you can imagine we've seen inflationary cost pressures, things like gold, things like assembly test, things like PCB, all the things you read about. We're certainly seeing some of that. I think we've done a good job of working with our supply chain and our partners to kind of balance that. So we've done a pretty good job. So where we see that price pressure is mostly on the input cost side.

Okay. Okay. Helpful. With regards to your biggest customer, Apple, you talked on the earnings call about kind of a flattish content in the next round. Can you talk about the puts and takes there? And I know you aspire to get it back to growth, but it seems like stabilization is a good interim step.

Yes. I think that -- look, I mean, it's a hypercompetitive market. I would say I am pleased, but not satisfied. I think we can do better. I honestly think we can do better. I think there are some things we did well this time. But I think that there's more upside ahead for us from that if we continue to execute very well.

Some of the investments we made in the R&D space a couple of years ago and last year, right? I don't think we've seen those fully play out yet. But I think that changing the slope of the curve was incredibly important to do that. I think we've done that. And I think that we're trying to get ourselves -- if one thing is just to zoom out a little bit and you look at our largest customer, just take the biggest one, they talked about their installed base being 2.5 billion units. You pick well north of 1 billion as mobile handset devices. You kind of do the math of what you think the RF content is there and think about that as our opportunity pool that gets refreshed every 4 years, right?

And so that's really what we want to do. And then if you look at the combination with Qorvo, really what enables us to do, and it's a little bit counterintuitive because what it should do, even though we get more business there, we actually volatility should go down because the single socket risk goes down. So if you end up having a massive TAM with some tailwinds behind us in terms of 6G, AI enablement and having a large customer gaining share in the iOS ecosystem, it should end up in a pretty good spot for us.

And how -- the postmortem on what happened before you got here, you lost half of an important socket to Broadcom. Is that sort of the steady state? Is that you sort of share that socket? And is that the normal state of affairs? And any areas where you see opportunity for growth or potential for loss?

Yes, good question. I mean, look, it is a -- so let's -- I want to be -- to state the obvious, the customers, whether it's the largest one we have or other customers, they're not changing their behavior because of us, right? They're going to continue to motivate and pick. So it behooves us to develop competitive products. And our customers are constantly going to look for alternatives, from multiple sources, just like we do. It's our job to make it super difficult. Fine, if you want to have an alternate product that performs worse or is more power or whatever, then please go ahead and do that, right? It's our job to make it difficult for them to do.

But no one should confuse that their gravity, right? There's only so many places in the world. If you're a semiconductor company like us and you pick whatever normal number you think for iPhones, $250 million, $270 million or whatever, there's only so many places in the world you have that kind of TAM that ships every single year. And so right, that gives them a certain amount of just a competitive environment that exists there, right?

Yes. And now you know what the modem is for that customer going forward. There's kind of coalescing around the internal modem platform. Does that help you both from the standpoint of inertial momentum, but also just to sort of have a clear insight into this is the ecosystem that...

Yes, I think that does because I think there's obviously less duplication of effort on both sides for that. I also -- what I'm excited about as well is that, and we really haven't talked about it, if you look at having the combination of the end-to-end signal chain from some of the receivers or transmitters all the way out to the antennas, I think there's some things we can do having access to the entire RF chain that we didn't have before. So I think the clarity on the internal platform is helpful. I also think having the entire RF signal chain is helpful. And we've seen evidence of that -- of the benefits of that at other large customers we have where we have a more complete picture of that.

So I'm excited about that. That will take years to develop, right? Because we've got to get in there. We've got to do the innovation. We've got to do some of that stuff. But look, that's what I love. I love technology where it's hard, it's complicated, difficult, it's gritty. That's where we make difference.

Yes, yes. Okay. And so then you talked about coming here a year ago, we need to have technology leadership. And it's not that Broadcom got better than you, but they got on par and that allowed you to share the socket. Where do you stand now with regards to that? Are you rebuilding that leadership?

Yes. I feel good about our technology. I feel good about that. And I know I'm going to say something here, which is a little bit counterintuitive. I actually love competing with Broadcom. They're smart. They're aggressive. They've got good technology, and you got to win having the best products.

Great, and they don't cut price.

Yes. Let's go compete. That's the place I want to go be. So if -- and I love that. So let's go do that. Let's suit up and go do that. That's the best place to be. So do I feel good competitively? We can do better. Not happy with where we are. Let's do better.

And the capabilities you have, I'm not an RF engineer at this point, but you've had this big push into bulk acoustic wave and you have a lot of the capabilities that they have. You're satisfied with the technologies that you have to fight that battle.

No, I always want to get better. We got -- and that's -- I mean that's part of what -- when I look out, I mean, we have visibility into stuff going out until the end of the decade. I'm excited about what we can do. I mean I get shivers talking to you about it. That's why I just -- I believe this is a great place to be. And while everyone is focused on other stuff right now, we're just going to focus on delivering great technology and focus on that.

Maybe we can talk about Android a little bit. And you've said that sort of Apple is probably best positioned to deal with these memory situations, but I think Samsung is pretty well positioned to deal with that as well.

Yes.

Yes, you would think and you would hope. I know there is a coopetition between those groups, but they should be able to at least secure enough to build phones. So how do you feel about your two big Android customers and the opportunities around the Android ecosystem?

I do think that -- I would say they're different. I mean one of our large customers, U.S.-based large customers, we've had a very collaborative relationship with them with many years -- for many years, and they actually value what we do. They are willing to collaborate and work with us. And frankly, pay for the performance and capabilities that we're able to give them, which enables them to differentiate their phones. And frankly, we feel good about that. And they do things differently in a way that allows us to put some of our best and brightest people on there. So I feel good about that.

And I think that some of them are also starting to see that the endpoint can be a very strategic element for AI, because that's the way that most people are going to access AI. It's going to be through a device like this. And so I think that some of them are viewing it as -- and having a really good product there is a competitive advantage. And so I feel good about that.

Can we talk about that a little bit? I mean, this time last year, that was kind of the hot topic was Edge AI, we're going to basically replicate what happens in the cloud on your phone. And that's clearly not the case. And that theme has kind of -- the enthusiasm has come down a little bit. But you're absolutely right that the AI happens at the device level, that there has to be Edge AI capabilities. Is that going to drive content up over time? And kind of give us a picture of what you're seeing with regards to that?

When we zoom out, I mean, what we have started to see is, I'll give you an example of what we started to see. We started to see more emphasis on the transmit side versus the receive side. And we've seen that out there. And there's a couple of things happened with that. One is because it turns out the transmit side is really what defines how far away from you can get from the tower. Think about as a speaker in a microphone. The tower itself can have a very large microphone. and you don't need a big speaker to hear the microphone. On the flip side, this can only have so big a microphone. And so the speakers on the receive side need to be very sensitive. And the later you make the microphone, the better you're going to get.

And so we see a lot of -- right now the challenge, of course, is that, that produces a lot of current, right? It takes out the battery. So that's why there's a lot of RF coming in there. And some of the technology we have is just amazing. I don't know whether some of you remember like the double bounce thing, right? That's what MIMO consume. Remember in the trampoline you're doing the double bounce, where there's like that kind of technology that exists on the wireless side that goes more than two. And so some of the technology we've seen is on the transmit side, and we think that is not only related to 6G, but more upload capability, right? And so we're starting to see some of that.

Okay. And you referenced -- I mean, Google is obviously a leader in AI and smaller in phones, but it seems to be doing a lot to bring those features to the phone.

Yes. I actually -- I think they've done a really good job. Actually, some of their products are very, very competitive. And I think they're investing there to make sure that Android doesn't get relegated to just the bottom tier. They want to have a halo device. And I think they're pretty well competitively positioned. If you look at where Gemini is, our relationship with our largest customer, I personally think they're in a pretty good spot.

Yes. A lot of Skyworks content in their phones.

A lot of Skyworks content in this. Yes, it's correct.

Okay. Great. So maybe shift gears a little bit, talk about Qorvo. What led you to that decision? You've sort of been on a path where you were looking to diversify, but also saying there may be opportunity to grow this way as well. What led you to move in this direction?

I've known Bob since -- before I took this job. I've known him for several years. And just standing back without the benefit of actually being inside, I actually thought the companies would be doing well together. It's one of the ideas when we sat here a year ago, it was already in my brain to do that. And the more I got into it, the more I realized, oh my gosh, how complementary these products are. Everyone just really focused on the overlap and there really isn't as much as people think. And I think that I looked at it and go, wow, the combination of these two companies, if you look at together, builds a $5.5 billion mobile business that should have an improved margin profile, more stability and opportunity to innovate across the entire signal chain.

And then we build a $2.7 billion non-mobile business that gets exposure to areas like defense and brings the GaN technology for both RF GaN and power GaN. You look at the combination being north of 50 points of gross margin, which is a big plus there, 30 points of operating income, growing nicely. I think it completely changes the shape of the company. And frankly, puts us on a different trajectory that we can go do other things. And the financial profile of it when we're done is going to be attractive. So for me, I don't think there was another better move that I could have made. And I just -- I can't wait to get it done.

And I mean, the cost synergies are pretty clear. But on the revenue synergy side, it seems like when you get into these, you get all the arb conversations about what would make the deal happen or not happen. And I feel like this is actually a good deal, whether both companies are gaining content or both companies are losing content, it's still better to sort of put the combination together. But do you have opportunities then to have higher smartphone content in addition to the broad markets...

100%, and we have not -- if you actually look at that, we have -- I think I've tried to be -- I tend to be a meat and potatoes kind of guy when I mean just say what I'm going to do, and I try and avoid fry stuff. But what we have not underwroten, we haven't really underwritten any significant revenue synergies at all. And shame on us, if we aren't able to figure that out. We haven't underwritten any sort of multiple synergies either. Shame on us, we haven't been able to get that with gross margins higher and stability higher.

And so -- and I think we've laid out -- I think we have a high degree of confidence in the synergies we can deliver them. I don't think if you look at how it's split between OpEx and COGS. I mean, none of them seem to me to be aspirational. And so I feel really good about it. Regulatory is proceeding as we expected. Shareholder vote was overwhelmingly supported it. And I think we're just -- we're kind of moving through the pendency period and all the fun that's involved in that.

Yes. On the regulatory side, are there any hurdles remaining? Is China a factor, their approval? Your biggest customer seems to be okay with it, which seems good. Just anything you can help us with on that?

Yes. Look, I would say that the regulatory process is proceeding as we expected. We're well advised. We're having constructive dialogue with everybody. Semiconductors are a very visible space these days. We've kind of gone from the shadows into the spotlight. So everybody is looking at that. Not unexpected. I don't think there have been any surprises. I don't think anything has changed my view on our ability to get this closed, and we continue to work closely with our advisers to get it done.

Okay. Great. And so then if you think about this business mix after this deal is closed, what do you think is the optimal mix between smartphone and broad markets? And is diversification away from the biggest customer a priority in the way you think about this?

The short answer to that question is yes. We have a problem, and I say that in air quotes of luxury. We have been working with that largest customer for 20 years. And probably -- I don't know this to be a fact, but I got to believe it's true. I don't think anyone shipped more RF components to them than we have. And when you think about how luxurious? If you think about the challenge we would have if I didn't have that largest customer. So we've built fantastic products. We've engaged with them for multiple decades. I think probably certainly in every wireless product that they probably ever made. And so now they become a huge customer of ours. So how do you make something big look smaller? You put something bigger next beside it.

And so I think we have to continue to grow our non-handset business, continue to drive the volatility down. I think what we're trying to do is get that volatility down so that we get some more stability there, get our gross margins above 50% and then continue to diversify the business to help bring some more stability and predictability. And I think all of those things will happen.

So yes, we're going to continue to be focused on growing our non-handset business, and I'm excited about having a good platform to do it with when we close with Qorvo.

I mean I've made this comment to you before and you probably don't like it, but I feel like it's annoying to have a low multiple because you have high customer concentration. On the other hand, there's opportunity implicit in that. You can buy back stock every year at a low multiple, you can grow earnings that way. You can just grow your earnings for a decade as you did before when you just gain content at that customer year after year after year. Meanwhile, diversification assets are expensive, right? When I look at some of the recent transactions, they've been for a company like yours would be -- the math would be a little bit more challenging than the Qorvo math.

So just how do you think about those trade-offs? I mean, does it -- and you're not going to have -- I mean, Apple won't be as large a customer at some point, but they'll still be a really large customer. They'll still be the first question I have to ask you, of course...

Yes, it's a good question. So first off, I feel really good about our capital structure and our balance sheet to be able to have some flexibility to do that. And I think that historically, the company has been the disciplined allocator of capital. Certainly, if you look at the even the year that I've been here, we've probably returned $800 million to investors via share buybacks and $400-and-some million in dividends. But I also think that historically, the company has done that. And you could argue that maybe there should have been some more allocation to M&A to help diversify the business, right? And I think that we took one step here with Qorvo.

And I do think that some of the -- I can't decide on what the multiple of stock will be. All I can do is kind of execute and deliver and continue to get. And I do think, however, that the multiple should improve if history is any guide, if we get our gross margin over 50%, we drive some more predictability in the business. People have belief in the long-term position where we go. We're kind of in a more focused industry from that side. And so right, I'm optimistic. And none of that is baked into the numbers. So -- that's kind of how I look at that.

But you're right, it does limit. I mean I talked to some of my investors for sure, I can go off and buy some sort of data center play at 30x revenue multiple that wouldn't make a darn bit of difference the company at the end, right? And that's a difficult place to be.

Yes. Okay. Helpful. So speaking of the broad markets business, you've had a good run there, 8 quarters in a row of growth. Can you talk about what's driving the strength there as a combination of industry recovery, but also some nice growth drivers. Can you give us an overview of that?

Yes, the industry recovery, some of the products, we still -- I mean, we're still having inventory hangover for a while ago. That seems to be behind us now. I mean our biggest growth drivers is WiFi, WiFi 7, the migration there continues to be -- that's probably the biggest play there on that side. Automotive has been a nice driver for us.

The funny thing is we're on the grand scheme of automotive, it's still -- we're still a small player. I mean -- but we're in the nice spot. We're in the vehicle connectivity, in vehicle entertainment, this kind of stuff. Independent of combustion engines and where it goes, do you see yourself having more or less connectivity out in time? Well, probably more. And you see it becoming software-defined vehicles and all the other things we're at. So that seems to be going pretty well. And then you've got the industrial data center piece, which is continuing to grow there as well. And then when we get the Qorvo piece, you get the defense space. And so I feel good about those.

Yes. I mean it seems like pretty clear that the case study of a successful acquisition was the Silicon Labs connectivity business, like you've gotten a lot from that.

Yes. I think that was good. And I think that, that was a good place to be. And I think that the Qorvo combination will be another good step for us. And we should be in a different -- a dramatically different place. I think both companies are going to benefit substantially from that.

Great. Can you talk a little bit about the WiFi 7 cycle? Where are you in that? How much of a growth driver will that be for you?

I think we're early innings in that. I think that we're still probably in the third inning of that, I would say, of a 9-inning baseball game. And I think we've got -- the demand there seems to be really strong, improved latency, improved bandwidth, improved power management. I mean, a lot of stuff going on there that I think is going really well. And so that demand seems to be very strong. We've already started work on WiFi 8. So that's why I feel confident that, that one is a long-term driver there from that side. And we're seeing both on the CPE side with -- in the industrial side as well, right? So that one seems to be going pretty well.

And so the broad markets business, particularly once you integrate the equivalent business at Qorvo, you have pretty good growth opportunities. You don't need to do more acquisition to bolster that, but you're willing to if the chance -- the opportunities are there.

Yes, I think we're going to be disciplined. I mean look, I think that we still need to continue to diversify the business, right? Even when we're done with the Qorvo situation or Qorvo combination, we'll still have, right, more than 50% exposure to the one customer, a disproportionate percentage of that is in the handset space. So I do think we're going to continue to emphasize that growth. Now that growth should -- as our broad markets continues to grow, that mix will come down. But I still think we're going to be looking to diversify there as well. I think it's just an important point for us.

Okay. Great. And then on some of the financial questions, can you give us an update on the factory optimization initiatives that you've been talking about and kind of where gross margins are going to be down the road with the two combined companies?

Yes. I mean, so we've -- certainly, both of us have taken some self-help process along the way, right? You've seen us make a decision on our Rubin facility. Some of the manufacturing decisions take a while to feather into the P&L, right, because you've got to -- you can't just shut them right off. You've got to, I'll say, run them out over time. And so we certainly think when we look at the gross margin of the combined company, we put out a model there of 50%, 55%. And how do you get there? Well, if you look at the mobile space, you've got mix improvement in the mobile space as Android, which is structurally lower gross margin goes down. you're going to be offset by a higher mix within the mobile space.

Then you've got the mix of the broad markets versus mobile. The combination should be higher broad markets than mobile. So you've got another tailwind there. And then you've got some structural things we can do on the COGS side with the combination to drive margins there. So we feel very comfortable with the 50%, 55% range, which I think puts us in a different tier of company we had before. So that's how we look at that.

Yes. All right. That's great. And then can you talk about the R&D priorities? How much of it will be going towards smartphone versus new markets?

Yes. Look, I mean, wireless -- I would say wireless is going to continue to be the wise one. And the reason I picked that is, right, there's lots of different applications. handset is obviously the biggest one, right? But there's a lot of overlap there in terms of base technology with the WiFi side, with the defense side. So I think that will continue to be a major push there.

And frankly, we need to continue to be competitive, right? I mean if I again, I go back to look at the installed base, right, of where we are today, both on the iOS side and the Android side. And you look at that -- we talked previously about the fact that the refresh rate now of the phones is probably the longest it's ever been. Well, we're starting to see that getting pulled in. Well, that's a huge tailwind for us, too, because at 1.x billion units, if you take a refresh rate of 4.5 years and you pull that down to 4, just do the math alone, that's a lot more units that happen. And so I think that we need to continue to be competitive. Like this -- we cannot -- and we compete with some other giants out there. So we need to continue to be competitive. So that will be number one.

And then number two will be continue to emphasize the diversity play. I really like that we're picking up some GaN space on the defense side, so both power GaN and RF GaN. That's going to be an area of emerging priority for us.

And you mentioned 6G a couple of times. I mean the time frame is still years out, I think. Can you just talk about, is there a big sea change to RF content? Anything -- any big opportunities you're looking...

Historically, we've seen dislocations around some of the G side. And so I'm not sure that this is going to be any different. I would say, I think one of the things that we see as potentially different is that during the 5G cycle, I think a lot of the operators, there was just tremendous amounts of capital. I'm not sure -- I think there's going to be more requirements put on the end devices this time, which should benefit us as well. But there's still some emerging work to be done on that side.

Okay. Great. I have one more question, and then I'll open it to the audience. Can you talk about the use of cash? I talked about buybacks and things like that. But obviously, you have the acquisition now. But you've been in this very strong cash flow environment. How do you think about uses of cash?

Yes. Look, I mean, clearly, the #1 use of cash is to continue to invest in our core business, right? We have got to kind of maintain and grow leadership there. Second, obviously, with respect to capital, we need to continue to invest in the capital to run our factories and do those kinds of things. Today, we have a dividend. I would argue the dividend rate is probably high. Now someone argues that's because our stock price is too low, which I agree with as well. But -- so dividends are obviously something to do, then we'd be doing share buyback and M&A.

I think that evidence would suggest we're putting a little bit of increased priority on M&A just because I think we need to change the shape of that company, right? We could argue over the past 10 years, we've been incredibly disciplined about returning a lot of capital to shareholders, but haven't really changed the shape of the company at all. And so I think the Qorvo deal is an example of us using the combination of cash and equity kind of the shape of the company. So how I think about that.

Great. Thank you. Let me pause there and see if we have questions from the audience.

If not, okay, well, maybe we'll close there. Just any closing remarks, anything you want us to think about with the opportunity with Skyworks in the next...

No, thanks. I guess when I look at the combination of Skyworks and Qorvo, put together, you have a very significant mobile handset business should have less volatility, stability through the cycles, less single socket risk, innovation across the signal chain and be a leader in the RF space, coupled with a very attractive non-handset business that is exposed to nice areas like WiFi, defense, aerospace and industrial, combination being north of 50 points of gross margin, 30 points of operating income, throwing off a nice position of cash and being in a position to continue to grow outside of that. So excited.

Great. Well, thank you very much.

Great. Thank you.

Good afternoon and welcome to Skyworks Solutions First Quarter Fiscal Year 2026 Earnings Call. This call is being recorded. At this time, I will turn the call over to Raj Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' First Fiscal Quarter 2026 Conference Call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President; and Philip Carter, Senior Vice President and Chief Financial Officer for Skyworks. This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com.

In addition, the company's prepared remarks will be made available on our website promptly after their conclusion during the call. Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, today's discussion will include non-GAAP financial measures, consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP. With that, I'll turn the call over to Phil Brace.

Thanks, Raji, and welcome, everyone. Before turning to the quarter, I want to briefly address our previously announced combination with CorVel. We believe this transaction is highly strategic and transformative, bringing greater scale, deeper R&D and a broader technology portfolio. Together, this combination is expected to reduce historical mobile volatility and strengthen our competitive position, enhance our broad market capabilities and expand our TAM into dispense and aerospace, while creating a clear path to more than $500 million of synergies over time.

As highlighted in our investor presentation on October 28, we believe this combination will deliver substantial financial benefits. We expect to achieve healthy gross margin through the cycles in the 50% to 55% range supported by significant operating leverage and enhanced earnings power. The combined company will generate robust free cash flow, underpinned by an extremely favorable capital structure with expected net leverage of approximately 1 at close. These advantages position us to drive long-term value for our shareholders and customers and support continued investment in innovation and growth.

Since announcing the transaction on October 28, we've made solid progress. We've completed our initial regulatory filings. A shareholder vote has been scheduled, and our teams have begun integration planning. As is typical for a transaction of this scale, we expect a comprehensive regulatory review, and we are working closely with regulators around the world. We still expect the transaction to close in early calendar year 2027, subject to the receipt of required regulatory approvals, approval of both company shareholders and the satisfaction of other customary closing conditions. I'd also like to recognize the Qorvo team for the constructive and collaborative approach that brought to the integration planning process. We're off to a great start and excited about the opportunity ahead when we come together as 1 stronger organization.

I want to emphasize that we are committed to closing a transaction and believe in the long-term value creation opportunity that the deal unlocks for our customers and shareholders. Beyond these prepared remarks, we will not be discussing the transaction as today's call will focus on our results from the first fiscal quarter as well as our outlook for the March quarter. Turning now to Skyworks performance for this quarter. We stayed focused on what we can control, operational execution, customer engagement and disciplined investment in our product road map. Our strategy remains straightforward, focused on our customers, invest in our core technologies and continue to grow broad markets.

Broad markets remains a key growth engine for the company, growing faster than the corporate average. Our products are designed into high-growth areas across a wide range of end markets, including connected vehicles, enterprise infrastructure, satellite communications, data center networking and emerging edge AI applications. This breadth supports durability and reduces reliance on any single program. Skyworks delivered strong results, exceeding the high end of our guidance, driven by upside in both mobile and broad markets.

We posted revenue of $1.04 billion, delivered earnings per share of $1.54 and generated $339 million of free cash flow and paid $106 million in quarterly dividends. Revenue, gross margin and non-GAAP EPS all came in above the midpoint of our outlook. In mobile, we outperformed expectations supported by healthy sell-through and strong execution on new product launches at our top customer. Smartphone replacement cycles, while still lengthy, are beginning to shorten, this trend is driving increased unit growth as consumers upgrade more frequently, especially with the rise of new AI-capable devices and more integrated features.

While we are mindful of broader industry discussions around component pricing and availability, we have not seen an impact on demand to date. Reminder that the vast majority of our mobile revenue is tied to flagship and premium tier devices. Channel inventory remains lean and we continue to closely monitor customer forecasts. As we look ahead to future business at our top customer, we successfully defended key mobile sockets and game content where architecture changes created opportunities with mix dynamics potentially moderating some of that progress.

Based on what we see today, we currently expect blended mobile content to be roughly flat year-over-year. We will not be commenting on specific sockets, models or lunch timing. We remain bullish on the long-term drivers of RF content, supported by accelerated replacement cycles, coupled with rising complexity tied to AI-driven workloads and higher performance requirements. Broad markets delivered its eighth consecutive quarter of growth with revenue up double digits year-on-year reflecting strength across edge, IoT, data center and automotive. In Edge IoT, WiFi 7 momentum continues to build, supported by bandwidth-intensive applications in the home and workplace. WiFi 7's higher throughput, lower latency and reliability position it as an important enabler as AI inference move closer to the edge.

Design win activity remains strong, backlog is healthy and we're already engaged with customers on early WiFi 8 programs positioning us well for the next cycle. Automotive demand remains solid, driven by increased connectivity across telematics, infotainment and software-defined vehicle architectures. Our pipeline is broad, global and aligned with long-cycle platforms across multiple OEMs and tiers, giving us good visibility into fiscal 2026. In data center infrastructure, demand signals are improving across our customer base, supported by increasing design win activity. Timing and power management content is expanding as the ecosystem transitions to next-generation 800-gig and emerging 1.6-terabit architectures.

We are seeing higher activity, particularly with cloud and networking customers that require tiding timing accuracy, improved power performance and better synchronization across high-bandwidth systems. Broad markets continues to expand its reach across a more diversified set of customers while consistently delivering margins above the corporate average. The demand drivers across these end markets are long cycle and multiyear positioning the business well as we move into fiscal 2016 and beyond. With that, let me turn the call over to Philip for a discussion of last quarter's performance and outlook for Q2 of fiscal '26

Thanks, Phil. Skyworks delivered revenue of $1.035 billion, exceeding the high end of our guidance range. During the quarter, our largest customer accounted for approximately 67% of revenue, consistent with the prior quarter. Mobile represented 62% of total revenue and came in higher than our expectations, driven by healthy sell-through at our top customer.

Broad markets also outperformed expectations, growing 4% sequentially and 11% year-over-year driven by growth across edge IoT, data center and cloud infrastructure and automotive. Gross profit was $482 million with gross margin of 46.6%. Operating expenses were $230 million at the low end of our guidance range, reflecting disciplined cost control while continuing to invest in priority growth areas. Operating income was $252 million, translating to an operating margin of 24.3%.

Other income was $6 million, and our effective tax rate was 10% resulting in net income of $232 million and diluted earnings per share of $1.54, $0.14 above the midpoint of our guidance. We generated $396 million of operating cash flow and capital expenditures of $57 million, resulting in free cash flow of $339 million or 33% free cash flow margin.

We ended the quarter with approximately $1.6 billion in cash and investments and $1 billion in debt, maintaining a strong balance sheet and ample flexibility to support our strategic and financial priorities. Looking ahead to the second quarter of fiscal '26, we expect revenue to range between $875 million to $925 million. We anticipate mobile to decline approximately 20% sequentially, consistent with seasonality.

We expect broad markets to be flat sequentially, representing 44% of sales and up high single digits year-over-year. Gross margin is projected to be approximately 44.5% to 45.5%, reflecting seasonally lower volume. We expect operating expenses to be between $230 million and $240 million as we continue to fund key R&D initiatives while maintaining tight control over discretionary spending.

Below the line, we anticipate approximately $4 million in other income and effective tax rate of 10% and diluted share count of 151 million shares at the midpoint of our revenue outlook of $900 million, this equates to expected diluted earnings per share of $1.04. With that, I'll turn it back over to Phil for closing remarks.

Thank you, Philip. Before we wrap up, a heartfelt thank you to our employees, customers and partners. Your dedication fuels our success and sets the stage for continued leadership and growth. Operator, let's open the line for questions.

[Operator Instructions]. Our first question comes from Harsh Kumar with Piper Sandler.

First of all, congratulations, guys. We know this is a tough environment, but you guys are doing really well in mobile specifically. Phil, I had a question for you. You mentioned 2 things. You said you won't take specific questions on the deal, but you mentioned you will see increased scale, deeper R&D capability, broader technology suite, et cetera. I was wondering if you could hit upon what maybe specifically are color wise what you expect to see out of this deal on these kind of fronts.

Yes. What I'm really excited about, thanks for the question. Look, what's always impressed me is the nature -- complementary nature of our portfolios. In fact, it's pretty clear. I mean Qorvo does a lot of the antenna side of the house, which we don't really have at all. So I'm really excited about bringing those complementary technologies together particularly on the RF side, it should result in reduced volatility.

It should increase our scale on the RF side, giving us the opportunity to innovate across the RF chain, brings us lots of engineers that we think are highly valuable. And I just think there's just the feature is super bright and how we do that. And then we bring the combination together brings a fantastic broad market business as well. So super bullish about that, and I hope that answered your question.

No, it does. And then as my follow-up, if I can ask you, you will have a pretty broad set of products to address your largest customer need. I think that's the biggest customer around that you want to be playing with, and you'll have kind of a pretty broad portfolio. So the question was, how do you see the combined company having the right kind of portfolio, what will you be focused on within that portfolio to address your customers' needs?

Yes. Look, I think that we bring a tremendous scale all the way from a lot of the antenna areas all the way back to the path in a number of different critical RF technologies. And when we see the RF complexity evolving as AI workloads look more to the edge. There's more transmit capability and things coming down the pipe. From what we can see, having the broadest Star portfolio in the industry is going to be a really powerful opportunity for us. And then also, I think, keep in mind, it gives us an opportunity to innovate in a variety of other areas, too, we talk about WiFi or some of the other areas as well.

The world is connected wirelessly. There are billions of devices connected wirelessly. And I think it continues to give us a platform to invest in that for the future going forward

Thank you. Our next question comes from Karl Ackerman with BNP Parabas.

Two if I may. Your guide implies a broad markets will grow on a year-over-year basis for, I think, at least 6 consecutive quarters, I think you said even on a sequential basis. Could you discuss -- you spoke a little bit about some of the design wins, particularly around WiFi driving demand for edge but could you also address where you're seeing the most strength of broad markets in the March quarter? And then which areas of this business, do you see that you have the most confidence in that can drive growth your long-term growth over the next 2 or 3 years? And I have a follow-up, please.

Yes, thanks. I mean, look, you're at this marks our eighth consecutive quarter of sequential growth with double-digit year-over-year revenue expansion. So we feel really good about that. When I look at kind of underneath the covers, what you asked for, I would I guess I would point to 3 major areas, right? The first would be WiFi, right? WiFi 7 adoption continues to be very strong. And there are some reasons for that, right? The increased bandwidth, the increased security is really as AI moves continues to move out there to the edge, we see WiFi continuing to be a major platform for that.

And the demand there remains robust. And certainly, we see a long push of innovation that leads out to WiFi and beyond. So I'm particularly excited about that one. On the automotive stuff, for us, that's also been an area that we've seen good growth. And there's a lot of headlines in the news about auto markets, but we actually tend to be kind of in the sweet spot of the growth area because -- we're talking about vehicle-to-vehicle connectivity. We're talking about infotainment and power isolation products, which are really kind of independent of what kind of combustion engine you use.

And we've seen pretty broad-based wins across the board globally on that. So that seems to be some tailwind for us. And then finally, on the power and timing, which is really related to the data center side, I mean, we're seeing tremendous uptick in our activity, design wins particularly as we have a really strong lead in what we call jitter attenuating clocks, which are really important as the frequencies continue to go up to 800 gig 1.6 terabytes and then some of our power isolation products which really have to do with as the servers move to higher and higher voltage, you need to isolate the power that's coming in from the low-voltage power of tacosilicon devices.

So I mean, I would characterize WiFi, automotive and then data center with power and timing is kind of being 3 structural tailwind things we have in our broad markets we're excited about.

Got it. During the prepared comments, you spoke about how you're seeing strengthening position, our 5G position in premium Android handsets, including the upcoming Galaxy S6 launch, at the same time, you spoke about how your overall content should at least be stable, if not maybe a little bit better than that going forward. Having said that as kind of a backdrop, I guess, should we expect that fiscal '25 should be the trough in content at your largest customer? And I guess more broadly, could you describe your positioning your largest customer and whether a genetic AI could drive higher RF content gains in edge devices than in prior solar technology upgrade cycles as well.

Yes. Thanks. Good question. Look, I think what I would say, look, we compete for business every single year at a large customer. I don't expect that to change. I'm pleased we defended our major sockets at all the mobile platforms.

So I'm pleased we did that. I'm not satisfied that we did because I think we have the opportunity to do even better than that. But I'm pleased we defended the sockets. And I think I think some of our prepared remarks and from our largest customers suggest there is a strong tailwind with both upgrade cycles, AI, demand pushing things to the edge. And we continue to see very strong demand so goes not just on the mobile side, but pretty much broad-based right now as well. We're keeping a close eye on it, just given some of the commentary around component prices and things.

But right now, we continue to see a very strong tailwind of unit demand.

Our next question comes from Edward Snyder with Charter Equity Research.

Ed, we're having some difficulty hearing you.

Sorry. Is that any better? .

Yes.

Sorry, guys. Yes. So a lot confused. You mentioned that you find sockets, you've got some good content gains, but you think they may offset by mix and given what we know about basically the mix here, I would have thought you'd have a little bit more of a tailwind in the second half of this year just from the sheer fact that you've gained back some content and the mix of modems at least is favoring you over what you did last year.

I thought last year would be your trough. But I know since CES, there's been a lot of a lot of discussion about the worst is yet to come, et cetera. So maybe you could help clarify that, why do you think mix is going to offset your content gains?

I think -- thanks for the question. I think that we've got to be careful. It's difficult for us to really comment on specific models and launch timing and things like that. But I think that suffice to say, some of the content varies between particular models. And it's really hard for us to predict what ones they're going to sell, when they're going to launch and how they're going to do. So I think our best guess right now is our blended content should be flat. We defended our key sockets. We gained back some more architecture changes, and we think net overall could be flat.

We do expect some tailwind with respect to some of the demand we're seeing, right? I mean it's very strong demand across the board. I'm happy that we did that. I'm not satisfied that we did, but I'm happy we did that, and we've got some more opportunities ahead. So hopefully, we try our best to kind of answer that. That's kind of where we're projecting a blended flat at this point.

Okay. And then if I could just ask, do you have a stock in Japan. I know you're underutilized in a couple of your factories, specifically with the filter factory in Osaka. Is that going to improve in the second half of the year substantially? Or should we expect kind of status quo me a little bit better?

Yes. Look, I think right now, it really depends on the technology base. We're not going to talk about specific loading or specific factories. I would say that in general, in the products that are being utilized, we are definitely -- we are at capacity, right? We are definitely hand to mouth from that. We are we're scrambling to meet REIT demand. And right now, our demand exceeds our supply. And so we're continuing to work that. There are pockets of areas where we talked about, for example, a specific facility, and that really has to do with more technology changes than anything like that. So I think that our gross margin guide, if you're kind of going there, that really reflects what we have best knowledge today of balancing mix. right, costs, prices and things where we want to go, right? It's something we keep a close eye on, and we're going to continue to work that going forward. .

Our next question comes from Timothy Arcuri with UBS.

I think you have about $1.2 billion left on your repo authorization. The stock has obviously come in. I think you sound super confident on these synergies and the deal closure being on track. So can you buy back stock? I think you can repo stock with Qorvo management approval. Is that right? Can you kind of talk about that? .

Tim, yes, this is Phil Carter here. Yes, so our free cash flow this quarter was $339 million, 33% margin. We're sitting with $1.6 billion in cash. $1 billion in debt. So we do have ample opportunity and cash to buy the stock. During the pendency period, there are some requirements but we're constantly looking at how we can deploy our cash. We did announce in the press release that we are paying a $0.71 dividend to our shareholders.

But we are constantly looking at the optionality. We do have to go to the debt markets in the next 12 months or so in anticipation of closing this deal. So we do want to maintain some level of financial prudence as well.

Okay. And then there was a huge amount of focus on the earnings call for your biggest customer around memory pricing and headwinds for their margins. So -- it seems like maybe it's a risk that they push back on you on pricing. So can you talk about that as a risk? You said content is flat, but is your pricing locked in with them? Because I would think that they are going to try to take everything out of all their their suppliers that they can, given these memory cost headwinds?.

Yes. No, I think that -- I mean, first off, when we talk about some of those wild swings in what we've heard about the Manpack, there's simply no way for any company like Skyworks to be able to dampen that kind of opportunity out there. So the short answer is no. There's always competitive pricing dynamics at our largest customer.

Having said that, as I mentioned, we are hand them out, we are scrambling for every part we can build at this point. And so we're not seeing any pressure associated with that. And I mean I wouldn't really expect to either now could that change going forward, maybe, but we're not seeing it right now.

Our next question comes from Peter Pang with JPMorgan.

Just in terms of the overall unit assumptions should be thinking. I think you talked about a pretty strong upgrade cycle going. At the same time, I think there's a lot of concerns about memory. And you guys historically have talked about low single-digit unit growth. Is that still the base case to assume for this year or because of some of the memory constraints that this could be more of a flat market? Maybe just if you can share some color on what you're seeing.

Well, look, I think that we're only really guiding 1 quarter out. But I would say, I think, consistent with what has been said publicly on prior calls, I mean, we are seeing very strong unit demand. And we're certainly seeing that. So that's reflected in our numbers, certainly above seasonality and we're seeing very strong demand.

So I'll leave it at that. I don't think we want to project demand going forward because we really don't know. We just take the input from the customers and go look at it there. So but we do expect to see a stronger unit demand that perhaps you've seen publicly talked about before.

Got it. That's very helpful. And then just on -- in terms of -- seasonality given the potential different set of launches and you guys have historically had a bigger point certain schemes. How do you think about seasonalities like in the year? Is it -- should we kind of just model based on historical seasonality or because of some of the different launch timing that we might just skew the seasonality a little bit.

Yes. Obviously, we can't really talk about launch timing of our customers and what to do. I know there's been a lot of industry chatter on that, and that's not really something we are prepared to talk about nor frankly do we really know, to be honest, it's not something they don't review there, none of our customers review their particular plans with us. But I would say that as we look in the out quarters, I mean, I don't I think we're kind of -- what I would characterize it as fairly normal. We're not seeing anything abnormal with respect to that.

So I would just -- nothing abnormal to strong demand, and I wouldn't say there's anything -- we're not seeing anything unusual with respect to that. So

Thank you. Our next question comes from Jim Schneider with Goldman Sachs.

Following on the prior comment, realizing you can't comment on your customers' product launch plans. But in principle, what impact would seasonally more muted business cycle or product launch cycle have on the company operational either in terms of production, factory loadings, overall gross margins or otherwise?

Well, gee, let me -- look, overall, I think obviously, being our large customer, right, any sort of swings in demand are impactful for us in terms of how we manage that. Right now, we are very constrained across the board. We're fighting hand them out for products, and we continue to do that. I think we've been an effective -- we've done an effective job operationally managing that.

I mean having some peaks and valleys with respect to demand is not unusual for that customer as they ramp up and down through the cycles. And so right now, I think that we tend to be in a situation where the demand is very strong, and we've seen these situations before. We're doing our best to manage them.

And it should signal change, then we'll deal with that accordingly. I mean I'm not sure I can give you a better answer than that.

That's fair enough. And then maybe just as a quick follow-up. You talked about the sort of recovery in broad markets, which I think is kind of consistent with what your peers have reported. Can you maybe talk about sort of idiosyncratic product areas that you think is going to drive sort of outsized market growth relative to the market for you this year?

Yes. I think I kind of mentioned them before, some of the areas that I'm excited about. I mean we talked about WiFi being a big driver there. We talked about being in the auto segment growing faster -- the data center space with power and our timing products continues to be good one.

Longer term, it's not yet big enough to talk about, but I'm excited about what we're doing in satellite comms too. I mean I just think we've got exposure in a number of areas. I mean, I just I try and remind everybody that I talk to. The world is connected wirelessly. We're in a very good spot for that. And some of our products that play in the data center, including timing and power are also seeing a bit of tailwind. So I think we've got a lot of great stuff going on and our broad markets continues to grow and continues to perform at a better and corporate average.

I think that will help us continue to get outsized earnings out in the future.

Our next question comes from Gary Mobley with Luke Capital.

I had just 1 question. In early December, you filed a Form S-4 in which you gave a revenue forecast specific to Skyworks business out through 2030 in -- and I believe that predates your down selection with your largest customer in the next-generation launch. So given what you know today on sort of your content in the upcoming launch -- do you still stand behind those revenue forecast outlined in the ESCO filing for 2026 and 2027?

Yes. Thanks for the question. It was obviously difficult for me to -- for a lot of reasons, I can't specifically comment on specific filings going to be back down. I just would say that I continue to be incredibly bullish about that combination going forward.

I continue to believe in the strategic and financial benefits of that. We are committed to closing the transaction. And frankly, I can't wait to get it closed.

Our next question comes from Christopher Rolland with Susquehanna.

This is Yash on for Christopher Rolland. And I had a question on gross margins. So maybe just looking forward a couple of quarters, -- are there any gross margin puts and takes we should consider just given the memory dynamics that was expressed by our largest customer. Any trends in mix, pricing? Any additional color there would be helpful.

Yes. So this is Carter. We don't give any guidance beyond 1 quarter. As we look to the next quarter guidance, we did guide margin down 160 basis points, and that's mostly due to typical seasonality in mobile and lower volume in the March quarter as well as slightly higher mix of Android.

We also have had 3 quarters in a row of exceeding the high end of our guidance range. And as a result, you can imagine you're getting a little bit more input costs on expedite fees and things like that to meet our on-time delivery targets with our customers. But yes, other than that, I would say we're not seeing anything abnormal from typical seasonality.

And then for Android, and I believe last call, you provided color, it was a little less than $100 million. So any update to that revenue? And how should we think about seasonality here through the year?

I would say for the current quarter, as we look at Android, it's down quarter-to-quarter. We are anticipating an increase from the current quarter Q1 into Q2. And so yes, as we look at that, it will be actually double-digit growth from Q1 to Q2. But we do anticipate that to moderate as we go throughout the year. So we're not seeing huge Android growth throughout the year as we're very selective on the devices that we choose to play in.

Thank you. And our last question comes from Liam Far of BofA.

Appreciate it. I just wanted to have a quick clarification. When you said that your content gains at your largest customer, offset by mix, do you mean that offset is from the '17 becoming a greater part of the overall mix or by expected shifts between models of the same generation?

It's really -- I said it could be potentially moderated by mix because we don't really know, right? I mean the issue is that we don't really know, and I don't even think the customer knows how the particular models are going to sell, and that won't be clear for some time. And so I think that we're trying to give guidance 1 quarter at a time. We defended our key sockets -- we made progress where we could. We're just making the best prediction of what we think we can and we'll give guidance along the way as we go there. We think our content should be stable on a blended basis and how it actually gets quarter-to-quarter is really going to depend on how the models do. And we'll just continue to keep an eye on that as we go forward.

Makes sense. And then Shifting to broad markets. I was wondering if you could touch on just in terms of day center progress. Is it still any -- is it growing faster or slower than the overall segment average. And in Wi-Fi, maybe -- I don't want to talk too much about the deal, but in terms of how colimentary those portfolios are and whether there's any opportunity for competition naturally between your 2 portfolios as you combine them?

Yes. On the data center side, 1 of the -- yes, the short answer is yes, that is growing faster than our overall broad markets. And let me give you an example of some of the power isolation products they have to put it in context. .

The power escalation products, what they do is they provide -- they basically isolate the very high voltage from the actual lower voltage microcontrollers and GPUs and things. And so as you -- all the trends with respect to having higher and higher voltage on the data center side, need to have very specialty products that basically isolate those powers.

Because you can imagine, if you put 400 or 800-volt DC onto a GPU, it's probably not going to last very long. And so all of those products, so we're getting lots of demand in that space. And then the timing products really around 1 point -- about 800 gig and 1.6 terabit with their low JR attenuating clocks are doing really well as well. So right now, right, those are growing definitely faster than corporate average.

The margins are better than the corporate average. We just wish they'd be a lot bigger. So we're continuing to work that and invest in those. Those are continue to be core investment areas for us.

With respect to WiFi, you asked about the combination, right? I think that both of the products have their unique positions to do that. We'll evaluate that going forward in terms of what we want to do. What we told the customers is we continue to keep our commitments to them going forward in time, and we're going to make the best decisions on how we do that going forward. .

Ladies and gentlemen, that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Brace for any closing comments.

Great. Thank you very much for joining the call today, and I look forward to seeing you in person at some of the upcoming conferences. Thanks again.

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation. You may now disconnect.

All right. We're going to get started. I'm Tim Arcuri. I'm the semi and semi equipment analyst here at UBS. And we're very pleased to have Skyworks next in the agenda. I'm very pleased to have Phil Brace, who's the CEO of Skyworks. So again, Phil, thank you for the time.

Thanks, Tim. It's a pleasure to be here, and it's a great event and great conference.

Great. Well, let's start with the strategic rationale and the timing of the Qorvo combo. Some of my investor conversations seem to miss maybe what some of the opportunities are that you see? And can you walk us through why now is the right moment to bring these 2 franchises together and how you're managing focus and continuity for the company while this all plays out?

Yes, it's a great question. I mean, first off, I've known Bob and Qorvo long before I took the job, actually. And so I was familiar with the company. And when I came on board at Skyworks, it just became so clear to me that the combination of these 2 companies is just -- would create a very strong platform. And so sometimes, it just takes a little bit of maybe a new perspective, some timing. We've got customer support. We have regulatory -- pass through regulatory.

And I think just some hard work and you take advantage of timing, you have a little bit of persistence, I mean the end state is going to be a company that has just a tremendous franchise, right, $7.7 billion of total revenue, $5 billion mobile business that will be more stable and then a very attractive $2.6 billion nonmobile business that will have really attractive franchises like defense and aerospace. We pick up GaN technology for both Power GaN and RF GaN. And finally, the capital structure of the company is very favorable and that really should allow us to grow from the future. So I couldn't be more excited. It's a tremendous opportunity. We're going to be stronger together.

And how are you managing the continuity and focus at Skyworks while this all plays out?

Yes, it's a good question. I mean that's one of the -- I would say one of the benefits of certainly the business we're in, right? It's a hypercompetitive business. What I joke with my team is a little bit lose a football analogy. It's like American football. You win a game, you've got to get up and put on your pads and go practice next day. And so we have a Super Bowl every year, and we continue to focus on that. Our teams are super energized by the opportunity to work together with Qorvo, but also they're very focused on the day-to-day business. And we've got a select group of people that are focused on doing integration and integration planning. We're operating independently until close, and we're kind of trying to manage that very carefully.

Great. Can we also stay on the deal and just ask about the customer support for the deal. You've mentioned strong support among the major customers. Some investors ask me why would your big customers be in favor of this?

Well, you might imagine, just step back for a second, I wouldn't have taken -- I don't think I would have pursued this deal. My Board wouldn't have pursued the deal. Qorvo's CEO and Qorvo's Board would not approve the deal without having some conversations with our largest customers on that. So we wouldn't have pursued it without some of those discussions. I think from their point of view, if you -- for me, one of the things I looked at, and I think from their point of view as well, the technologies are actually much more complementary than what people think on the outside.

If you actually look at it today, they do things like envelope tracking antenna tuners, ET PMICs. We use some of the pads and some of the high-frequency stuff, like the actual overlap is actually quite small. And I think what they looked at is they looked at the landscape. And frankly, the landscape has changed over the last several years, right? They've seen Android kind of diminishing importance for that. And they recognize that having a strong supply base is important to them. They have 2 very large suppliers in that space. And I think they're very supportive of us doing that. And I think they also look at 2 companies together that frankly, have some duplicate spending that they would rather see invested in stuff that's a benefit to them. So they've been a strong supporter.

So there are some things that the combined entity could allow them to do that wouldn't have been possible if they were to smaller subscale.

Yes, I think so. I mean some of the ways that I talk about that is in a very high-level analogy, we've got -- both of us are investing in basically core technology, right? We take elements from the periodic table and we turn them into technologies that power the world around us. Some of that technology that we do is just core development, transistor development, process technology development, packaging development. All of that stuff actually is before like the customer really sees that.

So if we can actually focus some of that instead of that duplication, focus on getting ahead of the curve, I think that will be a benefit to them. And we haven't really underwritten any sort of, we'll call it, revenue synergies. We're not assuming any sort of magic occurs, even though we do believe that having more of the RF signal chain should give us the opportunity to innovate and create a competitive advantage for us long term. We're not baking that into the models as of yet.

Yes. Can we talk about that? Because in the initial framework, you did talk about all the cost -- the typical cost synergies. But can you sort of double-click on areas where the combined portfolio could unlock revenue synergy over time? And maybe if you could quantify that or at least direct us to what that might be?

Yes. So I think that if you look at some of the numbers we've been published, we've been very -- I have been very careful to actually not project that. We haven't baked in any revenue synergies. We haven't baked in any PE synergies, multiple expansion, any of that sort of stuff because I think right now, we're just looking at the way that we can get focus on the value creation, which is the synergies and the synergy realization. If you step back and look at some things we could do longer term, I'll give you an example. We do have a small defense business. We're in some missile systems. You wouldn't know that today because it's small.

Our Qorvo has a very large defense business. Is there opportunities to bring some of those things together? We absolutely think so. Can we do some things where collectively we may make different priority capital allocation decisions about where we collectively invest resources or not? Maybe we will. We know from experience that we have one of our large Android customers based in Mountain View that we do the entire signal chain with the RF front end. We know that there are things we can do technology-wise, different trade-outs that may be a benefit to the customer. Those are still early days, but those are just some examples of things we can do.

And then just to remind everybody, the thing I get the most passionate about is, the world is connected wirelessly. All of these AI data centers, they're going to need to get devices out to the individual people, and that's all going to be done wirelessly, whether it's cell phones, glasses, think about drones, electronic warfare, automotive, everything. The world is a wireless world. And by the time this deal closes, 6G is going to be right around the corner, and we're going to be really well positioned.

Can we talk about the international regulatory path? Given your -- you have relatively modest exposure in China, they also -- they had higher, but now that's actually coming down. And the RF market in China is already pretty competitive. How are you approaching the regulatory process from an international perspective?

Yes. I think the -- obviously, we have to file in a number of different jurisdictions. I mean China is the big one that everyone talks about. I mean we feel like we're really well advised. I mean we've got some of the best law firms on the planet, people that have done very recent, very large transactions and got them through. I think as you noted, both of our exposures, domestic exposure in there is relatively low. It's hard for anyone to argue that there's not a viable robust business there. And I think that we're going to take a step-by-step methodical approach and frankly, try and just do a matter of fact. We do get some questions around, gee, why the timing? Why did you -- what was the reason you sent out the timing?

We just think that's being practical and prudent about when we think it's going to get done. So I think we're just going to take a deliberate methodical approach. We believe we've got a path through, and we'll just keep doing that.

If China were to become a big regulatory problem, are the synergies and the strategic rationale great enough that you would close without China?

I don't think so. I think that what we've seen in the past, right, is that I don't think there's a situation where they say no, I think they just don't approve and they just go on forever and ever and ever. And I think some people just give up at that point. I don't think that's the case in this side. This is U.S. to U.S. There's a robust business there. I think we're going to pay special attention to make sure we understand their concerns, if any, and we'll do that. But I don't think -- in the event, gosh forbid, that something should happen there, I don't think we'd be closing over China.

It'd be more likely that they would just slow roll approval and you would say, look, this is just -- isn't worth it.

Yes.

Let's talk about the content dynamics at your largest customer. You provided color in the past on the mix shifts in their lineup. Obviously, you did lose content this year. You were very clear about that from the beginning. This year, you had previously said that this would be the trough in content. You sort of haven't really reaffirmed that per se recently. But -- so I guess the first question is, is there anything that you would say on sort of the content outlook next year versus this year?

No, it's still a little premature. I'll say one thing, though. Like if you look at our recent results, like our recent results have been better than expected. I think one of the reasons for that is that the mix is better than expected. And I think that brings up an important point that the -- when you win or lose certain things, they put -- there's discrete decisions, and you're not entirely sure which models are going to sell well or not. So you kind of make assumptions based on that. I think right now, I feel good about our competitive position. I think some of that stuff is still being worked out. The slope of that line that I've been talking about has been down. I hope to change the slope of that line. I still feel good about being to do that.

And I think we'll have some more color about directionally where that will be in the next couple of months. But it's going to be just based on the mix shift, like as of now, it's hard to predict which phones sell and which phones don't.

So you think it's more like there are sockets you might lose. But from a blended perspective, it will depend probably more on like what model sells versus...

Yes. Like when you think -- I think generally, their gravity is going to be to try and dual source things. And when they dual source things, it's not like they put half of them on the same models. They split them up by model. So for example, there's much -- one of the latest models isn't selling especially well. Some of the other models are selling better. Well, if you happen to be on the models that are selling better, then you're going to do better. So I think there's some of that dynamic that's in play.

And I think one of the things I go back to the combination, the thing that's really important about that, I think, is that because we're going to have more complementary products, the revenue base there should be more stable because single socket risk will go down. And I think driving some stability in that business is going to be a very important fact, right? And if we can improve our utilization and get that up over 50%, all of a sudden now you have a more stable growing business. And that's kind of what we projected in the financials is kind of a mid-single-digit grower.

I guess I don't remember there being this much variability model to model as to what the content is. Do you think -- it doesn't seem like that's going to go away now. Maybe that has to do with the internal modem versus merchant modem. But do you think on a combined basis, when the company combined, do you think that, that -- and by then, you'll be past the internal modem versus merchant modem. Do you think that, that will cause some of this near-term instability and unpredictability to sort of go away?

I think it should wane because I think that when you add it up, you think about where they play and where we play, and it's kind of overlapped. And so the proportion of business for any one particular thing isn't going to be as high. And so therefore, you should be able to count on a more stable revenue base over time. And then we talked about the fact that our gross margin should be able to improve over time. That's going to be really driven by things like mix as we grow our non-handset business, improved utilization and maybe using our OSATs and things like that. And so I think that driving some stability in that business is going to be really important. And so that will be something -- one of our objectives for doing this.

And can we just talk about the impact of the combination on the competitiveness of the mobile market generally? Does bringing the 2 companies together extend your system-level capabilities in a way that improves the long-term content profile with these large customers, similar to what I just asked you, but just...

Yes. Look, I think so. If you look today, we have existence proof where today, one of our large customers, we do provide pretty much all of the front end for the handset. And we have been able to do unique things and make trade-offs and things that I think give that customer a competitive advantage. We do think there's opportunity to do that in the future. Some of those things will take longer to implement because right now, we're designing 2 generations ahead. So you kind of -- it's going to take a while for some of that stuff to converge, but I'm absolutely convinced there's opportunities here. And that goes beyond handsets, by the way. I think that's true in other markets as well.

And is there a reason why the big Android customer that you have, you have more content on that phone than on any other phone by far. Is there a reason why that customer is working so closely with you?

Well, one, I think we do a great job. I think we've got great technology. I think that they -- that particular customer, I think, is -- they are very much focused on having a flagship product that really competes with the best of them. And you actually look at the reviews of some of that pixel product, it's done really, really well. And I think that they are trying to do that to maintain a halo over Android to make sure Android just doesn't go down. And I think that we've been doing really well there. And in fact, like if you look in general, some of the other customers, too, we try and -- our products are very high performance and very low power. They are almost like think of it as Ferrari. We sell Ferrari, the other competitors sell Lamborghini. It just depends kind of what you want in a given time. We're not really selling Camrys or Hugos.

So if you need those kind of solutions, those aren't for us. And so we try to focus those products. And that particular customer really values that. And the other thing they do, which is smart, in my opinion, is they have 2-year design cycles in terms of wins. So it enables you to amortize that investment over 2 years. So they do a good job of that.

I want to go back to the content at your largest customer. Historically, that customer has prioritized performance over everything. As you mentioned, the internal modem has caused some noise, I guess. But as you look back, what sort of gives you confidence? I mean, when you sort of deconstruct why you got to the point you did where you've lost content, what sort of gives you confidence in your competitive moat and your engineering edge?

Well, I think I mentioned the first time I went and visited a large customer, they wrote down people's names on a whiteboard. They wrote down individual people's names. And then said, these are the best engineers in the RF industry. So that gives me a lot of confidence right there. Now some of it, you got to execute and some of it's like a sports analogy. Sometimes you have LeBron James or Steph Curry and you don't win every single game. You're competing. It's a very tough environment. Our competitors hires good smart engineers, and we need to continue to execute. I feel good about our technology. It doesn't mean it's not a competitive environment.

And do you think that the combination, if we talk about Google, do you think there's a potential for you to do even more with them on a combined basis? Or are you getting all the content that you think you can even on a combined basis?

The one thing I'm excited about them in particular, is I think there's many other things beyond just handsets that we could do that I'd love to get more exposure into. So I think similar for me is, okay, can we -- are there other technologies that we can bring to bear that would be interesting there, right? So I think that from a handset side, I mean, we're pretty strong there already. But I'm interested to see if we can expand our business there and obviously got lots of different businesses and business units that we can work with.

Yes. Let's actually talk about broad markets. So maybe you could talk about your broad market strategy and where you see the most momentum.

Yes. So, so far, if you look at us stand-alone, we've had very good momentum on the Wi-Fi side. WiFi has been a good product. I mean the Wi-Fi 7 adoption is kind of in its early stages. And that has a virtuous cycle and there's more content per device and more devices being sold. So that's kind of a double-edged tailwind that we have going on there. WiFi 8 is just around the horizon, and we see really strong demand across both enterprise and consumer segments for that. So that seems to be very well.

Automotive also tends to be another strong one for us. We do get some questions on, gee, everyone else is down and had trouble on automotive. We're actually fortunate enough in that we are small enough in automotive that we can still grow pretty well, and we're in kind of the growing parts of the market. We're talking about vehicle connectivity, whether we're going to 5G, in-vehicle entertainment and telematics, things like that. And so we've seen some good growth there. And then finally, on the infrastructure side, we're kind of finally behind inventory corrections, and we're starting to see some growth in the infrastructure side, particularly with our timing products and our power products.

So in general, we see pretty good tailwind across the board in our broad markets business. Inventory is low. And we're keeping a close eye on it, right? There's lots of kind of turbulence in the market, as you point out. So we're trying to take a cautious and prudent view on that. But so far, it seems to be good.

And which of those markets, if we go back to the Qorvo combo, which of these sort of subverticals within broad markets, which are the subverticals does the combination help you the most in?

Defense, right. We don't have any -- they bring GaN for both RF GaN and power GaN. So we don't have that today. We have a small defense business today. We're in some missile systems. they bring a lot more of that. So I think that's a huge plus. And given the geopolitical climate, I think that drones and electronic warfare and all that stuff is going to be around for a long time, and I think that really gives us a good spot in that space.

And can you sort of double-click on -- as you exited last quarter, double-click on the broad markets business and break it down by each of these -- each of its segments. I kind of think of it as being roughly 1/3, 1/3, 1/3. It's not exactly that. But can you just talk about each of those markets? And you did mention that the infrastructure piece was hit hardest. Can you just go through...

So if you look, we've got kind of the infrastructure space, which includes WiFi space. And so that one is growing pretty well. We've got WiFi 7 on the back of that. So that's going -- that one is going pretty good on that side. Did I say infrastructure, I say IoT. I don't know which one I said. We've got the automotive side, which includes connectivity and some of the elements there. That's probably second growing. And then third, we've got the infrastructure side, which includes power and power elements there from that side.

So that's about right. You've got it there. Our top grower, I think, is probably on the WiFi side in terms of dollars and magnitude. Auto is probably the second biggest grower. And then the timing business, which is timing and power is growing quite well on the infrastructure side.

And WiFi 7, where do we stand on WiFi 7? Is it still very early days?

I would probably say it's in the third inning of a 9-inning baseball game, right? It's probably where it is. I mean we still got -- we're going to see good growth into '26 from that. And we're starting to see -- I mean it's -- we've got more demand than we can fulfill on that side.

And what do you think the long-term growth profile is of the broad markets business? And I guess, personally, how much did this factor into your decision to join Skyworks and -- well, in the case of Phil Carter's case come back. So...

Well, for me, when I joined, what I loved about it is I love businesses where there are tough problems to solve. I did not get scared by the customer concentration element because, frankly, when you make the products we have, we have the best customer in the world, and we're everywhere in them. I think of this as a wireless world. And I think the opportunity to diversify ourselves into other businesses is a very powerful value creator. And I think the combination with Qorvo just enhances that capability. So I couldn't be more excited.

I can't wait for the deal to close, and we're going to go from there. And I think Phil Carter coming back, right, is -- I mean, I think he's here somewhere. You can ask him afterwards, but I think this is a strong statement coming back. He knew what he was getting into.

Maybe we could talk about you're sort of doing your own self-help along the way. You're not sitting around waiting for the deal to close. And you're already consolidating a site into Newbury Park. You guided gross margin to 46.5% for Q4 despite revenue coming down sequentially. So can you just talk about sort of how the consolidation of these sites helps gross margin and what the path the puts and takes will be on gross margin?

Yes. If we look at -- so obviously, we made -- the factory consolidation was one, obviously, probably should have been made a while ago. It was kind of one that we quickly decided to go get done. It's an example of us taking a look at it and consolidating that. We still have to migrate some of the long-life product lines out of there. So we probably won't see the effect of that until starting in fiscal '27. It should include -- improve both operating expense and capital efficiency from that side.

When we look going forward, right, we've got investments in our Mexicali facility in terms of assembly test. And we also continue to work on cost-down solutions across the board. We should also benefit from mix as our broad markets business continues to outgrow the handset business, that should help us on the mix side as well. I think shorter term, the mix is really going to be dependent on -- the biggest lever is mix between mobile and mobile and broad. That's probably the biggest lever we have.

And can you talk about what you've done to streamline costs otherwise? I know you've recruited new people. I think you've consolidated the product marketing into individual businesses. Can you just talk about all that?

Yes. I made a lot of changes. About 25% of my staff is new, and some of it was just bringing in some fresh air. And one of the things I did immediately was actually put the -- we previously had the product marketing people right in with the sales and marketing people and the business units in effect were just engineering organizations. That really created a problem in that the engineers weren't actually getting out there talking to customers enough. So I pretty much broke that down. We hired a new sales and marketing leader and the difference already has just been tremendous in terms of the customer engagement, the customer [indiscernible] getting out there.

We need to have more touch points with the customers. And one of my thesis -- one of the prevailing theories that was -- that existed before I showed up was that our broad markets business distracted us from our large customer business. I actually think it's the other way around. I think the large customer just distracted us from all these other things, and we haven't done a good job of doing that. So for me, that kind of unlocks some of that. And there'll be some expected savings that come out of that. And then secondly, I just consolidated 2 of the businesses units into one, and I eliminated some executive positions. And really, that was to get better leverage in R&D across the businesses, but also just to shake things up a little bit and sometimes bringing in some new talent is like listening to new music or breathing fresh air. It's a different way to look at things and you really drive some change and improvement that way.

Yes. I mean, like if I were going to play devil's advocate, I would say, well, the thesis was to sort of diversify away from your broadest or from your biggest customer. And now on a combined basis, after this deal goes through, you're going to have $15 to -- $14, $15 of content. I mean it's going to be somewhere in that range, which is commensurate with what your content is at Google basically. So it doesn't -- I mean, yes, maybe from a percentage perspective, it's a little bit lower, but it's still pretty high.

What I doubt for you there is, a, I think what we're going to get out of it is going to be less volatility. Like customer concentration in my mind, the concern is with respect to volatility. If you look at someone else who has high concentration in that customer, you pick Cirrus Logic, for example, they have even higher customer concentration. They trade a higher multiple. Why? Less volatile and higher gross margins.

So if we can actually get to the point where we've got a stable business that's that level of content such that the single socket risk goes down and you have that as a stable mid-single-digit grower that throws off a lot of cash and then you can start investing in complementary technologies that allow you to grow your business at above market rates, then I think we're going to start seeing some of the multiple expansion and some of the gross margin expansion that I think will come in time. But none of that is underwritten in terms of the deal.

And when you -- you've met with a lot of folks here and you've done a lot of meetings since you came to the company. What have investors overlook?

Well, I think that, one, they overlook our broad markets business at all. I think that's totally underappreciated. I mean there's -- if you look at where we've got fantastic strength in WiFi and timing and power electronics. I don't think we spend enough time talking about that at all. I think the other thing people don't really understand is just the depth of the technology and the capabilities that we have. In some ways, we get a lot of questions around what's happening with one particular socket or another and everyone's talking about how challenging it is to work with that one customer.

When you make the products we do, this is the best customer to have. I'm proud to have them and I want to win their product every day. And the world is going to be wireless, and it's going to be wireless for as far as the eye can see. So if I can use this time where there's light shining elsewhere to go and kind of build my capability and get stronger and bigger coming out of this, right? If you look at other companies that had our footprint a decade ago, they're a lot bigger than they are now. And I think that's kind of what I think there's a tremendous opportunity for. And I just -- I can't wait to get it done.

And do you think that post deal -- I mean, both of you have been deemphasizing China. Post deal, do you see any opportunity to reverse that? Or is that something that you're not even interested in?

No. So I think I would clarify the point as the -- it goes back to we make high-performance, low-power solutions. To the extent that customers around the world want that and want to pay for that, then I'm happy to have that. But if they want us to sell a Ferrari at a Camry price, we're not going to be doing that.

So do you think that on a combined basis, do you think that the Chinese customers will come to you and maybe see more value so that, that does open up that opportunity for you...

I think I'm very -- certainly very open to have those discussions and those are discussions we're having why we've been successful with -- our largest customer and the other customer in Mountain View is they value what we bring to the table and they recognize how that differentiates their products. To the extent we have other customers globally that are interested in that and are willing to pay, then I'm happy to have those conversations.

And when I looked at your financial model for the merger, it's higher than what -- if I took the Street numbers, combined them and I took your synergies, it was -- it's a decent bit higher than what the Street was expecting plus the synergies. So that really speaks to some of the self-help that you're going to do between now and then. And can you just talk about maybe like what else you can do? I mean, obviously, you've announced some facility consolidation. But like where is the line stop where you're like deal is going to close in whatever, a year or so we don't want to do too much before the deal closes. How much of a window do you have to truly do self-help?

Yes, it's a good question. I think some of the self-help there is really driven by -- if you look at some of the mix shifts, right? I mean you're probably talking about the gross margin and operating income line. If you look at some of the self-help, it's really based on some of the gross margin mix shifts that happen. And you look at what's happening with Qorvo, they're actually deemphasizing their China exposure, Android exposure is going down. So they're going to have mix shift within the mobile business, which should benefit them. And then they're going to have -- we collectively are going to have the same dynamics.

So our mix inside mobile should get better. And then our overall aggregate mix should get better as we have more handset business. And then we've got some of the other actions we talked about. In terms of other self-help, I mean, the one interesting thing as we go through the integration planning process, we obviously have to keep the company very separate. But we also know, I mean, they kind of look like us, right? We kind of have a pretty good idea. And to the extent we see something that we go, geez, we should be doing this anyway regardless of the deal closes, then I think we're going to be taking an active look at that.

So you're proceeding on an independent path until it becomes abundantly obvious that the deal will close and then you...

I think we have to proceed an independent class until it closes itself. And we can do integration planning and systems and processes and do some things like that. I mean one of the things is we use the same ERP system. So that's already helpful.

And just to be clear, you've not baked in any revenue synergies in that model at all.

No.

Great. Okay. Well, that's all the time we have. Thank you, Phil.

Great. Thank you very much. Thanks for your support.

Thank you for standing by. My name is Kathleen, and I will be your conference operator today. At this time, I would like to welcome everyone to the Skyworks Fourth Quarter for year 2025 Earnings Call. [Operator Instructions]

Thank you. I would now like to turn the call over to Raji Gill, Vice President of Investor Relations of Skyworks. Please go ahead.

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' Fourth Fiscal Quarter 2025 Conference Call. With me today for our prepared remarks is Phil Brace, our Chief Executive Officer and President; and Philip Carter, Senior Vice President and Chief Financial Officer for Skyworks.

This call is being broadcast over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website complete after the conclusion during the call.

Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, today's discussion will include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

Lastly, for detailed information regarding the Skyworks and Qorvo combination announced on October 28, I encourage you to review the press release investor presentation and related materials available on our Investor Relations website. Today's call, however, will focus on our fiscal fourth quarter and full year 2025 results as well as our outlook for the December quarter.

With that, I'll turn the call over to Phil Brace.

Thanks, Raji, and welcome, everyone. Before getting into the quarterly results, I want to take a moment to reflect on what we've accomplished over the past few quarters. One, we've had three straight quarters of solid execution with both revenue and non-GAAP EPS exceeding expectations. We're seeing strong momentum across mobile and broad markets as our teams continue to execute.

Two, we streamlined our sales and marketing teams to be more customer-focused and enhanced collaboration with the engineering teams, appointed a new executive to lead global sales and welcomed a new Chief Financial Officer, further strengthening our leadership team as we position the company for its next phase of growth.

Three, last quarter, we announced the consolidation of our Woburn facility to improve our long-term cost structure and support healthier gross margins.

And finally, for last week, we announced an agreement to combine with Qorvo, a transformative deal that upon closing will add meaningful scale, diversification and a broader highly complementary technology and product portfolio.

Moving to the quarter. Skyworks delivered strong results, fueled by a significant upside in mobile and sustained strength across broad markets. We posted revenue of $1.1 billion, delivered earnings per share of $1.76, and for the full fiscal year, we generated $1.1 billion of free cash, representing 27% free cash flow margin.

In mobile, results again were strong, with revenue up 21% sequentially and 7% year-over-year. Our outperformance reflects healthy sell-through and a richer product mix at our top customer, along with continued growth in Android. Looking ahead, we see multiple drivers of long-term RF content growth. Internal modem adoption, added AI functionality and higher RF complexity are expanding our opportunity inside the smartphone.

We're also delivering more performance in smaller form factors supporting new features within existing sockets. With our deep RF expertise, strong customer relationships and manufacturing scale, we are well positioned as the next phase of wireless innovation take shape.

Broad Markets has delivered another solid quarter. Demand was broad-based across edge IoT, automotive and data center. In edge IoT, WiFi 7 adoption continues to accelerate across home, enterprise and industrial applications. Customers are moving quickly to upgrade platforms that require faster connectivity, lower latency and better power efficiency. Backlog and order trends remain solid and we anticipate continued strong adoption entering fiscal '26. We're also making good progress on next-generation WiFi 8 programs to extend that leadership.

In automotive, design activity remains robust as vehicles become more connected and intelligent. The run rate exiting fiscal '25 represents a new record for our automotive business, surpassing our previous high in fiscal '23. We're entering next year with a robust pipeline of design wins across 5G telematics, infotainment and power management systems across a broad set of global OEMs.

In data center infrastructure, activity continues to rebound as customer inventories have normalized. The recovery that began in mid fiscal '25 has continued to gain traction and we see a favorable setup for further growth into fiscal '26. This quarter's momentum was supported by broad-based demand, including increasing timing design win activity for next-generation 800-gig platforms for data center and cloud infrastructure.

Taken together, Broad Markets has evolved into a more balanced and durable growth engine for Skyworks. Now an approximately $1.5 billion business with positive momentum over the past 7 quarters, expanding customer reach and margins above the overall corporate average.

Before we move into the financial details, I'd like to take a moment and welcome Philip Carter as our new CFO. Philip brings extensive financial and accounting experience in the semiconductor space, having previously served as Skyworks' Principal Accounting Officer before becoming the Chief Accounting Officer at AMD. We're happy to have him back and look forward to working together as we continue building Skyworks for the long term.

With that, I'll turn the call over to Philip for a discussion of last quarter's performance and outlook for Q1 of fiscal '26.

Thanks, Phil. I'm excited to be back at Skyworks and to work again with such a talented team, having spent many years here in my career, it's great to see the company's continued momentum and strong execution. I look forward to partnering with Phil and the rest of the leadership team to drive long-term value for shareholders.

Now turning to our fourth fiscal quarter results. Skyworks delivered revenue of $1.1 billion, exceeding the high end of our guidance range. During the quarter, our largest customer accounted for approximately 67% of revenue. Mobile represented 65% of total revenue, up 21% sequentially and 7% year-over-year, supported by stronger sell-through at our top customer and continued growth in Android. Broad Markets grew 3% sequentially and 7% year-over-year, driven by growth across edge IoT, automotive and data center.

Gross profit was $511 million with gross margin of 46.5%. Operating expenses were $247 million, slightly above the high end of our guidance range, primarily due to higher employee incentive accruals tied to stronger quarterly revenue. We're keeping a disciplined approach to spending, investing where it matters most for future growth.

Operating income reached $264 million, translating to an operating margin of 24%. Other income was $11 million, and our effective tax rate was 4.1%, resulting in net income of $264 million and diluted earnings per share of $1.76. For the full fiscal year, we generated $1.3 billion of operating cash flow and capital expenditures of $195 million, resulting in annual free cash flow of $1.1 billion or 27% free cash flow margin. We do expect free cash flow to remain solid in fiscal '26 but below fiscal '25, given the lower expected revenue base and more normalized working capital trends, particularly as we no longer expect a tailwind from inventory reductions.

We ended the quarter with $1.4 billion in cash and investments and $1 billion in debt, maintaining a strong balance sheet and ample flexibility to support our strategic and financial priorities.

Looking ahead to the first quarter of fiscal '26, we expect revenue to be between $975 million to $1.025 billion. We anticipate mobile to decline low to mid-teens sequentially. We expect broad markets to be up slightly sequentially, representing 39% of sales and up mid- to high single digits year-over-year. Gross margin is projected to be approximately 46% to 47%. We expect operating expenses between $230 million and $240 million as we continue to fund key R&D initiatives while maintaining tight control over discretionary spending. Below the line, we anticipate approximately $4 million in other income, an effective tax rate of 10% and a diluted share count of 150.5 million shares. At the midpoint of our revenue outlook of $1 billion, this equates to expected diluted earnings per share of $1.40.

With that, I'll turn it back to Phil for closing remarks.

Thank you, Phil. A heartful thank you to our employees, customers and partners. Your hard work and support fuels our success and sets the stage for continued leadership and growth. Operator, let's open the line for questions.

[Operator Instructions] And your first question comes from the line of Harsh Kumar of Piper Sandler.

I guess, Phil and Phil, congratulations on solid results, what I think is a very good guidance as well. Phil Brace, I had a question for you. It was not that long ago that your company was telegraphing a loss of content at your largest customers, but all things considered, when I look at what you guys have done, your revenues are holding really well. I mean, extremely well. And I was curious what has changed or what didn't happen or maybe what went right for you, was it units? Or was it share or just traction in other areas that is causing you to outperform relative to that prognosis maybe 6 to 9 months ago?

Yes. Thanks, Harsh. It's a good question. Look, obviously, we've been pleased with our results. The mobile results were stronger than expected and our guide reflects that.

I think there's a number of factors for that. First, obviously, units are better than expected. Our customers -- our collective customers, both our large ones as well as Android ones are seeing very positive uptake from the latest phone models, which I think has been successful. We've seen some of that. Frankly, we've also seen some mix in the underlying phones that have been geared towards our content as well. So we've had a little bit about the unit benefit and a mix benefit, it's -- obviously, as you can imagine, it's a little difficult to predict that three or four quarters out, right? So there's a lot of things you can't predict out. The guidance going forward does comprehend the content comments that we made previously. So I would say it's a combination of both. And I think we've executed well in spite of all that.

Very well. And for my follow-up, if I can ask you, you mentioned in your comments that you've streamlined sales, which I think was part of the problem. I was curious what just at a very high level, what you've done and how you went about it and how is it benefiting the business from here?

Yes, it's a great question. I mean, obviously, recruited in a new executive, which I've been really happy with sometimes just having some fresh air is helpful. It's like listening to music, it brings a fresh air. It's a different perspective on the way to do things.

From a structural perspective, what we've done is we've kind of put what I'll call the traditional product marketing functions, which were previously integrated into one group. We actually put that back into business units to really drive tighter alignment between the engineering and the product line road maps and frankly, have our sales team focused on what they should be focused on, which is revenue generation and customer acquisition.

Your next question comes from the line of Christopher Rolland of Susquehanna.

So I guess, first of all, for Phil, maybe on mergers and/or divestitures, obviously, besides big pending one. I think the story here at one point was to diversify outside of handset and a single large customer seems like you're actually doubling down the other way instead of diversifying. But are there still opportunities even when this is pending to do either mergers and divestitures. And is there a theme that could be involved here on the merger side, whether it be analog or IoT, obviously, without giving anything away, just -- I think we're waiting for a big strategic kind of update from you and maybe we were sidetracked or side-swiped by the Qorvo news. Thoughts on this diversification outside.

Well, to be frank, I kind of disagree with your characterization on a couple of comments, but I'll say, look, when we go back to the Qorvo deal, I think you should just go back to the data that we talked about last week, but I think this gives us both scale and diversification. The customer concentration should actually go down. And I view this as a concentration in wireless, not just handsets. And so I think that solves a lot of both strategic and financial challenges for the company, and I'm excited about the combination.

With respect to what occurs in dependency, both of our companies need to operate independently. We'll continue to do that. Obviously, right, they're subject to certain operating covenants that we both need to live through. And so we're going to continue to be focused on running our businesses and do that. I would not expect any major transformational activities and the like. And from my point of view, this represents the biggest deal the company has done in its history and one of the biggest transformation deals in the RF industry in general. So I characterize -- disagree with your characterization being sideswiped but nevertheless, thank you for the question.

It won't be the first time that someone's disagreed with me and vocalized it. Perhaps, secondly, it does sound kind of your prepared remarks, actually, from your answer to Harsh's question. It sounds like you guys may be a little bit more optimistic on Android. You're seeing better things there. Does the kind of forward outlook, has it changed at all? Are you perhaps a little bit more optimistic on addressing Android in the future? Or do you still worry about kind of the commoditized offerings or treatment of RF in that space?

Yes. I think, honestly, our biggest customer in that space is a mountain view of base customer, and that's -- we've got a very strong footprint there, and they tend to value the performance and integration and features that we can provide. I think that, that's -- I guess, I would say the theme is us focusing on the premium part of the segment that value the integration performance that we can provide, and that's where it is. And so you've seen us kind of I'll say, defocus away from the more lower-end commodity space, it doesn't value that. And so I think that no change from our view on that area and our Android strength is really on one major customer in sentimental view.

Your next question comes from the line of Krish Sankar of TD Cowen.

This is Hadi for Krish. Congrats on the results. I have a question on -- if we exclude the biggest customer, it looks like your revenues were up like 50% year-over-year. How most of that is driven by the units versus content? And how we should think about revenues outside the main customer going forward? And I have a follow-up.

So the first part of your question was about the business within the main -- I missed the first part of your question, if you wouldn't mind please repeating that.

Yes, if we exclude the biggest customer, your revenues were up like 50% year-over-year. So I wonder what's driving that? Is it units? Is it content? What's the biggest bucket? And how we should think about that going forward, that segment?

I think you're just referring to our Broad Markets business on that side, right? I'm just kind of looking -- or maybe Phil will help with that.

Yes. So as we look at our broad markets business, it's really strength across the board as we look at automotive, IoT, edge I mean we're seeing strength in kind of a lot of different markets within the broad market space, and that's really driving the growth outside of our largest customer.

All right. And a question about China. Your exposure there is below 10%. Your peer is trying to exit the market. So I think -- I wonder like how you guys think about the China market? And if you're comfortable with the level of exposure there today? Or do you have any plans to reduce that going forward?

I don't think we're changing our focus there. Look, our focus is really on the premium space in that segment. And I would like to point out, beyond handsets, we have other business there as well, including the automotive space and other areas where we have presence. We mentioned BYD and the like. So we do have other business there. We're really focused on the customers and the opportunities that will value the technology and the performance that we bring. And so to that extent, particularly for some of the higher volume, lower SP handsets, we're choosing not to participate there because they're just economically not attractive businesses. And that hasn't changed, and our focus won't change there.

And your next question comes from the line of Jim Schneider of Goldman Sachs.

I was wondering if you could maybe talk about some of the dynamics you're seeing in the broad markets business. I mean clearly, you're seeing a recovery across the space and across the peer group. But I'm kind of curious given some of the data center or other dynamics you called out, Phil, how you would encourage us to think about the long-term structural growth rate of that business? Is this something that could easily be mid-teens long term? Or is that maybe a little bit too aggressive and just how we should think about that from a long-term perspective.

Yes. I think we're looking at it as a long-term kind of double-digit grower. That's kind of where I would have it, where we've kind of got it pegged into and we're modeling and kind of shorter term and even in the medium term, I mean, some of the growth drivers behind that include WiFi, WiFi 7, moving to WiFi 8. You think about some of the strength in automotive in terms of connectivity, in-vehicle entertainment, some of the broadcast radio, things like that. I think that's going to go well. And then the infrastructure and cloud space timing and power opportunities. So we feel like we're attracted -- embedded in segments that have higher growth opportunities and are characterized by longer revenue cycle. So we think a double-digit growth is definitely possible in that business, and that's what we're building for and investing for.

And then maybe as a follow-up, if you can maybe kind of speak to the growth rate you expect from OpEx from here on out. Can you sort of hold this December OpEx run rate into say, the first half of the next calendar year. Should we expect some kind of step-ups from here? Or how should we think about the structural run rate in that given the investments you're intending to make?

Yes. So as you look at the fourth quarter, we did have an extra week in there, which added about $7 million to the current quarter. As we look forward for the guide that we provided looking at targeted investments, but we don't anticipate anything above normal inflation as we maintain discipline over our spend.

And your next question comes from the line of Karl Ackerman of BNP Paribas.

This is Sam Feldman on for Karl Ackerman. So Android was just under $100 million last quarter, driven by the Google product ramp. And it sounds like you saw strong unit volumes this quarter. So can you give us a sense of the magnitude and direction of the Android business this quarter and generally discuss the puts and takes of achieving $400 million run rate?

Yes. Thanks for that. This is Raji. So as you said, yes, Android was roughly a little bit under $100 million, and it was up sequentially. It's primarily driven by Google. We expect it to increase again in the December quarter, again, driven by Google.

Your next question comes from the line of Edward Snyder of Charter Equity Research.

So it's well understood that the mix that your largest customer isn't paving the internal solution, which is actually great for Skyworks, given you've got so much more content on the base model. So I'm curious, how much of the strength that you're seeing there is due to, say, mix versus units? And more importantly, earlier this year, the guide was for a pretty steep decline overall in the fourth quarter. You've done better than that. But that was primarily just for the first couple of quarters because the mix of phones doesn't favor the baseball in the first several quarters, but the Pro Max are discontinued over the first year. So your base model runs for a whole year after that.

So I'm just trying to get an idea. I don't want you -- I know you haven't got a forecast out too far, but the strength you're seeing in content probably shouldn't fade as the high-end models disappear in the next, whatever, 6 to 9 months, and you should -- this should provide you a pretty good base for increases next year. Is that a fair assessment?

Well, I think as you pointed out, and I think you kind of -- thanks as for the question, you probably -- I think you may have written a note included into this as well. It's actually very difficult to afford. First off, we can't. Second off, we shouldn't. And third off, it's super difficult to do because the actual demand and how it plays out depends not only on the mix of units within the phone, but the balance of phones between generations as well. And so some of the strength you saw in emerging markets could have been from different phone models and then there's mixes that we go in between there as well. I would say that it's fair to characterize that our guidance when we guide going forward, that includes our best understanding of where we're going to be both units and content-wise and I think that we'll just continue to guide that one quarter to the other. It has -- obviously, the net result has been better than we expected at this point, and we'll continue to guide one quarter at a time.

But you got to benefit from both mix and units?

Yes, I think that's probably fair to say, both mix and units, yes.

Great. And then I know it's too early to project because we haven't gotten to down select now either, but -- and I'm not looking for guidance here, but you know what you're up to bat against. Everybody knows what they're doing for the full year in the design competition. So you know what you're competing for and I know you've been kind of modest on your guidance for next year. Are we still kind of in that range, too? Or should we be thinking about maybe gains in modules that you had shared previously that maybe you're getting back more than you had on this year?

Yes, it's too early to comment on that, as you might know, I mean, I think that clearly, our content direction has been a downward sloping line. I think I've talked about that. The goal is to change the slope of that line, and I think we'll get more clarity on that in the coming weeks and months, but too early to comment on that. At this point, it's a highly competitive environment, but we feel confident about our technology and the products we're delivering, but it's a highly competitive environment, and we'll see how it plays out.

Your accounts receivables shot up. It's the second highest going back for, I don't know, at least 5 or 6 years. And I know it's stacked up because of the September quarter and the launch and all that. But I'm just trying to get -- is there something else going on that's a good incidence of both Google and your largest customers? So we're up 51% or ish sequentially. Is there something else in there that we should be thinking about?

Yes. There's nothing unusual in AR. It really has to do the linearity of revenue and the timing of collections, but nothing out of the ordinary.

Your next question comes from the line of Peter Peng of JPMorgan.

Congratulations on the results. I just want to follow up on the last question. So at your largest customer, is it the mix within the current generation? Or is it a better mix of the prior generation model that's driving better-than-expected content? Maybe you can clarify that.

It's all of the above. I mean it's better units. You've seen all the press, it's all of the above. We really can't get -- I mean, we really can't get into too much more on that. It's all of the above. It's better mix, it's better content. It's better -- it's lots of better results that are all included in the guidance. We can't really get into more than that.

Okay. That's fair. And then I think your fair -- your Broad Market has been growing for the -- it's almost 7 quarters in a row. And you guys are kind of in this high single digits. I think you guys have like three big buckets, your auto, your infrastructure and then your consumer IoT. Maybe if you can kind of give us a characterization of what is kind of back to normal growth? And what buckets are still kind of the more trend line growth?

Yes, sure.

Yes, that's a great question, Peter. So if you look at the guidance for broad markets, we're guiding it to be up slightly on a sequential basis. On a year-over-year basis, it's up kind of mid- to high single digits. The growth really is across the board, but it's being led primarily by WiFi 7. The WiFi 7 adoption is quite strong. The backlog is very strong entering into fiscal '26. So there's a lot of momentum there.

Second, we mentioned that the automotive business exiting fiscal '25 is at a record. So that's almost $65 million a quarter in automotive run rating exiting fiscal '25, and we feel good about the pipeline going forward.

And then lastly, the data center and infrastructure business, after kind of several quarters of inventory digestion by a lot of our customers, we're starting to see those customers start to rebuild inventory again. And we're also seeing some nice design wins, timing design wins on some 800 gig platforms that we mentioned on the prepared remarks. So all three are growing. We do expect some seasonality as we enter into fiscal '26, which you would expect after you burn off some inventory. So I would kind of factor that in. But overall, we're moving in the right direction in Broad Markets.

Your next question comes from the line of Craig Ellis of B. Riley Securities.

Thanks for taking the question. I'll echo the congratulations on the execution. Phil Brace, I wanted to start with one for you. So in your prepared remarks, you mentioned some key executive changes, bringing in a new CFO, a new head of sales. The question is, as you look across the broader organization, do you feel like you have the right team in place across all the other functions or do you expect there to be additional changes and to what effect, whether it be in product, manufacturing, operations, et cetera?

That's a great question. I feel great about the leadership team that I have in place now, and I'm not anticipating any changes.

All right. And then the second question is for Philip Carter. So it's a 2-parter one. As we look at the business, we're clearly tracking well in the fiscal first quarter. But can you remind us what fiscal second quarter seasonality is in the eyes of Skyworks. And related to that, as we think about some of the working capital dynamics of the business, how should we think the company is planning to manage things like inventory going into what is a seasonally softer period for its biggest segment for a couple of quarters.

Yes. So I guess on the first question, we don't guide beyond one quarter out. I think, generally speaking, it does look like normal seasonality. In terms of working capital, so we did benefit greatly in terms of free cash flow in fiscal '25 as a result of burning down some inventory. I do not anticipate that to repeat next year. So there is going to be some inventory build as we get near the end of the year. But yes, otherwise, the business in terms of inventory is running well. There's low inventory levels in the channel. And so we have pretty good visibility there. So yes, that's what we're seeing.

And there are no further questions. I will now turn the conference back over to Phil Brace, the CEO and President of Skyworks for closing remarks.

Great. Thanks for participating in today's call. I look forward to speaking with you at upcoming investor conferences throughout the quarter. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good day, and welcome to the Skyworks Investor Update Conference Call. [Operator Instructions]. As a reminder, this call may be recorded.

I will now turn the call over to Raji Gill, Vice President of Investor Relations and Corporate Strategy. Please go ahead.

Thank you, operator. Good morning, everyone. With us today are Phil Brace, Chief Executive Officer and President of Skyworks; and Bob Bruggeworth, Chief Executive Officer and President of Qorvo. This call is being broadcast live over the web and can be accessed from the Investor Relations section of Skyworks website at skyworksinc.com and Qorvo's website at ir.qorvo.com.

Before we begin, I'd like to remind everyone that during the course of this conference call that management of Skyworks and Qorvo may discuss forward-looking statements reflecting their views with respect to the proposed transaction between Skyworks and Qorvo.

Please note that today's discussion will include forward-looking statements and as such, are subject to risks and uncertainties. These risks and uncertainties include those risk factors discussed in the most recent reports on Forms 10-Q and 10-K filed by each company as well as those discussed in the joint press release announcing the proposed transaction. These and other risks and uncertainties could cause actual results to differ from those contained in our forward-looking statements.

Please review the disclaimers in today's press release and investor presentation and in the SEC filings, including the Form 8-K and Form 425 furnished today. Both companies have also posted a detailed investor presentation to their respective Investor Relations website. I encourage you to download the slide deck and follow along during today's call for additional context on the transaction.

In a separate press release issued today, Skyworks announced preliminary financial results for its fourth quarter and full fiscal 2025, available on Skyworks' IR website. Also in a separate press release issued today, Qorvo announced preliminary financial results for its fiscal 2026 second quarter available on Qorvo's IR website.

With that, I'll turn the call over to Phil Brace.

Thank you, Raji. Good morning, everyone, and thanks for joining us today, especially on short notice. Today, we announced a transformative milestone for our industry and both Skyworks and Qorvo. I'm glad to be joined by Bob to discuss this exciting transaction.

It's great to be here with you, Phil. As Phil just noted, today marks a remarkable moment for both our companies and our customers. Phil and I will take you through the benefits of the combination on this call, and we'll both be available for questions at the end.

Thanks, Bob. Skyworks and Qorvo are combining to create a U.S.-based global leader in high-performance radio frequency, analog and mixed-signal semiconductors with a combined enterprise value of approximately $22 billion. The transaction will bring together 2 of the most respected names in RF, combining complementary product and technology portfolios, enhancing R&D scale and expanding customer reach.

At closing, Skyworks and Qorvo shareholders will own approximately 63% and 37% of the combined company, respectively. Qorvo shareholders will receive 0.96 shares of Skyworks common stock for each share of Qorvo common stock plus $32.50 per share in cash. The Boards of both companies have unanimously approved the transaction.

Before we get into the details, I want to take a moment to highlight the key takeaways from this compelling combination. Together, we will have enhanced scale with revenue of $7.7 billion and adjusted EBITDA of $2.1 billion. A $5.1 billion mobile business positioned to innovate to address rising RF complexity across a broad range of complementary technologies, a $2.6 billion diversified broad markets platform with a growing and profitable TAM. An advanced domestic manufacturing position and improved factory utilization.

Additionally, this transaction will be immediately and meaningfully accretive to non-GAAP EPS post close with $500 million or more of advanced cost -- annual cost synergies within 24 to 36 months post close.

Now let me walk you through some of the key points in further details. Scale. With revenue of approximately $7.7 billion and adjusted EBITDA of $2.1 billion, the combined company will have broader R&D resources and a stronger manufacturing platform to compete against larger global players. In addition, we will have a more balanced revenue debt base across markets, including mobile, defense and aerospace, edge IoT, AI data center and automotive. The combination strengthens our customer set, improves efficiency and enhances predictability through the cycles.

Looking ahead, our healthy balance sheet and favorable capital structure will enable us to continue to invest in the business and drive shareholder value over the long term.

In mobile, the combination will create a $5.1 billion business with complementary technologies, expanding our reach into areas such as antenna tuning, envelope tracking and power management. This best-in-class RF portfolio will increase our SAM across platforms, driving greater revenue stability while strengthening our position as RF innovation accelerates into the future.

In broad markets, the combination diversifies our revenue and customer base and increases our TAM by creating a $2.6 billion business across multiple end markets.

In defense and aerospace, Qorvo brings a long-standing relationships with Tier 1 defense primes and deep expertise in GaN and GaAs across mission-critical applications, including land, sea, air and space radar systems, drones, electronic warfare and satellite communications.

In Edge IoT, the combination allows us to deliver a complete portfolio of connectivity solutions for broadband infrastructure, industrial automation and smart energy.

In AI data centers, we see compelling opportunities with power management, along with precision timing solutions to enable customers to meet the escalating power and performance demands of accelerated AI workloads.

In automotive, we'll have complementary product lines in connectivity, power and digital radio that can unlock design wins for next-generation vehicles. Broad markets will be a key platform for the company in the future.

Financials. We expect the transaction to be immediately and meaningfully accretive to non-GAAP EPS post close. We expect to achieve $500 million or more of annual cost synergies within 24 to 36 months post close when the companies are fully integrated. The synergy opportunity is both meaningful and actionable.

In manufacturing, we can drive fab optimization and higher utilization rates to support healthy gross margins through the peaks and the troughs of the business.

In SG&A, we plan to simplify operations and eliminate unnecessary complexity and duplication. Lastly, the combined entity can improve R&D efficiency by focusing resources on strategic growth areas and accelerating new product development.

Turning to regulatory approval. We've considered the landscape carefully and have major customer support. We're confident that the transaction enhances customer choice by delivering competitive solutions in applications where complexity is only increasing and the competitive landscape remains intense.

We expect the transaction to close early in calendar year 2027, subject to the receipt of required regulatory approvals, approval of both companies' shareholders and the satisfaction of other customary closing conditions.

In closing, I'd like to acknowledge Bob for his leadership and role in building such an exceptional organization with a rich heritage of innovation. We look forward to Bob's continued guidance and engagement as a member of the Board of Directors. We're excited for the future together with Qorvo.

Thanks, Phil. We are bringing together 2 organizations with a shared culture of innovation and commitment to technological excellence and industry leadership. Qorvo's technology has been at the heart of systems that connect, protect and power the planet.

We have a proven track record as innovators of new RF and power technologies and have made advancements in design, manufacturing and communications. This combination creates a pivotal moment for our combined customer base and the shareholders of the future company.

The RF semiconductor industry has changed significantly over the past decade with customer consolidation and growing competition from international competitors. In this environment, scale matters. Through this transaction, our combined company will have the size, scope and technological breadth needed to compete effectively around the world in mobile and broad markets.

As one company, our world-class engineering talent will include approximately 8,000 engineers and technical experts and over 12,000 issued and pending patents. With our enhanced scale and combined product and technology portfolios, we can develop advanced system-level solutions even faster, expand customer reach, meet growing customer demand and make an even bigger impact in both mobile and broad markets. Touching more on the mobile and broad markets businesses.

We're excited for the combined company to build on Qorvo's unique mobile capabilities with expanded R&D scale to invest in next-generation technologies for our customers. We also expect the combined company's broad markets platform to benefit greatly from Qorvo's deep experience in defense and aerospace industry with a significant product portfolio of space, military communications, electronic warfare, radar and drone solutions.

We've also received support for this transaction from Starboard Value, one of our largest shareholders. As we look ahead, we're confident this transaction is the best path forward for our stakeholders, and we're excited for what's in store.

Thanks, Bob. We're excited to see all that we can accomplish as a combined company and look forward to sharing more in the future as we move towards closing. Operator, let's open the line for questions.

[Operator Instructions]. Our first question coming from the line of Christopher Caso with Wolfe Research.

Congratulations on getting the deal done. I guess for the first question, you mentioned that you had support from customers in this deal. Can you elaborate that a little bit to what's been the feedback from customers so far? And obviously, it's probably somewhat limited in terms of what you can talk to them about, but just some more detail on that matter, please?

Yes. Thanks for the question. You might imagine that we wouldn't kind of undertake a transaction of this magnitude without having through first checked with some of our largest customers. And we might imagine that we've had some discussions in this area in that regard, and we certainly have their support in this area. So I think that's about all I can say on that topic.

Got it. Okay. With regard to the synergies, could you go into a little more detail on -- in the $500 million of synergies, where is that coming from with regard to both OpEx and some manufacturing consolidation that might be achievable through this?

Yes. I think as we mentioned, we've got $500 million or more of annual cost synergies within 24 to 36 months of close, I would say more than half of them are likely OpEx synergies, the other half or the other a little less than half will be COGS synergies. The timing of that synergy realization is really going to be dependent partly on when we close and then some of the decisions we need to make to kind of maintain customer continuity through that period. So I'd say it's slightly weighted towards OpEx, driven by duplication really in SG&A.

And then on the COGS side, optimizing our combined manufacturing footprint increasing utilization and supply chain efficiencies. We have a high degree of confidence in these synergies and a high degree of confidence in our ability to deliver them.

Our next question coming from the line of Krish Sankar with TD Cowen.

I have 2 of them. First one, Phil or Bob, kind of curious what do you think on China SAMR approval? Do you feel confident it's going to get through? And then I had a follow-up.

Yes. Thank you. Go ahead...

Yes. I think -- look, I think that we feel we're well advised on this process. We have strong customer support. The product lines are much more complementary than it might exist on this -- might believe on the surface. We believe the competitive landscape is intense. And frankly, this combination gives us the scale to invest R&D to compete against much larger global players. So we believe ultimately, this will get approved, but we've got a long process to get through all those hurdles.

Got it.

Bob, do you want to add anything to that?

Nothing to add, Phil. You nailed it.

And then a quick follow-up, Phil or Bob. I mean the product overlap, et cetera, all makes a ton of sense. I'm just curious, I think in the past, you've spoken about the RF TAM for Skyworks is roughly $20 a phone. You're probably at $8 a phone today. Is there a way to size it for the combined company, what it is, the TAM available and where you are today?

Well, I think, look, the way to size it -- I think the way that we're looking at it certainly increases our SAM. If you look at the combined company today, like just compared to Skyworks stand-alone today, we don't do many of the things that Qorvo does in that environment, including envelope tracking, including antenna tuning, including some of the power management solutions.

So from our perspective, the combination is incredibly complementary, opens up new SAM, decreases potential volatility with respect to single-socket opportunities, allows us to innovate at the system level. And so this really grows our SAM.

We think the RF complexity is going to increase. We think that there's potential for refresh cycle upgrades across the board. And frankly, we've got good customer support on it. So we're excited about the opportunity at our largest customer and certainly at other customers also.

Our next question coming from the line of Christopher Rolland with Susquehanna.

Congrats. I guess first is, I feel like the direction of travel was really diversifying outside of handsets. So I guess, first of all, are you guys still open, interested and desiring to do that?

And then secondly, would you guys consider additional RF opportunities, consolidation in this space from other names if you think that would pass regulatory muster as well?

Yes. Look, I mean, the way that I look at this, this transaction's combination actually brings both scale and diversification. And frankly, I don't look at it as uniquely a handset opportunity. I look at it as a wireless opportunity in that space. I think I've said publicly, the vast majority of devices connected to the Internet and connected wirelessly. That will be true for as far as the eye can see. And I think this combination on the RF side brings together 2 leaders in the space to make us more competitive.

Specifically with respect to handsets, I think it opens up our SAM, decreases our volatility, increases our customer stickiness. So I kind of view that as the wireless space. And then in the non-wireless space, really expanding our TAM. We just mentioned one in aerospace and defense, which is a huge one. And so we've got lots of other growth opportunities that I think could be additive that we haven't even talked about today.

In terms of us doing more things in the future, frankly, the capital structure of the combined company is going to be really favorable to allow us to invest both organically, shareholder -- capital returns to shareholders and frankly, incremental M&A should we see fit from a strategic point of view. So really, I think this is a scale plus diversification, a very attractive way to structure it financially, synergies to shareholders and puts us in a position to continue to grow from there.

And speaking of synergies, just from the manufacturing side of this, I think Qorvo had a bigger manufacturing footprint. And I think there were some utilization and capacity opportunities there filling those fabs. Can you talk about that and maybe what percent of synergies might be coming from manufacturing?

Well, look, I think both companies independently are working to kind of rationalize some of their capacity and do some things there. You've seen what Skyworks has announced on our own facility. I think that Bob can comment about what they're doing. I think both companies operate independently. Both companies are going to try and continue to do that.

The synergies I talked about there should be incremental to what both companies are doing together. I think long term, it's probably too premature to really talk about how we're going to do that. A lot of work underway there. I think there was an earlier question with regard to the splits of synergies. More of the synergies will come out of OpEx than manufacturing side. So I think more of them will be -- we can implement more of them a little bit sooner than the manufacturing side from that side so.

I don't know, Bob, if you want to comment on your own manufacturing plans from your side.

Yes. Thanks, Phil, and thanks for the question. I mean, clearly, we've been moving -- we've talked about Costa Rica shutting that down and moving it to our supply base. We also have already moved our gas into Oregon to improve the utilization there.

And then the last step we're doing in North Carolina is transferring our SAW filter technologies into Richardson, Texas. So we're working on that. But I believe, and just like what Phil said, bringing the 2 companies together, we can certainly improve our manufacturing footprint and reduce our costs and create those synergies.

Our next question coming from the line of Harsh Kumar with Piper Sandler.

Congratulations, Phil, Bob. Bob, you had created Qorvo in a very similar transaction more than a decade ago and created a lot of value for stockholders. I look forward to working with you both on this company, the new entity. So typically, Bob, question here is typically deals like this, 2 plus 2 equals way more than 4.

When you just look at what you're talking about, $2.1 billion EBITDA plus $500 million, that gets you to about 34% or so implied EBITDA 2 years out when everything is supposedly on paper is worked out. Let's say you and I are talking 2 years out and everything is working out, you're winning new business, et cetera. What can the optimized EBITDA profile or operating margin profile of this company look like?

Yes. Thanks for the question, and I certainly appreciate the support and look forward to it. And as you noted, semi industry has really been defined by growing scale and certainly improving diversification, and that's really what this transaction does. On the -- both of our companies' websites, we put kind of a long-term, at least a target model out there from what this could be. And the adjusted EBITDA range could get 35% to 40% kind of in the outer range is kind of what we're looking at.

Fair enough. And then my second question is competitively, the joint entity you will have, Skyworks will have everything you need to be the best RF player. You have the high band, you have competency mid. You guys are already pretty strong in low band. Can you talk about the joint entities with the big scale, the ability to win new business and actually grow from where you will be entering this transaction at.

Yes, that is exactly right. You nailed it because actually, that was the thing for me as Bob and I started talking, I've known them for a long time, and these product lines are way more complementary than one would think about. And I think the combined opportunity gives us the opportunity to innovate across the signal chain, maybe in ways we haven't done before.

And I think really, when you look at the advance -- the scale, it allows us to put more R&D in certain areas that can allow us to continue to extend our lead. So I think you're 100% right. I think this should be -- enable us to open up new opportunities for us to continue to grow, not just in handsets, but in wireless overall as well as some of the other exciting broad markets we talked about. And we haven't even talked about what we could do in aerospace and defense, in WiFi, in IoT, in automotive, in all the other segments that this has opened up to. I mean I just go back to billions and billions of devices are connected wirelessly, and that will remain true for as far as I can see.

So for me, it's incredibly exciting. I think this is not just about us in handsets. This is about wireless, expanding our scale and diversifying our business.

Our next question coming from the line of Tom O'Malley with Barclays.

Congrats on the deal. I had 2 really quick. The first is that you seem pretty confident on customers supporting this and then getting through the regulatory approval process. If the approval process does require some divestiture of businesses, are you open to moving out of China? You both had kind of gone on for the last several quarters, winding down the Android businesses. Is that still the intended target? Or do you think that you will go back and reinvest in that market given the larger scale?

Yes. Look, I think that I don't expect our collective focus on Android and China to change. I do expect the combined company will continue to decline over time, simply just because of focus, we're kind of focused on the premium side of the market where both companies are playing, and I expect that focus to remain the same.

With respect to the regulatory approvals, look, I mean, we feel well advised. As you know, it's a complex dynamic environment. We believe the deal is highly pro-competitive because it enables us to compete against the significantly larger players, and we believe that it brings us increased capacity, increased R&D scale and a lot of things that I think customers really value. And that's why we have that confidence.

Having said that, we're well advised. We've got to go through a lot of steps to go get that done. We'll be taking a methodical and thoughtful approach to getting whatever regulatory clearances we need.

I'd like to add to that, if I could, just on the Android, and I appreciate the question. And yes, we are both walking away from the lower-margin mass tier things. But when it comes to the premium and flagship phones, these guys still demand the best that's out there for RF. And I really believe bringing these 2 companies together, we can actually accelerate that, improve the integration. If you look at how complementary a lot of our products are, the Android ecosystem is still going to be important to us. It's just that premium and flagship tier. And I think this actually enables us to compete even more against some of the global players that are out there.

Super helpful, guys. And then just my follow-up. If you look at the slide deck, you look at the long-term model, 50% to 55%, both of you kind of in the high 40s today. If you add in the $500 million of synergies, it doesn't fully get you there. So maybe talk about some of the other levers that are getting you to that better gross profit margin longer term. Obviously, you don't want to talk specifically on pricing, but that's obviously the first thing that pop in people's minds. Just maybe any help on how you get to that long-term target.

Yes. Look, I think there's -- as you might imagine, there's a lot of things that go into that factory utilization mix is another big one, right? If you look out in time, we expect the broad markets portfolio, which tends to have higher gross margin and higher growth will continue to be a richer part of the mix as we go forward. So mix, utilization, factory consolidations, ASPs, all those functions that go into it. And the range is really dependent on a lot of those factors. So that's how that's going to work.

Our next question coming from the line of Brett Simpson with Arete Research.

I had a similar question on the long-term model. I think you guys said for growth mid- to high single digits. And I thought it might be a little bit higher than that for the combined business. But can you talk a bit about synergies and maybe split out long-term growth model for smartphones, what you think you can do in broad markets? And I guess just factoring in 6G is not 1 million miles away, you've got pricing dynamic probably gets better with the consolidation in the industry. So a bit more commentary on the mid- to high single digits would be much appreciated.

Yes. Look, I think when we looked at the model, I just want to be clear, we kind of viewed -- when we look at pricing dynamics and things like that, we view that to be stable over the horizon. We don't -- and obviously, you can make some other comments around whether that change or not. But our view at this point is that it's stable. When we look at the mid-single digits, the way we look at it is the handset market will be kind of low single digits. That's what our assumptions are there, offset by some of the Android decline and the China decline, increased by refresh rate, complexity increases and things like that.

And then our gross -- our broad markets business, we kind of think low double digits kind of growth rate, right? I think defense aerospace, IoT, automotive, those kinds of things. So we think the combination of the broad markets that kind of low double digits and then handset in the mid-single digits or mid- to low single digits is kind of where you get that into.

And you're right on 6G, look, I mean, that's part of why I get excited. I mean I think that long term, we've got a lot of tailwinds that could come into play on that. But frankly, we should be able to do better should those things exist. But we're not baking those into the model, right? I think that we're taking an approach that we have a disciplined focused way to return value. And frankly, some of the things you talked about, there should be value-enhancing opportunities for us as we close.

Okay. That's great. And just a follow-up. In terms of -- in the event the deal doesn't close for whatever reason, is there any penalties that we need to be aware of in terms of how this deal gets wind down?

You might imagine we had a flank of advisers on both sides advising us on all those different things. There's a variety of different closing conditions and a variety of different fees that are associated with that. That will be disclosed in the 8-K or in the transaction. You can go check out that in terms of where they are. Nothing -- I would say nothing that's nothing noncustomary.

Our next question coming from the line of Peter Peng with JPMorgan.

Congratulations on the deal. Just on the cost synergies, you mentioned earlier that roughly half of that is OpEx and half of that is COGS. Should we kind of -- in terms of linearity of realizing this $500 million, maybe that some of -- half of that will be probably realized in the first year and then the remainder in the second year. Would you be -- maybe talk about how you think about the linearity of the synergies.

To be clear, I think more than half of the synergies are likely to come from OpEx. That's what we said before. So more than half is OpEx, less than half of that. That would suggest that you could have a somewhat front-loaded ramp to the synergies. But what we're talking about now is $500 million or more within 2 to 3 years. And I think that's at this point. Some of the timing of the synergies, obviously, is going to depend on, a, when we actually close, when within the year we close, where we are with certain customer ramps profiles and programs. So there's some variability there that we can't really get into at this point. But more than half of the synergies are OpEx that would suggest to result in earlier ramp of the synergies, the timing of which is really going to be dependent on when we close and where we are in the customer ramp cycles.

Perfect. And then maybe just on areas of revenue -- potential revenue synergies. And is there any kind of thing that you're baking into that mid- to high single digits on your longer-term model areas of where you can see potential revenue synergies?

In the long-term model, we talked about -- we have not yet gone through the opportunity to see where the synergies are. I think that is an area that, frankly, both companies and both teams are excited about. We both have complementary technology, I think we can bring to both of the markets that we play in. So we have not yet gone through that, but I think that, that's an exciting tailwind opportunity for us. I mean when I look at the value creation opportunities beyond what we can deliver here, think about the ramp in wireless, think about the complexity of our app, think about the new things we can do when we combine these complementary portfolios. I think there's a lot of incremental upside here that we can drive in the long term.

Our next question coming from the line of Jay Rakesh with Mizuho Group.

Good to see the consolidation here. Just wondering in terms of the fab consolidation, what you're expecting. And I saw the $300 million or so breakup fee. Just wondering what you are looking at in terms of the probability on the SAMR approval side as well? And I have a follow-up.

Yes. One of the things that's exciting, and Bob, you can comment on the manufacturing side, specifically on the Qorvo side, if I pile things up. But look, one of the things I really got excited about, I mean, both companies have a very strong U.S. manufacturing footprint, and I think this really bolsters our manufacturing presence here in the United States. We've got some strong assembly test capability as well. So I think there's a lot of potential for us to do things not only from an efficiency utilization perspective, but frankly, even bring some potentially new capabilities on the manufacturing side that both companies haven't been able to before. So I'm excited about that.

Too premature to really talk about which facilities and how that works out. And we've got a detailed plan that we'll be working through. We're confident that we can get those synergies out, and we'll be working through that over the coming weeks and months.

In terms of SAMR, what I said previously stands at, we're very well advised on this topic. We think the deal is highly competitive. It brings together 2 complementary products. We've got customer support on it. And we'll just take that through. We'll just take that through the process and be deliberate and methodical about how we do it.

Got it. And then in talking about diversification, I know you run it by your customers. But is there a risk that this creates significant concentration from their side as well in terms of the supply chain and there is some diversification challenges that they have to go through as well?

Well, I can't speak for them. On that topic, I can say I don't think so. I mean if you look at some of the other players in this space, they -- we are competing against behemoth. And so I think that part of the attraction from the customer point of view is the ability for us to become a very strong player to help balance some of the other players that exist in the market.

Phil, I'd like to add to that, if I could. I think when we talk to some of our bigger customers, what they're excited about is our ability to combine some of our engineering to actually produce even better products than we're able to do today. So I feel very confident that there's the support that Phil has already talked about because they see what we can do when we're together. They want to build better products, and we can help them do that.

Our next question coming from the line of Gary Mobley with Loop Capital.

Congrats on getting this deal done. I haven't had a chance to read through the entirety of the SEC filings, but can you speak to whether or not this was a competitive bidding process? Just wanted to verify that.

What I can...

Yes. I mean the Board unanimously determined this transaction was in the best interest of our shareholders. They're confident the value to our shareholders represents an appropriate premium, as you can see what's going on for this transaction of this kind and reflects the value and the exciting future that we believe we're going to have.

Okay. In terms of regulatory approvals, in addition to U.S. [ HSR ] and China SAMR, what are some of the other regulatory hurdles that you feel you're going to have to cross?

Look, I think that regulatory matters, I think that I'll just go back to -- we do -- we will likely need to kind of focus on several other jurisdictions. We're working through that now with our adviser teams. We believe this is highly complementary, and we're confident where we are there. So I think that's really all I can say about that topic.

Our next question coming from the line of Cody Acree with The Benchmark Company.

Congrats on the transaction. While I appreciate the revenue synergies and the technology synergies, specifically in your smartphone space, are there areas that you've identified where either you have overlap today that may present some dollar content challenges in maybe next year's model or the year after's model or areas of your R&D where you have had similar road map path that would need to be redirected? And how quickly might you be able to redirect those efforts?

This goes back to the synergy comment again. I mean we expect $500 million or more synergies. More of those will come out of OpEx. I would expect -- we would expect to be able to realize some of those soon or sooner on the front end of the ramp versus the tail end of the ramp. We're talking about 24 to 36 months.

The timing of the implementation of that is related to what you described before and related to the timing of closure, right? I mean if we close at a certain point in the year, that's going to be a different cycle in the design cycle and the customer ramps and things like that. So what surprised me the most is there's actually much more complementary capabilities than there are overlap capabilities.

We talked about antenna tuning, envelope tracking, power management. And if you actually look at our business underneath it there, the amount of overlap in the specific wireless space is much smaller than you might admit. Having said that -- or I not admit that we might recognize.

Having said that, obviously, there are going to be some areas where we're going to look to prioritize the resources to frankly, invest more in key areas that our customers are looking for. So I do think there's opportunity there, and we'll be working hard to extract those synergies.

Great. And then lastly, just any thoughts on divisional leadership going forward.

No, we made no changes or no comments about that going forward. I would expect to make some more announcements about that closer to close. I mean the reality is both companies need to operate independently. Until then, the close period is we've got some quite a few months ahead of us on that. I think both companies need to remain focused on their core business and delighting the customers, and that's what we're going to be working on.

And ladies and gentlemen, that concludes today's question-and-answer session. I'll now turn the call back over to Mr. Phil Brace for any closing comments.

Great. Thank you very much for attending today on such short notice. This is a transformational opportunity, and transformational transaction for both Skyworks, Qorvo and the industry. It's a tremendous opportunity to both bring some scale and diversification. We're excited not only by the synergies, but the growth opportunities that this opportunity provides. And we look forward to giving you more information in the coming weeks, months and quarters. Thanks for all your support.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, everybody. Welcome to the Goldman Sachs Communacopia and Technology Conference. My name is Jim Schneider. I'm the semiconductor analyst here at Goldman Sachs. It's my pleasure to welcome Skyworks and CEO, Phil Brace to the stage today. Welcome, Phil.

Good morning. Thanks for having me.

Thanks for being here. I've known you for some time now, back your days at LSI. You step to be the CEO of Skyworks. And while it's not even been a year since he joined, maybe just give me your first impressions of the business and what has surprised you positively?

I think the thing that surprised me the most positively is the caliber of the engineering talent. I mean I used to get shivers up and down my spine when I still talk about it. I mean the stuff we do, the complexity of what we do, the caliber of the engineers. I just it's really a stimulating environment to be in, and I'm just incredibly proud of it. And I look to the future, I see 99.999% of the devices connected to Internet or connected wirelessly. And I think that will be true for as far as I can see, and so I feel good about the spot we're in as well.

Yes. And on the flip side, maybe what are the kind of 2 or 3 biggest areas of focus you're looking to improve in terms of the company's execution?

Yes, I mean, obviously, we've got to do better at our largest customer. I mean, it's a very competitive environment. We have a great relationship with them. I don't think anyone's put in more RF component than we have $25 billion or more since in iPhone 1. Having said that, there is any favors, right? We've got to deliver better parts and we live in a very competitive environment, and that's just what it is, and we've got to execute and deliver better. I think the other part for me is that on our broad markets business, we can do better there, too. We can do better telling the story.

We can do better executing. That's a $1.5 billion business and growing. I got some really nice secular tailwinds, and I just don't -- I think it's underappreciated by the market. So I think we need be better there, too.

Fair enough. When I speak with investors, the question asked most frequently is whether the RF semiconductor space is ripe for consolidation? And if they can actually physically happen from a regulatory or other perspective, maybe give us a perspective on that question.

Yes. Look, I think in general, when you just zoom back out, semiconductors is an industry that has been driven by consolidation over many, many years, right? And I think that -- it is a business that requires a certain amount of scale in order to afford the R&D that's necessary to continue to push the boundaries of innovation and technology. So I think to that extent, with that clear eye, you're looking to go, okay, certainly, there's some industrial logic to have, some sort of consolidation across the board in the semis.

And I think right now, I mean, there's a question of can it be done accretively? Is there the right path to regulatory? Do you have willing parties on the other side depending on what's happening in their strategic ambitions and goals, and so look, I certainly think it's something certainly considered -- certainly thinking about, but a lot of conditions have to be right to kind of make that happen.

And maybe give your perspective, I mean, are you kind of a willing party there? And maybe you have any perspective on the regulatory question.

Yes. Look, my #1 goal, I view myself as a steward of shareholder capital. So I'm looking to do things to grow the share price and grow the return for the shareholders. And so to the extent in that environment, certainly, I look at all elements on that, that'd be crazy not to. In terms of regulatory, look, I think the view is that the current situation tends to be -- they tend to be more constructive to deals and work on work on things that can make things happen versus blocking things. So I think we're probably in a slightly more favorable environment for that, but I'm not an antitrust regulator and I didn't sleep at a Holiday Express last night, so I'm not sure I would claim to be one either.

There you go. Away from consolidation, I mean, how would you characterize your appetite for M&A? And what might you look for in a potential target in terms of expanding your portfolio?

Yes, that's a really good question. I mean look, we've got a very solid foundation for our business. If you look kind of where we are, we feel really good about our technology position and you look at our ability to generate cash and return cash and return capital to shareholders. I think we've done an excellent job over the past few years. Having said that, I think there's a pretty clear argument that you might have used some more of that capital to invest in some other businesses to change the shape of the business, right?

I think today, our concentration on one particular customer and the handset market is results in suppressed PE compared to other players. And so what would I look for? Technology adjacent things, I like things that are hard to do. I like things that are complex. I'm going to look for things that are -- give me some stickiness, long-term longevity versus the volatility that can come from having a handset market. I look for things that are accretive and gross margin are attractive.

So that lends itself things to things like infrastructure, lends itself to, lots of things like that. You probably won't see me focused on the consumer side just because that gets me more volatility, which I think is a bit of a problem. Having said that, my #1 focus is kind of do things that are accretive and our technology adjacent and have a strategic fit. And so the aperture for me is pretty wide in that area. And you might imagine that I've got every -- lots of people coming through my door and knocking on my door all the time. So we're just -- I don't feel like I'm in a rush. So we're taking a deliberate focused view of that. But it's certainly fair to say that M&A is probably higher on that prior list than perhaps it has been in the past.

Okay. Maybe shifting to the current business. Last quarter, you reported a strong quarter and guided above the Street. What drove the strong results? Can you unpack that for us in terms of, is that the smartphone market getting better? Was your biggest customer doing better? And how much was idiosyncratic for Skyworks specifically?

That's a good question. I mean, look, I think we saw strength across the board. You saw it was a very strong results in the quarter and a strong guide going forward. And there are lots of questions around tariff impact and the like. And I'd like to point out that I got that question in the prior quarter as well and we ended up doing pretty well. Across the board, we saw a solid demand on the handset space that's both at our largest customer as well as a ramp in a new customer. Google, I know someone saw the Pixel 10 launch. We have a very good RF position there. And then in our broad markets business, it's multiple quarters of successive sequential growth, year-over-year growth, book-to-bill better than one and inventories at low position. And so that guidance hasn't changed and those conditions continue to persist at this point. So broad-based strength.

Great. I think on the call, you talked about Edge AI potentially having an impact on smartphone sales. What did you mean by that exactly? And do you expect AI to kind of catalyze sort of a multiyear replacement cycle for smartphones? Or maybe just talk a little bit about what you --

It's a great question. It's something we got lots of times. I mean if you look at the -- there's a great gold rush going on to the AI data center, right, billions and billions of dollars of capital going in there. My own view going back to the statement I made at the beginning is ultimately, all that data needs to get out to the edge and to the consumers someone here. And I guess everyone in the audience, where do they get it. They get it on this device. That's how that edge AI data, that's how that data in the data centers, gets to the end consumer.

And so myself, when I look at -- I mean, I have a 16, I love the intelligence that cleans up the phones and things like that. So I think that is actually going to drive it. If you look at some of the replacement rates right now, the installed base certainly larger customers over 1 billion units. The replacement rate is about 4.5 years longest as it's ever had been. All you need is a short compression to that and your results in hundreds of millions of units. And then furthermore, what we're seeing out in time is the more RF complexity and you might ask yourself the question, okay, why is that? Well, one, people are uploading more data. So they are for that. And then two, the upload is actually one of the things that drives battery life because the transmit power is kind of defined the distance from the cell phone.

The carriers don't want to deploy more CapEx. And so having more complexity in the phone, and they don't want sort of battery life either. And so to some extent, what we've seen in some of the future generations, more RF complexity. And so I think that some of those things really result in a tailwind for us going forward.

Maybe just kind of following on that past wireless cycles. There's usually a time when RF content tends to reinflect upward. Maybe talk about on-device AI and whether you think that's going to be a catalyst for this next wave? You talked about upline complexity, but maybe just talk about build materials and where you think it's going?

Yes. Historically, like if you look over the past -- I think you're right, over the past several years, the actual bill of materials has actually come down in the RF space, primarily due to integration and there hasn't been a ton of innovation in that space. And so that's been a bit of a headwind. What we've seen going forward is an increase in RF complexity in some of the RFIs and RFQs that are coming from our customers, which tends to leave there's a little bit of tailwind on the RF content. So when I look at the handset space in general, what do I see?

I see there's some tailwinds that we have for any sort of potential unit increase, whether that's from a new form factor, whether that's from new features on the A side, I see more RF complexity, potentially driving an increase in TAM. I see socket availability coming back as people move to the internal modem and then I see us being able to compete effectively as such we have. So for me, I kind of think that we are at the -- hopefully, we're at the bottom of where we were right and still producing a lot of cash and where we're going, which is why I have the sense of optimism the way I do.

Is it a done deal? No, absolutely not. We still got to compete. We've got to earn it every single day, but the conditions are right in my mind.

Yes. And I know it was asked about on the call and maybe you can't provide too much detail on this. But if your largest customer, Apple, were to use a larger share of internal versus external modems, how does that impact content for you on the margin?

On balance, it's a tailwind for us as some of the sockets that were previously integrated with the external modem now become available for us, and it represents an opportunity of about $2 a phone.

Got it. And just kind of wondering, as the quarter has gone, any notable change in terms of the guidance you provided a month ago? Or as things more or less tracking as expected?

Yes, things are tracking as expected, no changes.

Okay. About your largest customer for a moment. You ship a lot of parts to them, 9, 10 parts per phone, I think, probably more than anybody else. From a competitive standpoint, what areas do you think you're most differentiated in when it comes to that customer? And where do you feel kind of the most security market position?

Well, that's a good question. Me being paranoid, I'm never going to say I feel secure. I think we've got to compete for it every single time. And I think that's perhaps the lesson that was learned over the past couple of down selections maybe. So I don't like that, we need to own our own destiny. I don't feel secure in any one of them. We got to earn them every single time. Having said that, you asked me an initial question about what inspired me the most. I've had the opportunity to go around and meet just a bunch of different engineers and a bunch of different stuff that we do.

And the thing that really is interesting to me is, I mean, we're literally doing innovation around elements that we put in the transistors. We're doing really core innovation all the way up to devices, resonators, filters and then advanced RF packaging, and we have a very, very broad wave of innovation all the way to super, super complex in-house manufacturing in Mexicali. So when you look at our ability to innovate at every level from device all the way up to package, it's pretty impressive. And then our ability to deliver that incredibly high volume and sell it very effectively, sometimes less than a chocolate bar, right? You kind of go, wow, we're in a pretty good spot.

So having said that, right, our competitors, they are tough competitors, right? We're not -- we're in the big leagues. So our competitors have some good strengths too, and we just need to continue to innovate them.

And then maybe just talk about how you characterize your relationship with your largest customer. I know you've worked closely with them since joining, but maybe talk about how that relationship has developed over your time here?

I would say it's a super strong relationship. We have -- it's an incredibly tight relationship. We have people that go in and out of both our facilities daily. It's a very tight relationship. We've been working with them for many, many years but they don't do us any favors, right? I mean it's not their job to do us any favors. They wear a certain color badge, and we wear a certain color badge, and our job is to deliver the best part, and I want to make it impossible for them to choose anybody else. And that's my job to do that.

And so having said that, obviously, there's a certain familiarity you get when you have worked for someone for so long. And I think that, that at the end of the day, we've got to deliver the right parts, but certainly up until that point, it's a very collaborative relationship I mean it's -- they have a lot of respect for us, and we have a lot of respect for them. As a matter of fact, when I first went there, they wrote down some people's names on the board on a whiteboard and said these are the best people in the RF industry. And they didn't have to do that. And the fact that they did was like, okay, that give me a lot of confidence of the technical capability I have with the company.

Yes. Great. And then you noted earlier this year, you had lost content with your largest customer, that's well understood by the market at this point. But sort of going forward, how do you think about mitigating further losses? But more importantly, sort of how would you gauge your prospects at this point of regaining content that you may have lost based on what you've seen?

Yes, it's a good question. I get asked that question a lot. I mean I use a couple of analogies along the way. This is -- it's a very competitive environment. You really don't know until the end. There's 2 ways to look at it. When you have a winning -- if you have a winning product, you win, you get it all, if you have a jump ball, you split, and if you have a bad product you lose. And as you go along, it's almost like you're in a horse race. So you're the first for long, you're up by the nose. You're the second for long, you're behind by the nose.

And one thing that people who aren't familiar with the business I don't really understand, it's not sufficient to meet their specs, right? You actually have to beat their specs, and you beat their specs by a bunch, and you don't really know where your competitor is. And so you have some feeling of where you are based on the limits of physics and where you are. And I would say right now, I feel really confident. I think we've continued to execute well, and we do that. If you look at, I think we've still got some -- there are some areas where we haven't played historically that we're working to gain some ground on that will probably take a little more time. But I feel good about it. But results will be -- we've got to work hard. So yes, it's not done.

Makes sense. We'll move to the Android market and talk a little bit about it because I think it's somewhat neglected market. There seems to be a lot of good opportunities there. A lot of investors have mixed views on it. From what I understand, there are some opportunities in that market where you maybe have more content potential per phone than your largest customer. So maybe take us through how you view this market, what trends you're seeing and maybe as a follow-on, talk about your customer relationships in China and how you're managing those given the current geopolitical environment?

Yes. So that's a good question. Android business for us now is about $100 million there. So that's about what it is. About half of that is Google. And you saw that, some of you may have seen the Pixel launch. I think that some of those features there were pretty darn compelling, right, real-time voice translation, stuff like that. I think they're doing a really good job. Google is an interesting story because they really, I think their phone and what they're trying to do is kind of keep the halo around Android not relegated to the ultra low-end stuff, right?

So they're very technology-oriented and obviously, I wish they ship more phones, but I mean they are very technology oriented, and they're smart in the way that they engage with some of their partners, including us, where they have kind of more than one generation of phone, right? Because they know that they're simply, there's an opportunity cost to the engineers there. So I would say it's a very tight, very collaborative ship from that side, and we're optimistic and bullish about that.

On the other side, obviously, Samsung and the China players, we're going to be a lot more opportunistic there. Those businesses tend to be a lot more margin challenged from that just based on what they do. I mean -- and you may ask why is that? One of the reasons is -- we -- what we have is very high performance, very tightly integrated products.

And so customers that value that are willing to pay for that, great. If you're not, you just want to phone, you have thousands and thousands of SKUs and you do it per country, and you don't care about battery life and stuff like that. There are cheaper alternatives for that, and we're just not going to go compete at that level. So we'll be opportunistic about those spots.

And on the China piece? Or is it just kind of like...

It's limited. It's opportunistic. It's down to de minimis now. I'm not ruling it out, but it's not an area of focus for us, and it's going to be very opportunistic.

And just inherently or philosophically, maybe, do you think the Android market is more competitive than the iPhone market or not? And maybe what are the key differentiators in terms of competition at customers? Is it kind of a customer-by-customer battle and a focus on commodity versus high-end features? Or how do you see it?

Yes. Well, it's a great question. I mean, if you look at what we do, we deliver incredibly complex RF components at a very high level of integration that are optimized for performance and power to enable long battery life. And those customers that are willing to pay for that level of technology, we're a great fit for that. There's a vast number of phones that they don't care about that kind of stuff, and we're not going to go down and compete at that level. So the level of competition is, I would say, it's different in that the high end, the premium space where we play, it's a technology-oriented game and you need to deliver the best parts.

And the other segments, it's also hypercompetitive, but you need to deliver the lowest cost solution, and that's not an area where we necessarily want to focus. So I would say -- it's hard for me to judge the other space because you don't compete there too much, but that's probably why we haven't just because that's not a game we want to play.

Yes. And you cited the $100 million figure in terms of your exposure now. Would you say you want to kind of like trend that up, down or sideways, if it's up to you?

I want to grow all my businesses. So look, I think that to the extent that we've got some customers there like Google that we hope they continue to do well and push it really well. So I hope that grows, but it's still an area of demand for us.

And then I guess just if you think about the sort of flagship or premium Android smartphones and the kind of feature differentiation, or technology you're providing into those versus the one that your largest customer -- the ones at your largest customer, maybe talk about the things that might be different in the Android space.

Yes, one of the things that's different. If you look at the particular one we were talking about, we actually have 100% of the RF content in that particular model. And having the entire signal chain there allows us to do different things than we might otherwise do. And we actually find that one customer to be particularly innovative in that spot. They're actually not -- they're pretty smart guys up there, and they do some interesting things. So you might imagine that having all of the ships allows you to do different things in respect to how you partition devices, how you modulate the power, how you do some other things.

So I would say there's some innovative things when you're not constrained by having individual pieces. There are some things you can do in the system level that are interesting and valued by the customer in that space.

Maybe shifting to the broad markets business, which I think is a favorite topic of yours. We would love to sort of get your view, I mean it's been a big outperformer of both sequentially and year-over-year. Maybe level set, just how do you unpack the business in terms of the large buckets of revenue within it and the percentage they contribute?

Yes. I mean at a high level, I mean the thing when I get passionate about that. I mean that's a $1.5 billion business growing nicely accretive gross margin to the company. I mean if that business alone is an attractive, nice business is there. And the 3 major components of that, there's the edge IoT stuff, which is really WiFi, when you think about that. The biggest part of that is WiFi and you think about WiFi 7, just starting at the really forefront of the WiFi market. But both on the retroside, the enterprise side, that one is going quite well. we see a long runway there with WiFi even under development now. So that one, we think we've got some systemic kind of tailwinds behind us there on that.

The other one is automotive, right? And automotive, right, $200 million a year kind of business. We see that growing and we see that growing regardless of the engine, right, whether it's a combustion engine or not. Why is that? Because you see all of those in vehicle, right, whether it's ADAS and vehicle entertainment, what's happening there online downloads, over-the-air downloads. Whether it's 5G connectivity, WiFi connectivity, all the ADAS stuff that's happening, I mean, we see that move. And frankly, we're starting to see that. We've got big wins at BYD and Nissan and others that really kind of support that. So that's going quite well.

And then the other side is the infrastructure side, which includes some timing products. That's an area where we've continued to have up until recently, still inventory overhang code, if you can believe or not because some of those products are so inexpensive that it was easy for the customer to go by 5 years of inventory. We've actually seen that kind of behind us now. The book-to-bill is better than one, and we've got some great design wins there. Think of like Cisco, Juniper, Space-X and the like, that gives us some exposure into some of the data center market that for us is we have under exposure there. And so to have kind of a nice window there is also another green shoot for us. So Edge IoT, automotive and then infrastructure.

Yes. And I guess, with which would you say, in terms of the overall growth profile going forward, are you seeing the strongest kind of cyclical recovery of the type you mentioned versus which ones are more secularly driven, whether that's automotive data center or otherwise?

Yes. I think that's a good question. In terms of cyclical recovery, it's probably on the infrastructure side just because we've had so much inventory that we burn through there now. So we're starting to see that come back. Secular tailwinds actually, I think all 3 of them have secular tailwinds for that, right? I mean, obviously, on the WiFi 7, you just -- you see that continue to grow. You could argue there's some cyclicality there, too, as you go from 6% to 7%. And when you go through a transition like that, there's more RF content initially. So there's some good tailwinds there.

And then I mentioned the secular stuff on autos, which that -- we're probably more secular on that than we are cyclical simply because we're such a small portion of it. But when you look at the secular trends of ADAS and nickel entertainment, and all the things I talked about. That's probably just -- if you ask yourself the question 5 years from now or more or less, car is going to look like that, you probably go more. And so therefore, that's the way to about that one.

Yes. And you touched on WiFi a minute ago. Where are we in the WiFi 7 upgrade cycle, talk about the content uplift you see from 6 to 7, and sort of talk about the competitive environment in the space too.

Yes, it's a material upgrade. I mean a nice content uplift for us. We are early innings. I think it's probably $100 million or something like that. That's where we've got. We've got a good tailwind on that. It's barely started really from that. So we think we've got hundreds of millions more dollars to get that we should see over time, get that going forward year-over-year. And we see that with more antennas, more mesh capability, more power, more performance. So I think that that's a tailwind for us, a secular tailwind. There should be a tailwind for us going forward in multiple years out.

Yes. And then I guess, as we think about broad markets broadly, bad choice of words, maybe should we think about -- or how are you thinking about the growth that we're expecting in that market? Are we going to get back to more typical seasonality over the next few quarters? Or do you think we can still see sort of accelerating year-over-year growth in the out quarters?

Yes, it's good. I mean, typically, there is some seasonality with that business just based on the ebbs and flows of the purchase cycle and what's happened. I think that, that seasonality has been muted by inventory correction and some of the other things we've been having. So we continue to expect to see sequential and year-over-year growth. But I mean, we likely will see some sequential effects probably in next quarter or 2. It just depends on purchasing cycles and things, right?

Yes. Okay. Maybe kind of rounding out on some operational and financial questions, if we could. You talked about optimizing your manufacturing footprint, consolidating operations in Woburn to Newbury Park, that should help drive improved utilization, obviously, it lowers your fixed cost. Maybe give us any hint you can in terms of what the cost savings might be eventually?

Yes, we kind of avoided talking about that. One, it's going to take a little while to get that done. Second off, the ultimate costs are going to be driven by the ultimate utilization, which will depend on content, right? So it's a little bit of -- it's going to, it will be difficult to actually parse that out when it's done, but it should be tens of millions of dollars a year minimum. It will be a tailwind to both gross margin, CapEx, OpEx and our utilization should get better. So I mean, there's all metrics that should get better for that.

I'm very confident we have sufficient capacity to meet whatever content needs we have there. Frankly, it's probably a decision that should have been made a while ago in terms of that. So I feel good about that. We started that process now, and we're going to be deliberate and methodical how we do that just because we've got some parts. Most of our parts are dual source between the 2 facilities, but there are some parts particularly in the broad market space that are not, and we're going to need to go through kind of a PC notification for that. So that will take some time, and we just want to make sure we're doing the right thing for the customer.

Yes, and give us any kind of commentary you can in terms of the timing of this. I don't think anybody is expecting to show up in the numbers in the next few quarters, but maybe talk about is this thing you could see inside of 2 years?

Yes, you should start to see some of the benefit inside 2 years.

Okay. You've consistently generated pretty strong free cash flow. Looking ahead, any reason that doesn't continue and maybe talk about -- do you have a long-term view on steady-state free cash flow margin for business?

Yes, it's a good question. I mean if you look over the past years, I mean, we've certainly done a really good job of turning earnings into cash. I mean some of that was driven by working capital utilization. We did a good job of driving our inventory down, which actually enabled us to go back and take advantage of some what we thought was crazy time in the market. So we've put some of that capital to use and bought some of the shares back.

I think going forward, we're probably not going to see that same level of cash generation primarily because we've got our working capital down. Having said that, we continue to focus on cash flow, cash flow generation and share returns to -- returns of capital to shareholders. So some remains focus of ours. I think we've done a good job at the company for that, and we'll continue to focus on that going forward.

Yes. And then maybe around -- you touch on capital allocation. How do you see the balance between sort of dividend growth and then buybacks going forward for the company?

Yes. I think we've taken advantage -- if you look over the past several years, we've probably returned over $5 billion of capital to shareholders in the combination of share repurchase and growth. It goes back to the discussion on M&A. You might argue that we should probably increase a little bit of that capital on M&A going forward. And I'll probably look to that.

Having said that, I think the company is always disciplined. I'm looking to make sure I view myself as a steward of shareholder capital, and I'm going to be really focused on how to do that. You saw us take advantage of what we thought were or some crazy dislocations earlier in the year and put some of our capital work to take our share count down. And so not opposed to doing that when the time is right. But I'm also going to be looking to make sure I build the business long term and look for things that I can grow accretively, and help provide me with some diversification, which I think will benefit all shareholders.

Yes. And then just to close out, I mean stepping back and you've been in the company for some time now, and you've been in a lot of investor meetings, including one player today. Talk about sort of your view on investors, view of the company, what's the thing that you think is most understood by the investment community? And if we sit down again in 5 years, what are the things that people would be most surprised by looking back?

That is a really good question. What's most understood, obviously, like every single investor call I go to, they all ask about what's happening with content, right? That's the most -- I think that one is probably one of the most tracked tech things on the planet. So sometimes, it's hard to know whether people are asking about Skyworks, so they're asking about some other read-through on Apple.

But look, I think that's very understood. I think that one of the things that has been interesting, obviously, we had a disappointing result in the last down cycle. Most of the investors, I mean, it's kind of -- it's one of the reasons why we trade a little bit just kind of multiple like people get it. It's a game we're in, it's competitive. And you have a choice as a leader, you have a fruit treat. I use a fruit tree analogy with you all the time. Okay, you got -- you didn't get as much -- it's a bad one grown. I didn't get as many apples off the tree this year as I did last year. Well, choice A is I can cut down the water and fertilizer. But that pretty much guarantees I won't get as many apples next year or choice C, I can go, you know what, we're going to keep going because I believe in this, and that's kind of what we're doing.

So I think a lot of investors understand that. I think what investors don't understand we need to do a better job of it and frankly, better execution is how to grow our non-mobile handset business. I mentioned before, it's a $1.5 billion business growing in really attractive segments, right? WiFi 7, automotive, infrastructure, timing, space. No one even talks about that. We don't ask about that. And I think that in 5 years from now, I think I'd like to see us have a much more balanced profile that is growing, generating returns for shareholders that results in share outperformance. And right now, we're kind of in the do-loop of what's happening in the next down selection cycle. So that's what I'd like to see.

Very good. Well, thanks very much for being with us today. We appreciate it. Thank you very much.