Skyworks Reports Better-than-Expected Results; Qorvo Merger May Be Accelerated to 2026

Overview

UBS's latest earnings commentary highlights that Skyworks Solutions (SWKS.US) delivered a solid second fiscal quarter ended March 2026, with both revenue and earnings beating market expectations, and provided guidance for the next quarter that exceeded Wall Street consensus forecasts. The company also announced a new five-year, $1 billion Android platform order, expected to contribute gradually starting in fiscal year 2028. Most notably, management expressed optimism about the progress of the Qorvo acquisition, suggesting it could be completed within 2026. Based on slightly higher earnings forecasts and an upward revision of industry valuations, UBS raised its target price from $63 to $75 but maintained a “neutral” rating, citing continued caution regarding smartphone end-market demand.

Core views

Performance: FQ2 revenue at $944 million, down -1% YoY and -15% QoQ, yet outperforming UBS and market estimates by 4% and 4.7%, respectively; gross margin at 45%, in line with expectations; operating margin at 20%, 1.1 percentage points better than forecast; non-GAAP EPS at $1.15, 6% above UBS estimate and 10% above market consensus. Guidance: The company expects FQ3 revenue between $900 million and $950 million, with a median of $925 million, surpassing UBS and market original forecasts of $873 million and $861 million, respectively; gross margin at 44.5%-45.5%, OpEx at $235 million-$245 million, corresponding to EPS around $1.03, again ahead of market expectations. Demand Structure: Apple still accounted for 60% of FQ2 revenue; management expects this to drop to 55% in FQ3, emphasizing healthy inventory levels in Apple channels; Android revenue was under $80 million, expected to grow another 30%-35% in FQ3. The company remains focused on high-end Android models, with China revenue accounting for less than $20 million. Long-term Orders: Signed a new five-year, $1 billion agreement with a major Android customer (speculated by UBS as Google), with revenue gradually released from fiscal years 2028-2030, mostly realized in 2029-2030. M&A Progress: Skyworks has approved Qorvo’s $400 million stock buyback; management says China’s antitrust second-phase review is ongoing and first hinted that “the deal could close by late 2026 rather than early 2027,” easing market concerns over regulatory delays. Valuation Adjustment: Using a post-merger 2027 EPS of $5.29 and a forward PE of 14x, UBS arrived at a target price of $75, still reflecting a valuation discount compared to peers, due to the high smartphone business share (63%) leading to valuation discounts.

Analysis framework

UBS adopted a dual-track approach—performance tracking plus M&A modeling: 1. First, calibrate short-term financial models using quarterly results and guidance, focusing on dissecting revenue dynamics between Apple and Android; 2. Then, use a post-merger pro-forma model integrating Skyworks and Qorvo’s revenue, gross margins, expenses, and synergy assumptions to forecast combined EPS from 2025 to 2029; 3. Use peer comparison to determine valuation: Selecting a scatter plot of smartphone/communications revenue share versus NTM PE, finding that companies with high shares generally trade at a discount, thus justifying the 14x PE applied after the merger; 4. Through scenario analysis (Upside/Base/Downside), arrive at a target price of $75, corresponding to 3% upside potential, maintaining a neutral stance.

Methodology notes

• Valuation MethodPE Valuation

  Target price derived by multiplying post-merger 2027 EPS by a forward PE of 14x

  UBS used the combined earnings of Skyworks and Qorvo as the valuation benchmark, applying an industry-average PE discount to reflect the high volatility of the smartphone business.

• Industry/Segment Analysis FrameworkVolume-price decomposition

  Breaking down revenue into three segments—Apple, Android, and Broad Markets—and forecasting volume and price changes separately

  By dissecting revenue contributions from different terminals, UBS can more accurately capture the impact of Apple seasonality, Android premiumization, and data center growth on overall performance.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Skyworks Solutions (SWKS.US)

  Better-than-expected performance + merger catalyst, yet undervalued

  Strengths

  Stable Apple share, Android premiumization, growth in data centers and automotive business

  Weaknesses

  High smartphone exposure, heavy Apple dependence, short-term FCF pressure

  Comparison

  Similar to Qorvo in high smartphone exposure, yet trading at only 14x PE, lower than peers with low exposure at 30x+

  Risks

  Regulatory approval delays, Apple’s self-developed modem replacing Skyworks RF content, weakening smartphone demand

• Qorvo (QRVO.US)

  M&A target, will be integrated into Skyworks upon completion

  Strengths

  Synergies after merger, scale expansion

  Weaknesses

  Deal still pending China SAMR approval

  Comparison

  Similar valuation discount to Skyworks, transaction premium already partially reflected

  Risks

  Regulatory rejection, integration falling short of expectations

Key data

• FQ2 Revenue$944 millionDown -1% YoY, down -15% QoQ, outperforming expectations by 4%
• FQ2 Non-GAAP EPS$1.15Down -1% YoY, outperforming expectations by 10%
• FQ3 Revenue Guidance Median$925 millionAbove market consensus of $861 million
• New Android Order Total$1 billionFive-year contract, ramping up gradually from fiscal years 2028-2030
• Apple Revenue Share FQ2/FQ360%/55%Management expects normal seasonal decline
• Post-Merger 2027E EPS$5.29UBS forecast value
• Target Price$75Based on 14x 2027E PE

Impact & implications

UBS believes that Skyworks’ solid short-term performance, secured long-term growth through new orders, and the potential acceleration of the Qorvo merger together form catalysts for the stock price. However, overall smartphone demand still faces weak consumer spending and inventory adjustment pressures. The company’s revenue structure remains highly dependent on Apple, limiting valuation expansion space. Therefore, despite raising earnings forecasts and the target price, UBS maintains a neutral rating, advising investors to pay attention to the outcome of the merger regulatory review and the pace of Apple’s new iPhone shipments in the second half of the year.

Risks

• M&A needs to pass China’s antitrust review, with risks of delay or rejection
• Continued weakness in smartphone demand, inventory adjustments exceeding expectations
• Apple’s self-developed modem potentially reducing demand for Skyworks RF components
• Increased industry competition leading to price and gross margin declines

What to watch

• Results of China’s SAMR second-phase review on Qorvo merger
• Timing of Apple’s 2026 new iPhone launch and changes in Skyworks’ content share
• Sales of high-end Android models and initial ramp-up timing of the $1 billion order
• Whether data center and automotive businesses can sustain 30% growth rate