Analog semiconductor earnings are entering a recovery window, with stronger expectations for NXP and ON, while QCOM remains under near-term pressure
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Analog semiconductor earnings are entering a recovery window, with stronger expectations for NXP and ON, while QCOM remains under near-term pressure
Morgan Stanley previews the second week of semiconductor earnings, believing NXP and ON will benefit from the analog cycle as well as improving automotive and power demand, while QCOM, despite catalysts from Apple and data center optionality, still faces smartphone fundamental pressure as the main theme.
- ON Semiconductor Corp.'s price target was raised from $64.00 to $85.00, reflecting accelerating analog/cyclical recovery and increased exposure to diversified power markets.
- NXP is maintained at Overweight, with the core reasons being relative outperformance in automotive semiconductors, still-low channel inventory, and an intact 2026 automotive content growth thesis.
- QCOM is maintained at Underweight; although Apple demand and the June investor day may bring a short-term squeeze, weak Android trends and handset revenue risk still limit fundamental upside.
- The report believes recent earnings from analog chip companies such as TI, STMicro, and Renesas have reinforced signals of improving industrial, automotive, and MCU pricing.
Report interpretation
Overview
This report is Morgan Stanley's preview of the second week of North American semiconductor earnings, focusing on NXP, ON, and QCOM. The tone is neither outright bullish nor bearish, but differentiated: NXP and ON are expected to show strength in analog, automotive, and power-related businesses, while QCOM faces pressure from smartphone demand, especially on the Android side, though its stock may see short-term volatility driven by strong Apple demand, the data center narrative, and crowded short positioning.
Core views
The core views include: first, NXP's results may come in better than market fears, as automotive and industrial demand are improving, channel inventory remains low, MCU pricing power is strengthening, and the company has outperformed the automotive semiconductor market over the past two years. Second, ON may deliver an upside surprise and raise guidance, but expectations are already elevated after the stock's sharp rise since the start of the year; the report raises valuation multiples and lifts the price target to $85.00. Third, the fundamental view on QCOM is unchanged: smartphone profitability has likely peaked for now, weak Android demand and reduced procurement by Chinese handset makers may create downside revision risk, and data centers are more of an early-stage option than a near-term, verifiable earnings source.
Analysis framework
The report uses a combination of earnings preview, segment revenue forecasts, gross margin and EPS comparisons, differences between buy-side expectations and consensus, risk-reward scenario analysis, and price-target valuation multiples. The analysis focuses on variables such as next-quarter guidance, automotive visibility, channel inventory, SiC/power demand, capacity utilization, smartphone revenue, and the data center roadmap.
Methodology notes
Compare Morgan Stanley forecasts with market consensus expectations
Use differences in revenue, gross margin, and EPS to judge the likely direction of post-earnings estimate revisions.
Bull, base, and bear case price targets
Derive the potential stock price range based on different assumptions for revenue growth, gross margin, EPS, and P/E multiples.
Analog cycle and channel inventory recovery framework
Assess the turning point of the analog chip cycle using weeks of inventory, lead times, channel restocking, and signals from industrial and automotive demand.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- NXP Semiconductors NV (NXPI.O)One of the main covered names, rated Overweight
- Strengths
- Growth in automotive semiconductor content, low channel inventory, improved MCU pricing, and potential continued outperformance in the automotive semiconductor market in 2026.
- Weaknesses
- Management may continue to sound conservative, and visibility into automotive demand is still affected by macro and supply chain variables.
- Comparison
- Relative to the recently strong large-cap analog names, NXP has underperformed since the start of the year, so some of the cautious automotive expectations may already be reflected in the stock price.
- Risks
- Macro weakness, intensifying automotive competition, a prolonged downturn in industrial and IoT cycles, and weak consumer end-market demand.
- ON Semiconductor Corp. (ON.O)One of the main covered names, rated Equal-weight, with a raised price target
- Strengths
- SiC and power demand are stabilizing, the analog cycle is improving, data center and automotive design wins support second-half demand, and improved utilization may drive gross margin upside.
- Weaknesses
- The stock is up 82% YTD and about 20% over the past 5 days, meaning market expectations have already risen significantly.
- Comparison
- The valuation multiple has been raised from the historical average of about 15x to 20x, reflecting improved cyclical elasticity and exposure to diversified power markets.
- Risks
- High expectations leave little room for error after earnings, long-term demand visibility remains uncertain, and if restocking falls short of expectations, second-half upside will be limited.
- Qualcomm Inc. (QCOM.O)One of the main covered names, rated Underweight
- Strengths
- Strong Apple demand and iPhone share above 90% may support short-term handset revenue; the June investor day and the data center CPU/accelerator roadmap carry option value.
- Weaknesses
- Smartphone profitability has likely peaked for now, Android is weak, Chinese brands are cutting processor procurement, and QCOM is reportedly reducing TSMC orders.
- Comparison
- Unlike NXP and ON, which benefit from the analog and automotive cycle, QCOM is more constrained by the handset cycle and share changes; the data center opportunity remains early-stage.
- Risks
- Crowded Underweight positioning may trigger a short-term squeeze; if the data center narrative gains momentum, the stock may detach from near-term fundamental pressure.
Key data
- ON price target change$64.00 -> $85.00The price target increase comes from raising the valuation multiple from 15x to 20x, reflecting an accelerating analog cycle and improved exposure to power markets.
- NXP March quarter revenue forecast$3.176bnDown 4.8% quarter over quarter and up 12.0% year over year, slightly above the Street's $3.154bn.
- NXP June quarter revenue forecast$3.260bnUp 2.6% quarter over quarter and 11.4% year over year, slightly below the Street's $3.273bn.
- NXP base case price target$299.00Equivalent to about 17.5x CY27 Non-GAAP EPS.
- QCOM March quarter revenue forecast$10.5bnDown 14% quarter over quarter and 3% year over year, slightly below the Street's $10.6bn.
- QCOM June quarter revenue forecast$10.1bnDown 4% quarter over quarter and 3% year over year, broadly in line with the Street.
- QCOM handset business risk exposure约30% handset revenue at riskAndroid still accounts for more than 70% of QCOM's handset revenue, and the report believes strong Apple demand is unlikely to fully offset pressure in the rest of the handset business.
- Potential upside in ON gross marginMSe and Street均为39.6%附近The report believes that if utilization improves and depreciation declines materialize, full-year gross margin could surprise into the 40% range.
Impact & implications
The investment implication is that style differentiation within semiconductors will continue: evidence of recovery in automotive, industrial, analog, and power supply chains is strengthening, benefiting earnings revisions for NXP and ON; meanwhile, the handset supply chain, especially Android, may still weigh on QCOM. From a short-term trading perspective, QCOM's crowded Underweight positioning, Apple demand, and the data center narrative could create squeeze risk, but the report still views these as catalysts rather than evidence of a fundamental turnaround.
Risks
- If NXP and ON fail to provide signals of improving automotive, industrial, or channel restocking trends for the second half, earnings revisions may fall short of expectations.
- If Apple demand for QCOM is stronger than expected or the investor day strengthens the data center narrative, the Underweight view may face short-term pressure.
- Cuts to auto production forecasts, the Iran conflict, and input cost inflation in memory, steel, and aluminum may affect end demand and supply chains.
- SiC and power devices may still be affected by excess supply and global price competition.
- The report discloses that Morgan Stanley may have business relationships with the covered companies, and investors should treat this research as only one factor in decision-making.
What to watch
- NXP's comments on the 2H restocking cycle, automotive visibility, and the 11-week channel inventory target.
- ON's guidance on SiC, power demand, capacity utilization, lower depreciation, and the path to gross margin improvement.
- QCOM's March and June quarter handset revenue, especially whether Apple strength can offset Android weakness.
- QCOM's June investor day commentary on data center CPUs, accelerators, and FY27 revenue visibility.
- Subsequent comments from analog chip companies on industrial, automotive, MCU pricing, and customer pull-ins.