Qorvo Inc (QRVO) — Q3 2025 Earnings Call Transcript

Thanks very much. Hello, everyone, and welcome to Qorvo's Fiscal 2025 Third Quarter Earnings Call. This call will include forward-looking statements that involve risk factors that could cause our actual results to differ materially from management's current expectations. We encourage you to review the safe-harbor statement contained in the earnings release published today, as well as the risk factors associated with our business in our annual report on Form 10-K filed with the SEC because these risk factors may affect our operations and financial results. In today's release and on today's call, we provide both GAAP and non-GAAP financial results. We provide this supplemental information to enable investors to perform additional comparisons of operating results and to analyze financial performance without the impact of certain non-cash expenses or other items that may obscure trends in our underlying performance. During our call, our comments and comparisons to income statement items will be based primarily on non-GAAP results. For a complete reconciliation of GAAP to non-GAAP financial measures, please refer to our earnings release issued earlier today available on our Investor Relations website at ir.qorvo.com under Financial Releases. Joining us today are Bob Bruggeworth, President and CEO; Grant Brown, CFO; Dave Fullwood, Senior Vice President of Sales and Marketing; and other members of Qorvo's management team. And with that, I'll turn the call over to Bob.

Thanks, Doug, and welcome everyone to our call. Qorvo serves six primary end markets. They are automotive, consumer, defense and aerospace, industrial and enterprise, infrastructure, and mobile. Each is underpinned by global megatrends, including electrification, connectivity, mobility, sustainability, datafication, and AI. These trends are driving new functionality and new user experiences that are made possible by the customers we serve and the products our technologies enable. Looking at our business by operating segment, in HPA, we continue to grow our defense and aerospace business while expanding our business in power management. In CSG, we are building upon our strong position in RF solutions across markets while investing in diverse growth businesses, including an expanding portfolio of automotive solutions and SOCs for Ultra-Wideband, BLE, Thread, and Matter. In ACG, we are focused primarily on delivering 5G advanced products for our largest customer and for the flagship and premium tiers of Android. Our largest growth opportunity in ACG is with our largest customer, and we are investing today to continue increasing our share with them in subsequent programs over multiple years. As we said on last quarter's call, the opportunity in master Android 5G declined at a faster rate than anticipated during our Investor Day. Android build plans changed to reflect higher consumer demand for entry-tier 5G devices. In response, during the December quarter, we implemented changes across the organization in how we support Android 5G. This included a reduction in force in ACG and other company functions. We narrowed our focus to the premium and flagship tiers to increase profitability and reduce variability. Our 5G product development spend is now focused solely on premium and flagship tiers. While we continue to serve mass tier programs previously awarded, we expect these lower-margin programs to go end of line in fiscal '26 and into fiscal '27. To size the impact for fiscal '25, total Android 5G revenue in ACG is expected to be approximately $875 million. Of this, we expect Android 5G to decline gradually by approximately $150 million to $200 million annually in fiscal '26 and again in fiscal '27. The majority of the decline will be China-based with the balance being mid-tier at Samsung. In fiscal '26, we expect a single-digit decline in ACG revenue and growth of approximately 10% to 12% in CSG and HPA, excluding the silicon carbide business. Beginning in FY27, we expect ACG to return to growth where our updated long-term revenue target is for mid-single-digit growth. In HPA and CSG, our long-term revenue targets haven't changed, and we expect double-digit growth in fiscal '25 and double-digit growth again next fiscal year in HPA and CSG. We believe the actions we are taking will have a positive impact on our gross margin. For reference, gross margin in the December quarter included a headwind of approximately 300 basis points attributed to the divested silicon carbide business and the mass-tier Android 5G revenue we are in the process of exiting. As we look into fiscal '26, we expect gross margin to expand by approximately 150 basis points on roughly flat revenue. In a moment, Grant will expand on the actions we're taking to improve gross margin and reduce OpEx. Now let's look at our performance and opportunities by market. We saw sequential strength during the quarter in defense and aerospace, industrial and enterprise, and infrastructure. In D&A, revenue was up sequentially in the December quarter, driven by multi-year tailwinds. These include upgrades to non-terrestrial networks and the transition from mechanical radar systems to active electronic scanning radar systems. Tailwinds also include onshoring the trend of one-to-many and system-level functionality requiring advanced RF packaging. Design wins in December were diversified across radar, comms, space, and electronic warfare. In electronic warfare, Qorvo offers an industry-leading wideband solid-state PA technology. Qorvo is unique and we can service the opportunity onshore in the U.S. from early design up to a full system solution through our advanced manufacturing facility in Texas. December was a record revenue quarter for our D&A business, and we expect continued strength to support full-year year-over-year growth this fiscal year and next fiscal year. In Industrial and Enterprise, revenue was up sequentially. During the quarter, we achieved critical performance milestones related to Ultra-Wideband and WiFi enterprise access points. We're engaged with two leading tier-1 equipment manufacturers with Ultra-Wideband and WiFi 7 content at both, and we expect commercial production to begin this calendar year. We see this as a significant milestone in Ultra-Wideband adoption, creating the essential infrastructure for new Ultra-Wideband-driven services enabled by indoor navigation, asset management, and real-time location services. We increased shipments of high-frequency BAW filters in support of enterprise WiFi deployments across geographies, and we expanded power management engagements with new and existing customers and enterprise SSDs. Turning to infrastructure, we believe we are past the bottom and are now seeing stabilization in our broadband and cellular base station businesses. December revenue increased significantly year-over-year in both markets. In the broadband market, we are supporting DOCSIS 4.0 deployments at multiple operators in North America. We are early in these deployments with significant share and we are positioned for growth in our broadband business this coming fiscal year. In our base station business, we have weathered an industry-wide inventory correction and see opportunities for our small signal portfolio in markets like India. In automotive, revenue for the quarter declined sequentially as end-market softness continues. During the quarter, automotive OEMs and Tier-1s continue to show strong interest in our growing portfolio of automotive-grade Ultra-Wideband products. This includes a design win for an Asia-based EV OEM to supply our Ultra-Wideband solutions in an upcoming vehicle launch. Our sales funnel of automotive Ultra-Wideband opportunities continues to grow as we bring a broad set of new content and capabilities. The Ultra-Wideband opportunity in automotive includes multiple anchors and up to $20 per car addressing secure access, child presence detection, kick sensors, and other precision short-range radar applications. This is new content, presenting the type of complex RF challenge Qorvo is uniquely positioned to solve. In consumer markets, December quarterly revenue declined sequentially, reflecting market headwinds. For Qorvo, customer demand continued to build across consumer applications for our Matter SOCs. We are ramping Matter SOCs alongside our WiFi 7 FEMs for a leading provider of WiFi ecosystems based in the U.S. This customer is an early adopter of Matter technology in home networking applications, enabling seamless connectivity across lighting, thermostats, window sensors, and other consumer applications. We supported a U.S.-based network operator in their migration to WiFi 7 with multiple Qorvo WiFi 7 FEMs, and we secured a design win to support an upcoming WiFi 7 ramp with a network operator in Japan. Lastly, we expanded shipments of our high-frequency BAW filters for service providers in the U.S. and in Europe. In the mobile market, revenue declined sequentially. During the quarter, we successfully supported the flagship launch at our largest customer. Shipments during the quarter included discrete placements such as tuners as well as integrated placements like ultra-high band pads. This customer represented just over 50% of the total revenue in the December quarter. In the current quarter, we expect sales to this customer to decline sequentially, though less than the last couple of years. As we have said previously, we have secured sufficient wins to date to give us confidence in year-over-year content growth in this year's fall launch. Qorvo revenue is more heavily weighted towards the Pro and ProMax models versus lower content consumer models. Volumes and mix across models and model years can change our weighted average content in any given year. Given these variables, for FY26, we're currently forecasting revenue at our largest customer to be flat-to-up modestly. At our largest customer, we've been invited to compete and are engaged on more product programs than ever before. At our second-largest customer, Qorvo design wins this year with this Korea-based Android OEM span our product portfolio. We will be broadly represented this year in the flagship launch ramping now, as well as in their high-volume mid-tier, premium-tier, and flagship-tier smartphone programs launching throughout the year. Qorvo content in 2025 will include low-band, mid-high band, and ultra-high band pads, as well as mid-high secondary transmit antenna tuning, discrete filters, and WiFi 7 FEMs. Qorvo is executing on a broad set of strategic initiatives to expand margin, generate strong free cash flow, and increase shareholder value. We remain very focused on driving growth and diversification while finding opportunities to improve operating efficiency and enhance our cost structure. The actions we are taking have already resulted in gross margin improvements and a meaningful reduction in our forward OpEx in the current quarter and for fiscal '26. And with that, I'll turn the call over to Grant.

Thanks, Bob, and good afternoon, everyone. Our December quarter results were favorable relative to our guidance with revenue of $916 million and non-GAAP diluted EPS of $1.61 per share. Our non-GAAP gross margin of 46.5% and non-GAAP operating expenses of $248 million were also favorable to our guidance, which reflects continued cost discipline across COGS and OpEx, as well as recent restructuring actions. On the balance sheet, as of quarter end, we held approximately $770 million in cash and equivalents. Our cash balance at quarter end reflects the retirement of $412 million of our 2024 notes. Following the repayment of these notes, we now have approximately $1.5 billion of long-term debt remaining and no near-term maturities. We ended the quarter with a net inventory balance of $656 million. This represents a decrease of $38 million sequentially and a decrease of $70 million on a year-over-year basis. Turning to the cash flow statement. We generated operating cash flow of $214 million and capital expenditures of $38 million, which resulted in free cash flow of $176 million. As a reminder, our CapEx spend will vary quarter-to-quarter and reflect the timing of cash disbursements. Consequently, CapEx as a percentage of sales in any given quarter may be above or below our target of approximately 5% of sales. We repurchased approximately $100 million of stock at an average price of $73 per share in the quarter. The rate and pace of our share repurchase consider several key factors, including our long-term financial outlook, free cash flow, debt maturities, alternative uses of cash, and other relevant strategic considerations. This approach is designed to ensure that our capital allocation strategy balances future growth with the return of capital and aligns with our underlying goal of delivering long-term shareholder value. Turning to our current quarter outlook. We expect revenue of approximately $850 million, plus or minus $25 million. Non-GAAP gross margin between 43% and 44% and non-GAAP diluted EPS between $0.90 and $1.10. The sale of our silicon carbide business earlier this month is reflected in our guidance. We will record a negligible amount of silicon carbide revenue in Q4 versus approximately $9 million in the December quarter and approximately $30 million in fiscal '25. We project non-GAAP operating expenses in the March quarter to be approximately $250 million. This includes other operating expense of $1 million to $2 million associated with the remaining portion of our digital transformation projects. We expect other operating expense related to this project to remain at this quarterly level throughout fiscal '26. Below the operating income line, non-operating expense is expected to be between $13 million to $15 million, reflecting interest paid on our fixed-rate debt, offset by interest income earned on our cash balances, FX gains or losses, along with other items. This aligns with our prior comments that non-operating expense would increase following the retirement of our 1.75% 2024 notes. Our non-GAAP tax rate for fiscal '25 is expected to be approximately 11%. We expect our non-GAAP tax rate could increase to between 18% and 19% in fiscal '26 as new regulations take effect. However, the impact of global minimum tax legislation for U.S.-based companies under the new administration, as well as changes to international tax policy remain highly uncertain. For modeling purposes, in fiscal '26, we expect gross margin to expand by approximately 150 basis points on roughly flat revenue. This reflects a single-digit decline in ACG revenue and growth of approximately 10% to 12% in CSG and HPA, excluding silicon carbide. In ACG, we expect Android 5G to decline by $150 million to $200 million from approximately $875 million in fiscal '25. At our largest customer, for fiscal '26, we expect revenue to be flat-to-up modestly. Beginning the fiscal year, our June quarter has multiple seasonal items to consider. June is the lowest seasonal quarter for our largest customer. We are on the other side of the Galaxy ramp at Samsung, and like prior years, our D&A business will be down meaningfully in June on a sequential basis due to program timing while expected to grow double-digits for the full year. Regarding our actions to improve gross margin, each business segment brings distinct drivers. Beginning with ACG, we expect to enhance margins and reduce variability as our portfolio management efforts and pricing strategies reduce our exposure to legacy mass-tier Android 5G. In HPA, the divestiture of our silicon carbide business is margin accretive. In addition, our strategic investments supporting continued growth in D&A will also be accretive. In CSG, gross margin will increase with the relocation of gas production from our underutilized North Carolina facility to our high-volume Oregon site. We continuously evaluate further opportunities to reduce our capital intensity and product costs, including process technology advancements and die size reductions. The complexity of our solutions coupled with the global RF compliance requirements faced by our customers results in multi-year design cycles. We're working closely with our customers as we align our factory footprint to address only the most differentiated elements of our products and increasingly leverage the scale, capabilities, and cost-effectiveness of our outsourced partners. All of these factors in aggregate are expected to support high 40% gross margin in seasonally strong quarters during fiscal '26 and up to 50% gross margin in a seasonally strong quarter during fiscal '27. On operating expenses, we implemented a significant workforce reduction, primarily targeting our mass-market Android business as well as supporting areas to enhance our cost structure. In parallel, we streamlined our digital transformation efforts, canceling numerous elements of the project to ensure the scope aligns with the anticipated economic benefits. And finally, the sale of our silicon carbide business is accretive to both gross and operating margins. These actions are reflected in our Q4 guidance and will extend into fiscal 2026. Overall, we anticipate achieving over $100 million in gross annualized savings across COGS and OpEx. A portion of these savings will be reinvested in key growth areas such as D&A, power management, Ultra-Wideband, and programs for our largest customer, as well as to offset inflationary pressures. On a net basis, we expect non-GAAP operating expenses to average approximately $250 million per quarter in fiscal '26, subject to typical quarterly variability. We are confident that the steps we're taking today across our product portfolio and manufacturing footprint are positioning us for success. We're reducing capital intensity and focusing our internal production only where it differentiates our products. The benefits of these strategic initiatives will become increasingly evident as we advance through fiscal '26 and into fiscal '27. Before we open up the call for questions, we want to briefly address the filing that was recently made by Starboard Value. We welcome engagement with all our shareholders and value their input on ways to create shareholder value. With that said, the purpose of today's call is to discuss our third quarter results and outlook; we appreciate you keeping your questions focused on those topics. At this time, please open the line for questions. Thank you.

Hi, guys. Thanks for taking my question. I wanted to verify some of the numbers that you guys had in your prepared remarks. If I heard correctly, you will have in fiscal year '25 about $875 million of revenue from Android customers and that might whittle down to something less than $500 million over the next five years. I presume the remainder will be primarily Samsung and maybe some high-end customers over in China; am I running through all that math correctly?

Yes, hi, Gary, this is Bob. Thanks. You're correct on the $875 million and you're correct on it's going to be going down about $150 million to $200 million this year, probably the same. Most of that will be in China, to your point, but it does include some of the Samsung business and includes more than HBox because we do have other customers in China, some that sell in the U.S.

The remainder will be in that premium and flagship tier.

Got it. Okay. Thank you. So, Bob, I know you were clear on the assumption that HPA would grow double-digit percent in fiscal year '26, but I wanted to ask a question about the repeatability of the HPA strength that you just showed in the third quarter. If I'm not mistaken, there might have been maybe a Department of Defense contract, maybe something a little bit atypical in the quarter; maybe you can just give us a sense of the details of that to the extent you can and the repeatability of it?

Sure. Thanks, Gary. We did see nice growth in December. We're also going to see even better growth in March, and it really gets to the timing of the defense contractors, and when they flow their money to us. Some are tied a little bit more. They give us orders right before the end of the government's fiscal year, which as you know, is at the end of roughly our third quarter and then obviously the end of their own calendar year. So we actually see a back half typically much stronger than the first half in our Defense business. So yes, we saw good growth in December quarter. We're also going to see even better growth in the March quarter. And then as Grant mentioned, it's going to drop off in the June quarter. But for the year, we expect Defense business to grow actually faster than all of HPA.

That's a valid point. Let me elaborate on that for a moment. In perspective, our D&A business is now around $400 million. As Bob noted, it tends to be seasonal. Customer orders and program timing will see a significant increase in March, followed by a decrease in June, which could see a decline of as much as $75 million before we expect growth through the rest of the year, likely surpassing our HPA business in the range of 10% to 12%.

Yes. Hey, guys, congratulations on solidly beating the earnings estimate. I guess my first question, Bob, there was a lot in the comments section, but if I heard it correctly, I think you're saying that you're expecting better than normal seasonality for your Cellular business, and I'm assuming that's with your largest customer. Could you maybe talk about what that means? What we should be thinking and expecting? If you can just paint a picture for us, that would be helpful. Then I do have a follow-up.

Yes, thanks, Harsh. On the last quarter's call, we mentioned that we'd probably be down 5% to 10%, you can see our guidance is roughly within that range. And what I said in my prepared remarks is, we'll be down at our largest customer, but not as much as we've been in prior years. And that's all the color that I'm able to add at this time, Harsh.

Okay, that's fair. And then, Grant, maybe you talked about a lot of things on the gross margin side. If I had to say what would be the one or two biggest things that you think, Bob or Grant, that are needle movers for the gross margin? You talked about high-40s and then ultimately even potentially hitting 50s, what would be two of the biggest things that will be happening to make the margin go up in your opinion?

Thanks, Harsh. Appreciate the question. We're working on a lot of fronts as it relates to gross margin. Probably two of the larger ones would be, as we exit some of the Android business that Bob mentioned, it will have an accretive impact on our gross margin just as it relates to revenue mix. Beyond exiting some of that Android business, we're also looking at factory costs and factory footprint and ways we can leverage our outsourced suppliers. We had a sizable workforce reduction and cost reduction that we handled in the December quarter, and that's going to help us as we look forward. And then, of course, there's also the process improvement, die reductions, and other sort of blocking and tackling types of things that we're doing in our factories and product design that help drive our costs lower.

Hey, guys, thanks for taking my question. My first one was just in relation to March guidance. So you gave us $875 million for the year in Android; you could set that pretty easily. And then you talked about less-than-seasonal declines in your largest customer. So you have a decent proxy from where ACG is, the other two businesses to kind of get to your guidance. You talked about mid-teens growth on the full-year. Both of those look to be tracking a little bit ahead just given where guidance is, so is there any weakness that you would call out amongst those two businesses in any pockets other than the silicon carbide stuff, or just trying to square away the math here. If I set Apple down a little better than seasonal and Android to your number, you're getting a little bit above guidance. Any help with March to start?

Sure. Let me address the question. You're correct that silicon carbide revenue is a key factor. Looking ahead to the March quarter, we anticipate a minimal amount of revenue compared to the December quarter, which was about $9 million. This is one of the changes to note. For modeling purposes, we estimate around $30 million for the entire fiscal year 2025. Additionally, as you mentioned, there are typical seasonal trends related to the ramp-down of our largest customer. We expect Android to see a sequential increase due to flagship platform launches, and we've indicated a significant growth in our D&A business as noted in both December and again in March. Regarding the CSG business, we benefited from some substantial WiFi ramps in Q2, and overall, both of these businesses are expected to grow by double digits year-over-year. As we look ahead, we plan to maintain this momentum into fiscal year 2026.

Got you. And then you gave a decent amount of color in the prepared remarks. On June, you highlighted that that's normally bottom seasonal for the largest customer, and then you talked about defense being down as well, just given that you went out of your way to highlight that in the prepared remarks; could you give us any color from a total company perspective, what you're expecting there?

We didn't provide any guidance necessarily at a total company level, but if you're modeling it roughly, you're in that down 10% to 15% range for the full company heading into the June quarter. Again, the seasonal dynamics there are a very strong defense business, which has grown in terms of percent of our total top-line. So we benefited from the growth, but the seasonality and order patterns that our customers create a dynamic heading into June that's larger than typical and then the Android ramp at a large customer for their flagship will also be ramping down in the same period that our largest customer ramps down. So quite a number of seasonal factors. Although for the year, as Bob pointed out, we do expect to be approximately flat in revenue. So there will be growth in the outside quarters.

Thank you, gentlemen. Given your comments on the Android ecosystem, I would like to know the outlook for RF content in the industry over the next couple of years if the baseband modem of your largest customer continues to be with your competitor. Some investors are concerned that reuse could persist if the baseband share stays the same, and I would appreciate your clarification on this. Thank you.

Sorry, Karl, could you clarify, did you say our largest customer or the industry? I wasn't sure what you were talking about with the baseband.

I'm referring to your position within the iOS ecosystem, whether there is a change or no change in the baseband modem, whether you think there is a growing risk of reuse, or if you believe there is innovation and continued content gains in that part of the market?

I want to make sure I understand the question. You're asking if they stay with the Qualcomm baseband and there's been a lot of discussion about them coming out with their own baseband, if they stay with the Qualcomm baseband, what happens to the RF sections? I just want to make sure I understand it.

That is correct. That is correct. Yes, how do we think about the content opportunity for that? That is correct.

It all depends on their future architectures, which we cannot comment on, but historically, each successive model requires more and better RF. This includes our tuners and other components we provide, such as improved filters and more integrated modules. Therefore, we do not anticipate any change.

The only thing that we said and we continue to reiterate is that the ETIC that we would be able to provide to the internal platform we wouldn't provide on the Qualcomm platform. So that would be the major difference that you would see for us.

Thanks for taking my question. Bob, I wanted to kind of come back to this long-term growth opportunity for your ACG or Mobile business. You mentioned that it could be flattish; I think you said for fiscal '26, if I got it right, but then starts to regrow. And my question is, what helps to regrow if it is flattish in a year, when you are gaining content, right, among some of the high-end SKUs and when cellular units are expected to grow, then how does it start to regrow until, I don't know, 60 takes off? I guess my real question is, how much are you baking in for the continued headwinds from all the China in-sourcing and Qualcomm competition? Is it possible ACG business sort of stays flattish for the next several years?

Yes. Thanks for the question, Vivek. In my prepared remarks, we did talk about us actually being down in ACG for FY ‘26, to be clear. So we said that and we said that HPA and CSG would grow double-digits. So that gets you to the company flat, and we said that we're expecting in our Android business, the category that we talked about last quarter that we'll be exiting, we're down $150 million to $200 million. So you're right, it's going to be a challenge; therefore, we've got to continue to grow at our largest customer that we've talked about as well as maintain our share in the flagship and high-tier phones in the Android ecosystem. So that's our current plan. But in '26, we were pretty clear it’s going to be down.

Sure. Thanks, Vivek. For modeling purposes, you could assume that gross margin will follow the same or roughly approximately the same seasonal pattern that we've seen in the past with June below September and December, and I would expect that to continue into fiscal '26. We're continuing to support the existing commitments that we've made to our Android customers on running platforms, and to a degree in periods where we have higher Android as a percentage of sales, it has a seasonal impact on the gross margin. So as we work our way through fiscal '26 and that $150 million to $200 million of revenue related to Android comes out, we will become less seasonal and expect to be less volatile on our gross margin in addition to increasing as we look into fiscal '26 into fiscal '27. In terms of OpEx, there are some normal seasonal patterns in terms of payroll-related items that we'll see in March. Typically, June could be in that same neighborhood based on program development spend, and I would expect to model approximately that level throughout the year, plus or minus probably approximately $5 million per quarter depending on any of those seasonal impacts.

Hi, thank you so much for taking the question. You guys talked quite a bit about some of the restructuring initiatives in motion today or things that you've executed on. You talked about headcount reduction; obviously, you sold your SIC business and the gas business shifting some production from North Carolina to Oregon. Looking ahead, I don't expect you to share anything that you haven't made public, but would you say, you're kind of in the early innings of this journey and sort of rightsizing your company or optimizing your company, or are you in the middle innings, late innings? Any commentary on how to think about restructuring over the medium term that would be helpful.

Thanks, Toshia. This is Grant. Let me start with the question and then we can get to your follow-up if one. We're constantly considering ways to optimize our factory footprint. In fact, it's a topic that we regularly consider. And it shifts with revenue mix and the demand that we're accusing to support over time. The best way to think about it is as we described it at our Investor Day, we'll manufacture internally where it differentiates our product or where our foundry market doesn't exist. Today, filters is a great example where we make those in Richardson, and there's not a commercial or merchant market available for those. And then we will outsource to some of our trusted partners where we can mutually benefit from their scale and their technology development. So we can pick and choose the technologies from our outsourced partners that are best suited to our products, both from a performance and cost perspective without having to support each of those individual manufacturing technologies in-house.

That's great. Thank you. And then, as a quick follow-up, just on customer concentration, with Apple, I guess, flat or growing nicely and your Android business coming down, revenue concentration is growing. All else equal, I think investors typically prefer diverse revenue streams. I know you guys talked about HPA and CSG outgrowing ACG over the medium to long run. So organically, that concentration should come down over time, but is there a willingness on your part to kind of lean in on M&A to accelerate that diversification process or not so much, you prefer to go at it organically? Thanks.

I'll take this on. In the past, as you know, a lot of our acquisitions have been more technology-based and complement, you know, product offerings that we already have. We would absolutely be open if we felt we were a better owner, and we could significantly increase shareholder value by making a transaction like that. I mean, obviously, we did a good job when we merged the two companies of RFMD and TriQuint, and if we saw another opportunity to do that, we would certainly be active on that.

Yes, thank you. Just a question with regard to some of your comments regarding your largest customer and on short-term and long-term. And I know, typically, there's not much you could say, but you did indicate that you expected your content to grow this year, but then you talked about like a flat to modestly up increase. I guess I'd interpret that as probably a modest content increase this year, so if you could clarify that? And then longer term, you're going to need growth of that largest customer to grow the ACG business given what you're doing in Android; maybe if you could give us a sense of where the opportunity is for you? Is that just additional content that fits into your traditional strong areas or is that going after some market share from some others?

Thanks, Chris. This is Grant. Let me take the first part of your question and then maybe Dave or Bob could comment on the future opportunity set. But at our largest customer, there's no changes to the comments that Bob made and I made in December; we're confident in the awards that we have to date and the upcoming fall platform. And for the year, we expect it to be flat-to-up modestly there. Volume and mix are always uncertain, and if you want to split it into our fiscal year halves, the first half of our fiscal year versus the second half, and our largest customer will likely to be down in the first half of fiscal '26 relative to fiscal '25 and up in the second half of fiscal '26 relative to the second half of '25. So our content is more weighted to the Pro models versus the consumer model. So as we pointed out last quarter, the model mix does have an impact on our revenue, but we'll continue to deliver on our strategy of gaining content, and as the volume pulls through revenue, I think we're well-positioned there.

I'll take the second part on what we're working on to grow our share and share of wallet at our largest customer. In the areas we currently support, there's opportunities to gain share. Obviously, we've talked pretty clearly with the group that if they come out with their own modem, their baseband, we believe we'll be able to pick up the ETP mix. So that's actually gain and RF content for us that is taking share from an incumbent. And then clearly, there's other highly integrated modules that we've been invited to participate in and work towards winning. So that's the playbook that we're laying out for our team.

Hey, guys, thanks for the question. The revenue at your largest customer flat-to-up, if I understand that correctly, that assumption would include opportunities in the PMIC or envelope tracker but does not include any integrated modules that sound like they have not been awarded yet; is that how we should think about that?

No, our awards today give us confidence, as we talked about, and is a kind of apples-to-apples basis in the fall models; we feel very confident that we're delivering on our Investor Day promise of gaining content and share there in areas where not only we have strength in the past, but also in areas that we've shared content before and have continued to gain share. So our comments are primarily related to the entire portfolio of products we sell into that customer. I did give some color on the first half versus the second half and how fiscal '26 compares to fiscal '25, which should give you some indication of the timing related to it, but other than that, we can't get into any of the details related to our largest customer and things that haven't yet been released.

Sure, thanks, Chris. Regarding our cash usage and capital allocation, there are no changes. We meet regularly with our Board to review our needs each quarter, including working capital, capital expenditures, organic and inorganic growth opportunities, and debt reduction, all of which have been ongoing discussions. Additionally, we are dedicated to delivering value to our shareholders through share repurchases. Our assessment with the Board remains unchanged. In terms of capital intensity over time, a key reason for our strategy is to manufacture in-house when it enhances our product differentiation, and we plan to maintain that approach. We have the necessary capacity in place and will focus on maintenance and improvements to sustain our edge. We will also collaborate with external partners to leverage their scale and minimize further investment in our factory network from a capital expenditures standpoint.

Yes, thank you. I guess this question is for Dave. You guys talked a lot about the D&A momentum here. I was wondering if you could maybe spend a few minutes on some of the other segments, industrial, enterprise, infrastructure. It's nice to hear the stabilization in areas like broadband. What's the visibility like that we've seen a lot and heard a lot of mixed data points for these end markets? I'm just wondering if you could talk about the design activity environment and your visibility. We appreciate the sort of longer-term guidance by segment, but I would love to hear a little more about visibility into, I guess, sustainability and how you're thinking about growth trajectories as you flow through fiscal '26 in those areas. Thanks you.

Yes, in some markets, we are seeing a near-term weakness in demand for existing programs, particularly in automotive and industrial sectors. However, we continue to grow from a small base in many of our businesses, focusing on new content. Looking ahead, we feel optimistic about the opportunities available. Our funnel of opportunities and customer engagements is expanding. In the enterprise sector, we are upgrading to WiFi 7 and adding ultra-wideband for indoor navigation and real-time location services, which is progressing well. We've discussed various ramps this year, particularly in Power Management, as we transition from our solid-state drive business to the enterprise segment, presenting good content growth prospects. In automotive, ultra-wideband adoption is growing significantly among all end customers and Tier 1 companies, and we anticipate robust uptake over the next three to five years, positioning us as a leader in that market. Additionally, in the defense sector, our SATCOM business is performing well. With the launch of LEO satellites, there is potential for substantial content revenue each time one is deployed, and with direct-to-sell capabilities acting like a base station in space, the revenue potential per satellite is promising. These represent significant growth opportunities for us in the defense market beyond our traditional business.

Thanks, Dave. If I could ask, hopefully, a little follow-up for Grant. Just thinking through maybe a little bit longer-term investment into OpEx and you talked about repurposing some of the savings into some areas like you just talked about. But I'm wondering, as you think about sort of focusing on your large customer in ACG, should we expect any meaningful change of mix in OpEx, ACG versus the other two segments? Or do you think it will be kind of steady state longer term?

We're looking at OpEx improvement across the company, not necessarily within any given operating segment. There's a lot of shared resources across the company that are allocated based on the size of the business and how much effort is put in by the support functions. So when we think about OpEx, it's across the entire company. The most recent workforce reduction. That was, in certain cases, specific to Android as we think about our product road map and as we look forward, which products we're going to develop and support. And we took appropriate action to reflect the revenue change in fiscal '26 and '27 that we discussed today.

Thanks a lot. I just want to dig down a little bit more on the guidance for the fall of your largest customer and what your assumptions are there? If we assume units are flat, and the Pro, Pro max split is the same as it was last year. I just want to be clear that you're guiding for content gains. And if those content gains, how much does that include, let's say, leasing two different SKUs with two different modems because I know it seems based on your comments, Bob, that you're pretty confident your content is going to go up on an internally developed model just for the ETP mix alone. I just want to make sure those assumptions are correct to start off with. Thanks.

Thanks, Ed. Regarding the internal modem, we are very confident that our ETP will be included. As for the content we have already secured, we believe strongly in that. We haven't specified how many modems will be utilized this year, but I am very confident that we will secure additional content this year based on our existing awards.

Okay. If everything else remains constant, you will see an increase in content based on the awards themselves.

Yes.

Great. On the defense side of the business, it seems to be performing very well and is likely the best-performing area overall. Do you expect any significant changes? I know you mentioned Low Earth Orbit satellites, which also relate to defense. Are there any anticipated changes in spending related to the repercussions of the Ukraine war, especially concerning AESA and the focus on drones? I'm uncertain about how Qorvo fits into the radar systems, so could you provide some insights into that? I'm aware of the long-term plans, but I'm trying to understand how these developments might affect you, if at all.

Yes, this is primarily due to the transition of radar systems from mechanical models to AESA radars, which presents a significant content opportunity. We are actively collaborating with key players in the market. For airborne radar systems on aircraft, we anticipate opportunities worth hundreds of thousands of dollars, and for ground-based systems, it could be as much as $1 million per system. This is certainly a growth area for us, and we are highly focused on it.

Yes, it does. So we'd say if it's radar in the plane out in sea or in land, we're already in it, and if it grows, we'll grow nicely.

Perfect. Thanks, guys.

Thank you.

Thanks, Ed.

Hi, Bob and Grant. Just on the China side, I mean, there's a move, looks like, with the China handset OEMs to move to mid and low-end because of the subsidies that the China government are giving. Once you exit the low-end Android, how much exposure would you have to the China market?

Sure, Vijay. So we had said on a run-rate from a China Android perspective, we are right around that $100 million per quarter mark, and we would expect to track down to the $50 million level on plus or minus.

Understood. As you shift your focus to primarily your top two customers, does this pose a risk? It seems to create a more competitive environment, particularly since your competitors are likely adopting similar strategies. Does this make the competitive landscape more challenging and restrictive?

I would say, today, they're both very competitive; nothing has really changed there at our largest customer as well as at our second-largest customer. I mean, that's what we've been dealing with for the last 10 years at Qorvo. So we're not seeing much change there in that sense. The real change has been, as we've been talking about in China, that mid-tier, which was a great place where we made a lot of money over the years, has really downshifted as consumers looking for more entry-level phones. That's been the big change.

Got it. Thank you.

Thank you.

We want to thank everyone for joining us on tonight's call. We appreciate your interest, and we look forward to speaking with many of you at upcoming investor events. Thanks again. Hope you have a great evening.