Qorvo Earnings Call: Profits Rise as Revenue Resets

Qorvo Inc ((QRVO)) has held its Q3 earnings call. Read on for the main highlights of the call.

Qorvo Charts Profit-Focused Course Amid Revenue Headwinds in Latest Earnings Call

Qorvo’s latest earnings call struck a cautiously optimistic tone, with management highlighting strong execution on profitability, cash generation, and portfolio repositioning despite acknowledging notable top-line headwinds ahead. Solid Q3 beats on revenue, margins, and earnings, combined with clear progress in shifting away from lower-margin Android business and toward higher-value HPA and defense markets, left management confident it can expand margins and earnings even as overall revenue is expected to decline in the mid-single digits in fiscal 2027. The overarching message: Qorvo is deliberately trading near-term growth for higher quality, more resilient earnings.

Strong Q3 Financial Performance

Qorvo delivered a stronger-than-expected third quarter, posting revenue of $993 million, non-GAAP gross margin of 49.1%, and non-GAAP diluted EPS of $2.17, all coming in ahead of prior guidance. The performance underscores robust demand across key franchises and disciplined execution despite a mixed macro backdrop and ongoing smartphone market volatility. For investors, the beat on both the top and bottom lines signals that Qorvo’s core businesses remain healthy even as the company prepares for a structurally different revenue mix in coming years.

Material Gross Margin Improvement

Margin expansion was a central theme of the call. Non-GAAP gross margin improved by roughly 260 basis points year-over-year in Q3, reflecting a more favorable product mix, cost discipline, and early benefits from manufacturing optimization. Management expects similar year-over-year gross margin improvement in Q4 and is targeting full-year fiscal 2027 gross margins above 50%. This focus on profitability, rather than pure revenue growth, is key to Qorvo’s strategic pivot and underpins its goal of driving EPS higher even as sales soften.

Robust Cash Generation and Liquidity

Qorvo showcased strong cash generation, producing approximately $265 million in operating cash flow during the quarter and about $237 million in free cash flow after $28 million of capex. The company ended the quarter with roughly $1.3 billion in cash and equivalents against around $1.5 billion in long-term debt, with no near-term maturities. This healthy liquidity position gives Qorvo flexibility to fund restructuring, invest in high-growth segments, and navigate cyclical industry swings without stretching its balance sheet.

Inventory Reduction Strengthens Balance Sheet

Inventory management was another bright spot. Net inventory ended the quarter at $530 million, down $75 million sequentially and $111 million compared with the prior fiscal year-end. This reduction indicates improved supply-demand alignment after prior industry oversupply and should support continued cash generation. Lower inventory also reduces risk if smartphone or broader electronics demand softens more than expected.

HPA Momentum and Defense Tailwinds

High Performance Analog (HPA) continues to emerge as a growth engine. Management expects HPA to sustain double-digit growth, supported in large part by strong demand in defense and aerospace markets. Qorvo forecast that DNA/defense-related markets will reach about $500 million in fiscal 2027 sales, driven by government programs and increasing RF content per platform. This shift toward higher-margin, less consumer-cyclical business is a cornerstone of Qorvo’s strategy to stabilize earnings and diversify away from smartphone dependence.

Strategic Product and Commercial Wins

The call highlighted several important design and product wins that bolster Qorvo’s long-term growth narrative. The company secured new high-band pad content in a cellular-enabled iPad, adding incremental revenue in premium consumer devices. It also received its first production orders for automotive ultra-wideband in December, giving it exposure to a key secular growth area in connected and secure vehicles. In connectivity, Qorvo delivered its first Wi‑Fi 8 samples, positioning itself early for the next standard transition, and taped out its first chip for next-generation enterprise SSD power management ICs. These wins point to expanding content opportunities across consumer, automotive, and infrastructure markets.

Manufacturing Optimization and Restructuring Progress

Qorvo is pushing ahead with efforts to streamline its manufacturing footprint and lower capital intensity. The company closed its Costa Rica facility ahead of schedule, transitioning production to external partners, and is on track to transfer SAW filter production to internal facilities in Greensboro, North Carolina, and Richardson, Texas. These steps are intended to improve asset utilization, reduce fixed costs, and free up capital. While such transitions carry operational execution risk, management framed them as necessary to sustain structurally higher margins over time.

Portfolio Rationalization to Enhance Profitability

Management emphasized that Qorvo’s portfolio is being actively reshaped for profitability rather than sheer scale. The company has divested its MEMS-based Sensing Solutions business and is deliberately resizing its Android exposure, especially in low-margin mass-tier products. Coupled with tight operating expense control, these moves are expected to lift operating margins as the business mix tilts toward higher-value segments like HPA, defense, and premium content in consumer and infrastructure markets.

Android Revenue Decline and Strategic Exit

The most visible revenue headwind comes from Qorvo’s smartphone strategy, particularly around Android. Android revenue declined by low double digits sequentially in December, and management expects Android revenue to fall by about $300 million in fiscal 2027 versus fiscal 2026 as the company exits lower-margin mass-tier sockets. While painful for near-term sales, this is a deliberate exit aimed at improving overall margin quality. Management also noted that memory pricing and availability are pressuring mass-tier Android build plans, which effectively accelerates the exit trajectory.

Full-Year Revenue Outlook Under Pressure

Reflecting these strategic choices, Qorvo forecast a mid-single-digit decline in full-year fiscal 2027 revenue. The primary driver is the intentional reduction in Android content within the Advanced Cellular Group (ACG), partially offset by growth in HPA. The company expects the Connectivity and Sensors Group (CSG) to be roughly flat year over year, weighed down by the sensing divestiture, while HPA grows at a double-digit pace. For investors, this sets expectations for a period where top-line performance lags even as mix and profitability improve.

Share Loss in Ultra-High Band Sockets

Qorvo also acknowledged competitive pressure in certain premium smartphone components. Management noted that it holds lower share on the ultra-high band pad in upcoming phone models compared with last year, which will drive a year-over-year decline in that specific product area. While not a broad-based loss of position, the commentary underscores ongoing competitive dynamics in RF front-end content at key flagship customers and contributes to the softer revenue outlook in the handset segment.

CSG Headwinds from Business Divestiture

The divestiture of the MEMS-based Sensing Solutions business is another factor weighing on reported revenue, especially within CSG. Management was clear that this move is intended to improve the segment’s profitability profile rather than its growth rate, and that it will present a year-over-year headwind to CSG revenue comparisons. Investors should therefore expect a cleaner, more profitable CSG portfolio, but one that may not show strong top-line growth in the near term.

Customer Concentration Risk Remains Elevated

Qorvo’s dependence on a single large customer remains a key structural risk. The company’s largest customer accounted for approximately 53% of Q3 revenue, highlighting significant concentration risk if content levels or unit volumes change unexpectedly. While the push into HPA and defense markets should gradually diversify the base, the current concentration makes earnings and cash flow sensitive to design wins and share shifts at this dominant customer.

Seasonality and Memory Market Pressures on Android

On the near-term demand side, management expects Android revenue in the March quarter to be down more than typical seasonal patterns. One driver is external: memory pricing and availability are pressuring build plans in the mass-tier Android ecosystem. Another is strategic: these conditions are reinforcing Qorvo’s decision to accelerate its exit from low-margin Android sockets. Investors should therefore anticipate a weaker seasonal pattern for Android through the current quarter and into the transition period.

Underutilization and Manufacturing Headwinds

Qorvo noted that factory utilizations are not yet at desired levels, leaving notable headroom in its manufacturing base. While no specific underutilization charges were recorded this quarter, management acknowledged that factory consolidations and production transitions create execution risk and can weigh on short-term efficiency. Over time, however, the company expects these moves to support higher gross margins once utilization normalizes and the manufacturing footprint is better aligned with the new, more focused portfolio.

Forward-Looking Guidance and Profitability Targets

Looking ahead, Qorvo guided fiscal Q4 (March quarter) revenue to about $800 million, plus or minus $25 million, with non-GAAP gross margin in the 48–49% range and non-GAAP diluted EPS around $1.20, plus or minus $0.15. Non-GAAP operating expenses are projected between $240 million and $250 million, with non-operating expense of $8–10 million and a fiscal 2026 non-GAAP tax rate near 15%. For full fiscal 2027, management expects revenue to decline in the mid-single digits, including a roughly $300 million drop in Android revenue, flat CSG performance, and double-digit growth in HPA, alongside about $500 million in DNA market sales. Despite the revenue decline, Qorvo is targeting full-year gross margins above 50% and EPS approaching $7, signaling confidence that mix upgrades, cost actions, and manufacturing optimization can drive meaningful earnings power.

In sum, Qorvo’s earnings call presented a company in active transition—accepting near-term revenue pressure in exchange for a structurally more profitable and diversified business. Strong Q3 results, margin expansion, and healthy cash generation provide a solid foundation for this pivot, even as Android exposure, ultra-high band share loss, and customer concentration remain key risks to monitor. For investors willing to look beyond the next few quarters, Qorvo is positioning itself as a higher-margin RF and analog player with growing exposure to defense, automotive, and next-generation connectivity markets.