Clarify the comms infrastructure outlook given the Analyst Day flat CAGR, current recovery, and deemphasis on RF power.

The long-term flat CAGR model for comms infrastructure remains, but its composition is shifting. The current recovery is driven by secure cards (RFID) and digital networking (data center exposure). RF power will be deemphasized and decelerate, with revenue composition shifting more towards digital networking, while secure cards are likely to remain around 50%. “The revenue composition is going to change from RF power more towards digital network and secure cards is likely to stay around 50%. And that's the way you should think about it.”

What is driving the accelerating momentum for the rest of the year, and how much is cyclical versus secular?

Visibility has significantly improved, with strengthening direct order book and distribution backlog. The Q2 guide implies 18% YoY growth (adjusted) for the first half. The momentum from company-specific growth drivers is expected to continue throughout the year, driving growth in the second half. “The visibility has improved. I think what has changed, direct order book continues to strengthen. The distribution backlog continues to improve. So I think we believe the momentum continues.”

Provide more details on the data center growth, including whether it's new products, market tailwind, or a strategic area for NXP, and how NXP differentiates.

NXP's data center exposure is focused on the control plane (power, cooling, uptime, secure controls), not the data plane (GPUs/accelerators). Products include Layerscape networking, i.MX for board management, and MCUs for cooling/root of trust. This growth is from ramping products, outgrowing the 10-11% SAM growth, with 20-25 products involved, leveraging NXP's industrial strength for high reliability and long lifecycle applications. “Our products are Layerscape networking processing for control plane networking. We have our i.MX products for board management. We have our MCUs doing root of trust or being part of the cooling system. So the way to think about it is we play in the part of the system where you need high reliability and long life cycle applications.”

NXPI

NXP Semiconductors (NXPI) Q1 FY26 earnings call: guidance and Q&A

Earnings call· Mar 2026 (Q1 FY26)· Information Technology· Apr 28, 2026

Source: earnings call transcript

Executive summary

NXP Semiconductors Q1 FY26 — Strong Performance Exceeds Expectations, Driven by SDV and AI

NXP Semiconductors delivered a strong Q1 FY26, exceeding revenue and EPS expectations, driven by broad-based improvements across all end markets and accelerating company-specific growth drivers in software-defined vehicles and physical AI. The company's data center exposure is rapidly expanding, with revenue expected to more than double in 2026. Management reaffirmed its 2027 financial commitments, signaling continued confidence in its long-term growth trajectory.

Highlights

Revenue of $3.18 billion, up 12% year-over-year, exceeded midpoint guidance by $31 million.
Company-specific growth drivers in Automotive and Industrial & IoT grew 18% year-over-year, representing approximately one-third of Q1 revenue.
Non-GAAP earnings per share of $3.05, $0.08 above the midpoint of guidance.
Industrial & IoT revenue increased 24% year-over-year, with newer processing solutions growing approximately 75% year-over-year.
Data center related revenue is projected to more than double from $200 million in 2025 to over $500 million in 2026.

Concerns

Non-GAAP interest expense was $90 million and taxes were $173 million, with below-the-line items $3 million unfavorable to guidance.
Stock-based compensation amounted to $109 million in Q1.
Selective smart pricing adjustments are being made due to high input cost pressure, though the Q2 impact is immaterial.

Guidance & targets

Category	Target	Timeline	Confidence
Q2 FY26 Revenue	$3.45 billion, plus or minus $100 million high materiality	Q2 · FY26	High
Q2 FY26 Non-GAAP Gross Margin	58%, plus or minus 50 basis points high materiality	Q2 · FY26	High
Q2 FY26 Operating Expenses	$800 million, plus or minus $10 million medium materiality	Q2 · FY26	High
Q2 FY26 Non-GAAP Financial Expense	approximately $92 million low materiality	Q2 · FY26	High
Q2 FY26 Non-GAAP Tax Rate	18% low materiality	Q2 · FY26	High
Q2 FY26 Noncontrolling Interest	$14 million low materiality	Q2 · FY26	High
Q2 FY26 Non-GAAP Earnings Per Share	$3.50 at the midpoint high materiality	Q2 · FY26	High
Q2 FY26 Automotive Revenue Growth	low double-digit percent range year-on-year and up in the high single-digit range sequentially medium materiality	Q2 · FY26	High
Q2 FY26 Automotive Revenue Growth (Adjusted)	high teens percentage growth year-over-year and 10% sequentially medium materiality	Q2 · FY26	High
Q2 FY26 Industrial & IoT Revenue Growth	high 30% range year-over-year and up in the high teens range sequentially medium materiality	Q2 · FY26	High
Q2 FY26 Mobile Revenue Growth	low single-digit percent range year-over-year and down in the low double-digit percent range on a sequential basis medium materiality	Q2 · FY26	High
Q2 FY26 Communications Infrastructure and Other Revenue Growth	up in the mid-30% range versus Q2 2025 and up in the mid-teens percent range versus Q1 2026 medium materiality	Q2 · FY26	High
FY26 Data Center Revenue	north of $500 million high materiality	FY26	High
FY26 VSMC Investment	additional $425 million medium materiality	FY26	High
FY26 ESMC Investment	about $50 million medium materiality	FY26	High
FY26 and FY27 Revenue Growth	double-digit revenue growth in both 2026 and 2027 high materiality	FY26-FY27	High
Long-term Gross Margin	expanding towards 60-plus percent high materiality	Long-term	High
Long-term Capital Allocation Strategy	balancing returns to shareholders with disciplined investments in the business to support long-term profitable growth medium materiality	Long-term	High
Q2 FY26 Capital Expenditures	approximately 3% of revenue medium materiality	Q2 · FY26	High
Q2 FY26 VSMC Capacity Access Fee Payment	$55 million medium materiality	Q2 · FY26	High
Q2 FY26 VSMC Equity Investments	$125 million medium materiality	Q2 · FY26	High
Q2 FY26 ESMC Equity Investments	$10 million medium materiality	Q2 · FY26	High
Structural Gross Margin Expansion	approximately 200 basis points high materiality	Long-term	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Automotive Revenue was in line with expectations. Adjusted for the sale of the MEMS Sensors business, automotive growth was 10% year-over-year. Growth was driven by accelerating customer software-defined vehicle programs, improved electrification trends, and continued momentum in radar and connectivity. Adjusted growth YoY: 10%Accelerated growth drivers contribution to YoY growth: nearly 90%	$1.78 billion	6%	—	—
Industrial & IoT Revenue was near the high end of guidance. Growth was driven by newer industrial processing solutions. Industrial was strong with notable strength in factory automation, data centers, and energy storage. The core business is also recovering. Newer industrial processing solutions (i.MX, RT, MCX) growth YoY: ~75%Newer industrial processing solutions contribution to Q1 growth: nearly halfCore business growth YoY: 15%Secular growth drivers as % of segment revenue: ~37%Secular growth drivers growth rate: 40-50%	$628 million	24%	—	—
Communications Infrastructure Revenue was at the high end of guidance. Growth was driven by digital networking exposure to data center and continued ramps of UCODE RFID product. The segment is recovering, primarily on the back of secure cards and digital networking. Revenue tied to secure cards (end of last year): ~50%Revenue tied to digital networking (end of last year): ~25%Revenue tied to RF power (end of last year): ~25%	$380 million	21%	—	—
Mobile Revenue was in line with guidance, reflecting continued strength in the secure mobile transactions franchise.	$391 million	16%	—	—

Orderbook & backlog

Channel Inventory 11 weeks Q1 FY26 end

Up from 9-10 weeks

Increased to service stronger demand, especially in Industrial & IoT. Q2 guide assumes inventory stays flat at 11 weeks, aligning with long-term target.

Product announcements

Product	Type	Timeline
S32 CoreRide Zonal Reference Design	milestone	Q3 FY26
Aviva Links SerDes Platform	milestone	Production in 2028
Kinara AI IP Integration	update	Late 2027 and 2028 (revenue contribution)

Deals & partnerships

Not stated divestiture $878 million

Sale of the MEMS Sensors business. Automotive growth figures are often adjusted for this sale.

Capital programs

VSMC Manufacturing Joint Venture underway

Period spend: $385 million

Spent to date: 67% through investment cycle

Benefit:approximately 200 basis points of structural gross margin expansion

Investment in Q1 FY26 comprised of $189 million in long-term capacity access fees and $196 million in equity contributions. Tools are installed and ramping soon. Expected to be fully operational in 2028.

ESMC Manufacturing Joint Venture underway

Spent to date: 30% through investment cycle

The company is 30% through the investment cycle for ESMC. Expected 2026 investments are about $50 million.

Risks & headwinds

High Input Cost Pressure Ongoing

Not quantified, but leads to selective smart pricing adjustments.

Mitigation:Operational efficiency, selective smart pricing adjustments to protect economics. Q2 impact is immaterial.

Supply Chain Bottlenecks Ongoing

Not quantified, described as 'slight bottlenecks'.

Mitigation:If internal offsets are not possible, additional charges for upside demand may be passed along to customers.

Q&A highlights

What is driving automotive growth (China vs. outside, pricing vs. unit/content), and is NXP seeing pricing benefits given supply tightness?

Automotive growth is primarily structural and content-driven, not unit growth, with NXP's business growing 10% YoY (adjusted) in Q1 and expecting high teens in Q2 despite SAAR declines. All regions, including China, are growing YoY. Pricing adjustments are selective and immaterial for Q2, focused on mitigating input cost pressure.

“our auto business, NXP is performing well. And you can see from the print in Q1, it grew 10% after you account for the sensor business, and Q2 guide implies a high teens year-over-year growth on the same basis. So you can see that clearly, the momentum is improving. And so that tells you already that this is not necessarily a story about unit growth, this is a story about the transformation, the architecture transformation that is driving content growth.”

asked by Vivek Arya · answered by Rafael Sotomayor

2 min read 6 chapters

Detailed narrative

Automotive Growth Drivers Outpacing SAAR

NXP's automotive business is demonstrating strong structural growth, with Q1 revenue up 10% year-over-year (adjusted for MEMS Sensors sale) and Q2 guidance implying high teens year-over-year growth. This performance significantly outpaces broader automotive production trends, driven by accelerating software-defined vehicle programs, electrification, radar, and connectivity.

These accelerated growth drivers contributed nearly 90% of the segment's year-over-year growth in Q1, highlighting a content-driven expansion rather than unit volume.

Industrial & IoT Momentum and Physical AI Opportunities

The Industrial & IoT segment exhibited robust growth, with Q1 revenue up 24% year-over-year and Q2 guidance projecting high 30% range year-over-year growth. This strength is broad-based across factory automation, data centers, and energy storage. Newer industrial processing solutions, including i.MX, RT, and MCX, were key contributors, growing approximately 75% year-over-year and accounting for nearly half of the segment's Q1 growth.

The market's transformation towards physical AI at the edge is creating significant content opportunities in processing, connectivity, and security for NXP.

Expanding Data Center Exposure in Control Plane

NXP is strategically increasing its presence in data center applications, focusing on the control plane for power, cooling, uptime, and secure controls, rather than the data plane (GPUs/accelerators). Revenue from data centers is expected to more than double from $200 million in 2025 to over $500 million in 2026.

This growth is driven by ramping products like Layerscape networking processors, i.MX for board management, and MCUs for root of trust, leveraging NXP's industrial-strength portfolio for high reliability and long lifecycle applications.

Channel Inventory Management for Strong Demand

Channel inventory increased to 11 weeks in Q1, up from 9-10 weeks, a deliberate move to support stronger demand, particularly within the Industrial & IoT segment, where 80% of the business is serviced through distribution. The company's Q2 guidance is based on maintaining channel inventory at this 11-week level, which aligns with its long-term target.

This proactive management ensures NXP can meet the accelerating demand from its customers.

Strategic Acquisitions Driving Future Growth

Recent acquisitions are being integrated to bolster NXP's long-term strategy. TTTech's engineering team is now focused on the S32 CoreRide initiative, with zonal reference designs sampling to customers in Q3. Aviva Links' SerDes platform has secured new customer awards, with production expected in 2028, opening a new market for NXP.

Kinara's AI IP is being integrated into the i.MX platform and future auto/industrial processors, generating a sales funnel exceeding $1 billion and expected revenue contribution in late 2027/2028.

Manufacturing Strategy and Gross Margin Expansion

NXP is on track with its hybrid manufacturing strategy, including the VSMC and ESMC joint ventures, to enhance long-term supply resiliency. The VSMC facility is 67% through its investment cycle, with tools installed and expected to be fully operational in 2028.

This is projected to contribute approximately 200 basis points of structural gross margin expansion. The company is also seeing gross margin expansion driven by higher revenue, product mix, and improving front-end utilization, expected to reach mid-80s percent in the second half of the year.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.