Q1 revenue guidance fell short of expectations due to weak recovery of the automotive business, causing NXP Semiconductors NV (NXPI.US) to drop after hours.

Chip manufacturer NXP Semiconductors NV (NXPI.US) has announced better-than-expected revenue guidance for the first quarter of 2026. However, due to slightly lower-than-expected growth in the automotive market, the stock fell nearly 5% in after-hours trading on Monday. The financial report shows that NXP Semiconductors NV's fourth-quarter revenue increased by 7% year-on-year to $3.34 billion, surpassing analysts' average expectations of $3 billion. Under Non-GAAP accounting standards, gross profit increased by 7% to $1.91 billion, with a gross margin of 57.4%; operating profit increased by 8% to $1.15 billion, with an operating profit margin of 34.6%; diluted earnings per share were $3.35, beating analysts' average expectations of $3.31. By business segment, revenue from the automotive business increased by 5% year-on-year to $1.88 billion, falling short of analysts' average expectations of $1.89 billion, with some analysts expecting as high as $1.97 billion; revenue from industrial and IoT businesses increased by 24% to $640 million; revenue from mobile business increased by 22% to $490 million; revenue from communication infrastructure and other businesses decreased by 18% to $330 million. NXP Semiconductors NV primarily supplies chips to the automotive industry, which contributes to over half of the company's revenue. Its chips use mature process technology and are widely used in functions such as driving safety, connected car, and in-vehicle infotainment systems. Like its peers STMicroelectronics NV ADR RegS (STM.US) and Texas Instruments Incorporated (TXN.US), NXP Semiconductors NV has been impacted by chip oversupply following the pandemic. Automakers and consumer electronics customers who hoarded chips during the shortage period are slowly digesting their inventories. The threat of tariffs from former U.S. President Trump has further delayed the recovery process. NXP Semiconductors NV had previously indicated that the oversupply may finally be nearing its end and noted a "significant" acceleration in its automotive business. CEO Rafael Sotomayor, who took office in October last year, also stated that he sees signs of a "cyclical recovery." Last week, STMicroelectronics NV ADR RegS, which supplies Apple Inc. (AAPL.US), provided revenue guidance for the first quarter that exceeded analysts' expectations, citing a rebound in demand from consumer electronics customers. However, as the financial report of this analog chip manufacturer showed an uneven recovery in different end markets, its stock price still fell. STMicroelectronics NV ADR RegS's CEO Jean-Marc Chery stated in a call with analysts that the automotive market is "not yet stable." Looking ahead, NXP Semiconductors NV forecasts revenue for the first quarter of 2026 to be between $3.05 billion and $3.25 billion, with a midpoint of $3.15 billion, surpassing analysts' average expectations of $3.09 billion; it expects Non-GAAP diluted earnings per share to be between $2.77 and $3.17, with a midpoint of $2.97, slightly beating analysts' average expectations of $2.95.