Good day, and thank you for standing by. Welcome to the Skyworks Q4 2026 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Raji Gill, Vice President of Investor Relations. Please go ahead.
Thank you, operator. Good afternoon, everyone, and welcome to Skyworks' fourth fiscal quarter 2026 conference call, our first as a combined company with Qorvo. With me today for our prepared remarks are Phil Brace, our Chief Executive Officer and President, and Philip Carter, Chief Financial Officer and Senior Vice President of Skyworks. This call is being broadcast over the web and can be accessed from the investor relations section of the company's website at skyworks.com. In addition, the company's prepared remarks will be made available on our website promptly after the conclusion during the call. We have also posted a new corporate overview presentation to the investor relations section of our website, which outlines the combined company strategy, markets, technology portfolio, and investment highlights.
Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements. Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K, for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today. Additionally, today's discussion will include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the investor relations section of our company website for a complete reconciliation to GAAP. A note on presentation: because the Qorvo transaction closed on October 5th, after the end of our fiscal fourth quarter, our September quarter results are Skyworks standalone, and our December quarter outlook is on a combined basis. With that, I'll turn the call over to Phil Brace.
Thanks, Raji, and good afternoon, everyone. This is an important moment for our company. On October 5th, we completed the combination of Skyworks and Qorvo, uniting more than six decades of innovation. We now have greater scale, a broader technology portfolio, and an expanded manufacturing footprint, enabling us to continue to push the boundaries of what's possible. I want to thank our employees on both sides. Bringing two companies together while continuing to deliver for customers takes enormous effort, and our teams have stayed focused throughout. That focus on execution carried through our final quarter as a standalone company.
In the September quarter, Skyworks delivered revenue of $1.05 billion, above the midpoint of our guidance range, delivered non-GAAP diluted earnings per share of $1.28, $0.01 above the midpoint of our guidance, managed operating expenses to $237 million, near the low end of our guidance range, and repurchased $107 million of stock at an average price of $66.27. In the quarter, demand was healthy across our end markets, and book-to-bill was strong. Timing and power products continued to be a highlight, with growing design engagement in AI data center. Automotive and industrial design activity was also robust. In smartphone, we executed well in our seasonally strongest quarter, driven by healthy demand at our largest customer, partially offset by well-known softness in the Android market.
Broad markets, which will form part of our Diversified Growth Markets category going forward, delivered revenue of approximately $416 million, exceeding our expectations. Revenue grew 9% year-over-year in the quarter and approximately 10% for fiscal 2026, driven by strong growth in data center, Wi-Fi, and automotive, despite continued softness in consumer IoT. Consistent with prior quarters, strong demand came against a challenging cost backdrop. Input costs remain a headwind to margins, and we expect that to continue. We are taking actions to mitigate these costs, including optimizing factory loading, securing long-term supply agreements, and continuing to raise prices as appropriate. Looking ahead, we now have a full-stack RF front-end platform for next-generation smartphones, weighted heavily toward premium devices, where RF content is greatest and where we will continue to focus. Expanded reach across four secular growth markets: Physical AI, defense, infrastructure, and automotive.
A broader technology portfolio, adding RF GaN, higher frequency capabilities, low voltage power, and wired broadband. A path to a compelling target financial model, which Philip will walk through. Going forward, we will report our businesses in two categories: smartphone and Diversified Growth Markets. Smartphone includes our former mobile business and Qorvo's Advanced Cellular Group. Diversified Growth Markets include our former broad markets business and Qorvo's High Performance Analog and Connectivity and Sensors Group. It's a large and growing part of the company with above-average gross margins and exposure to secular growth markets. On a pro forma combined basis, smartphone revenue was approximately $4.6 billion in fiscal 2026, down approximately 11% year-over-year, reflecting the anticipated decline in Android revenue and content dynamics at our largest customer. Broader content across each device should support steadier results as our reliance on any single socket declines and our content opportunity expands.
Looking further out, the smartphone is emerging as a primary AI device, which we believe supports a continued shift towards premium phones. At the same time, RF complexity is rising again. 5G Advanced and then 6G bring higher power, more transmit and receive paths, new spectrum, and satellite connectivity, all of which require more filtering, more amplifications, and more sophisticated antenna solutions, m ore bands, more paths, more performance, and more opportunities for Skyworks. On a pro forma combined basis, Diversified Growth Markets revenue was approximately $2.9 billion in fiscal 2026, up approximately 12% year-over-year at attractive gross margins. Let me give you a little more color of what's contained within our Diversified Growth Markets. Physical AI and connected edge, more than $1.6 billion in fiscal 2026, covers connected devices at the edge, Wi-Fi access points and gateways, IoT devices, and industrial automation and robots.
As AI inference moves from the cloud into these edge devices, factories, and robots, our wireless connectivity, power management, and power isolation technologies give us more content opportunity per device. Defense and aerospace, approximately $500 million, is driven by modernization, space, and electronic warfare, and expanding satellite constellations. We bring more than 35 years of development in gallium arsenide, gallium nitride, filters, advanced packaging, along with Category 1A Trusted Foundry accreditation. Our products are fielded across air, land, sea, and space, supporting all branches of the U.S. Armed Forces and allied forces worldwide in radar, electronic warfare, sensors, and secure communications. Defense customers are also increasingly engaging with us on power solutions to pair with our GaN amplifiers, further strengthening our position. Data center and networking infrastructure, approximately $400 million, is our fastest-growing market, and we expect that to continue.
In the AI data center, we provide high-precision timing, power isolation from the grid to the rack, and power management for enterprise SSDs, where AI inference is creating new tiers of storage. Automotive, approximately $340 million, continues to benefit as electrification, connectivity, autonomy, and infotainment raise content per vehicle, from telematics and secure access to EV charging and battery management. We expect these trends to continue. Now, an update on our integration. We are off to a fast start. The initial consolidation of our management team is complete, our HR systems are integrated, and we expect the remaining IT integration to be done in the first half of calendar 2027. We remain fully committed to the $500 million or more of annual cost synergies, with roughly 2/3 from operating expenses and 1/3 from cost of goods sold.
Operating expense savings will come first, with cost of goods savings building over time as we optimize our factory footprint, and we expect the earnings benefit to build through fiscal 2027, weighted to the second half. What excites me the most is our expanded engineering capability. Our engineers are already working together, sharing ideas and combining technologies with the goal of creating products that neither company could build alone. With that, I'll turn the call over to Philip to take you through our fourth quarter results and first quarter outlook as a combined company.
Thanks, Phil, and good afternoon. Because the transaction closed after our quarter end, our September quarter results are Skyworks standalone. Skyworks revenue for its fiscal quarter ended October 2nd was $1.046 billion. Qorvo's revenue for its fiscal quarter ended October 3rd was $937 million, which included an additional week, bringing combined September quarterly revenue to approximately $1.98 billion. Beginning with our February earnings call, we will only report on a fully combined basis, with smartphone and Diversified Growth Markets as our revenue categories, and therefore not providing legacy Skyworks or Qorvo details going forward. For the Skyworks standalone September quarterly results, revenue was $1.046 billion, and above the midpoint of our guidance range of $1.035 billion.
Mobile represented approximately 60% of revenue, supported by healthy sell-through at our largest customer in our seasonally strongest quarter, partially offset by well-known softness in the Android market as we remain focused on the premium tier. Broad markets represented approximately 40% of revenue and grew 9% year-over-year in the quarter and approximately 10% for fiscal 2026, led by strong growth in data center, Wi-Fi, and automotive. Our largest customer accounted for approximately 62% of revenue, including non-smartphone products. Gross profit was $465 million, or 44.4% of revenue, in line with our guidance. Input costs continue to remain a headwind. We are working toward offsetting them through cost controls and price increases, and over time, through manufacturing synergies as we consolidate our factory footprint.
Operating expenses were $237 million, about $3 million below the midpoint of our guidance, as we continue to fund key R&D programs while maintaining tight control over discretionary spending. Operating income was $227 million, translating to an operating margin of 21.7%. Other income and expense was roughly $12.5 million, and our effective tax rate was 10%, resulting in net income of $193 million and non-GAAP diluted earnings per share of $1.28, $0.01 above the midpoint of our guidance. Turning to the balance sheet, we ended the quarter with approximately $2.6 billion in cash and investments and approximately $2.5 billion of debt, reflecting the roughly $2 billion of acquisition financing we completed ahead of the Qorvo closing. Turning to our outlook for the December quarter, our first as a combined company, we expect revenue of $1.8 billion-$1.9 billion.
At the midpoint, this includes approximately $1.07 billion from legacy Skyworks and approximately $780 million from legacy Qorvo. This will be the last quarter in which we provide this split. As Qorvo did not provide guidance during the pendency of the transaction, we want to be clear on the starting point. Combined September quarterly revenue was approximately $1.98 billion, including an extra week at Qorvo worth approximately $70 million. Our outlook at the midpoint is down approximately 7% sequentially, or approximately 3% excluding the extra week. We expect smartphone revenue to decline in the low teens percentage sequentially, reflecting seasonality, well-known softness in the Android market as we remain focused on the premium tier, and the extra week in Qorvo's September quarter.
We expect diversified growth markets revenue to grow in the low single digits sequentially, despite the extra week in the prior quarter, and in the high to low double digits year-over-year on a combined basis, representing more than 40% of sales, led by data center and defense. We expect non-GAAP gross margin of 46%-48%, reflecting a favorable mix shift towards diversified growth markets, including higher margin defense and infrastructure. This is partially offset by continued input cost increases, which we expect to persist. Over time, an increasing mix of diversified growth markets, manufacturing synergies, improved factory loading, and pricing actions support our path towards our gross margin targets. We expect non-GAAP operating expenses of $465 million-$505 million, reflecting the combined company as we continue to invest in our key technology roadmaps.
Including our planned merit increases, we expect operating expenses to decline sequentially from December quarter levels throughout fiscal 2027 as synergies are realized. We expect the majority of the earnings benefit in the second half of fiscal 2027. We expect to realize approximately $150 million of synergies in operating expenses within fiscal 2027 and to exit the year at an annualized run rate of approximately $250 million-$300 million. Below the line, we anticipate approximately $50 million of other expense at the midpoint, primarily reflecting a full quarter of interest expense on the acquisition financing. We expect an effective tax rate of approximately 10% and a diluted share count of approximately 241 million shares. At the midpoint of our revenue outlook of $1.85 billion, this equates to expected non-GAAP diluted earnings per share of $1.25.
As synergies are realized, we remain confident in the earnings power of the combined company. Over the long term, we target mid to high single-digit revenue growth, and once fully integrated within 24- 36 months of close, non-GAAP gross margin of 50%-55%, non-GAAP operating margin of 30%-35%, and adjusted EBITDA margin of 35%-40%. With that, I'll turn it back to Phil for closing remarks.
Thank you, Philip. Before we open the line, I want to thank our employees, customers, and partners. This is our first quarter as one company, and the energy across our teams is outstanding. Engineers from both sides are already working together, and I'm excited about what lies ahead. Together, we are stronger than either company on its own, broader technology, greater scale, and a much larger opportunity ahead. I've never been more excited about where we're headed. Operator, let's open the line for questions.
Certainly. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. In the interest of time, please limit yourself to one question and a follow-up. Please stand by while we compile our Q&A roster. Our first question will come from the line of Karl Ackerman of BNP Paribas. Your line is open, Karl.
Yes, thank you. Your broad markets continue to progress well. How are you thinking about the longer-term growth rate for broad markets as a combined entity now that you have closed Qorvo? I guess the question is, can you sustain a similar rate or higher from the high single to low double-digit growth outlook that you laid out for December?
Yeah. Karl, thanks for the question. This is Phil. Glad you asked it. It's an important part of the portfolio. I'm glad you called it out. I mean, if you look at the combined number back in fiscal 2026, we talked about $2.9 billion, and we talked about Physical AI, really at the $1.6 billion level. We have defense and aerospace at 500, data center and infrastructure at 400, and then auto at 340. For me, those are exciting growth areas, new technology. Right now, frankly, all of those businesses are supply constrained, and the demand far exceeds our ability to supply them. So we're working hand over fist in most cases. We are seeing a little bit of softness in the consumer IoT space, and I think we talked about that, but certainly, in the other markets, we are supply constrained at this point.
We' re going to look to try and get as much supply as we can.
Got it. Yeah. Thank you. If I may just follow up to that, I understand that broad market supply shortfall was part of the challenge in the past. It sounds like that narrowed a little bit in September. If you could just double-click on that a bit, Phil, with respect to your ability to procure more wafers or substrates or test capacity, and what you can do to further attack the demand opportunity in front of you for broad markets. Thank you.
Yeah. I think you are right to call that out. Certainly, in the September quarter, we did a good job. We picked up. We were able to secure some additional supply to our customers. Certainly, our data center business grew, I think, 90% year-over-year from that perspective. So that continues to grow really well, both the timing and the power products. That continues to be an area we continue to work towards, right? I kind of mentioned, it's a tight market out there, and we're working hard to do it. It's something our operations team are spending a lot of time focused on for obvious reasons.
Our next question will be coming from the line of Craig Ellis of B. Riley Securities. Craig, your line is open.
Yeah, thanks for taking the question. Phil, I'll start with you, and it is a longer-term question. Can you just frame up how you look at the longer-term growth model for mid to high single-digit revenue growth, and just talk about what you' d expect the contribution to be from smartphone, and then with Diversified Growth, are we sustaining these attractive double-digit growth rates, or could you even see them accelerate?
Yeah, thanks for asking the question. If you look at the company as we break it out, and we've kind of tried to be clear about that, we got the smartphone space, which is continuing to be a major part of the business. We feel good about our expanded content position there. We' ve got full access to the RF front-end stack now, and we really should be driving more stability there. I think that's one of the things we are trying to really get there, is less variability per device. We're going to weight those investments towards the premium segment, where RF content matters the most. We have more content opportunities there. We're trying to grab some stability there. So, that's going to be the focus of that business, is really kind of around stability.
We see content opportunities as we head into the 5G Advanced and the 6G marketplace, as more bands, more filters, more capabilities come in place. But long term, we see that as kind of a low single-digit grower, just based on the size and the scope of that. That's kind of what we're planning. That really represents premium growth, RF content opportunities offset by normal integration, price compression, things you get in normal. That's kind of how we see that. The Diversified Growth Markets really have got four major pillars under there. We talked about the Physical AI and connected edge, right, which is kind of the biggest part of that business now, really exposed to things like Wi-Fi, which is a good growth segment for us. You're seeing expanded areas in industrial automation. Defense is a new part for us.
That's really a supply constraint there from that side, and I think that it's a state of the world where that type of technology will continue to be a major part there. Data center is our fastest-growing segment from that point. We don't see any slowdown in that segment. That's going to be supply constrained as well. And we seem to be in the sweet spot of automotive with respect to connectivity, infotainment, electric vehicle charging, and things like that. So, we feel good about our portfolio of businesses, and we think that supports the growth outlook there. And frankly, we're going to be working hard to try and beat that, but I think I feel comfortable about that growth outlook now.
That's great. And then the follow-up is either for you or Phil Carter. Help us understand how you see the path to the 50%-55% gross margin level. How much is the contribution from volume? How much from mix? How much from some of the cost savings that come into the model in the latter part of the synergies capture period? Thank you.
Yeah, I'll start, and then Phil Carter can jump in here a little bit. I think it's a combination of all those things. I think some of what you're going to see is, as we continue to grow the Diversified Growth Markets faster than the smartphone segment, you're going to see good mix, which should help lift that over time. You're also going to see some of the effects of the factory consolidations and some of the other things we're going to do over time. So, I would say it's a mix of all those things. We have some headcount-related actions we'll take in that space as well. I will say, to point out, it is an inflationary environment, as I mentioned in the report. So, we do have some headwinds we're fighting against there that we're going to continue to work to mitigate.
But that's kind of how we see it. I do not know, Carter, if you want-
Yeah, no, that is exactly right. I think the last thing I would mention, just within the smartphone space, we are seeing a better mix shift towards the premium devices, right, as you kind of see a decline in our intentional exit of the lower-end Android space. Yeah, that captures it.
Our next question will be coming from the line of Krish Sankar of TD Cowen. Your line is open, Krish.
Yeah, hi. Thanks for taking my question. Both of you, I have two questions, short-term and a long-term. My first question is more short-term is, congrats on closing the deal. It looks like your largest customer, they decided the RF content in calendar first quarter, and since the deal just closed a month ago, but they're probably aware of this deal, I'm just wondering, does it change their content award process this time, given you are a bigger, much larger scale RF supplier? How to think about it going forward? Then I had a longer-term question.
This is Phil. I'll take that. No, I don't expect their award process to change. I do think we are obviously a larger provider for them now, but I'm not expecting our largest customer to change anything with respect to what they do. For us, it remains to be a highly competitive market. I expect that to remain to be so, and we're just going to have to continue to execute and deliver. I guess I would say one thing with respect to that, just because of the different portfolio of products we have, the seasonality may be a little different than what we have seen in the past, just because of where some of those products are loaded.
I think that historically, we'll try and do a better job of kind of talking about seasonality patterns going forward, because I think there is a little bit of variability from what we've seen in the past, just based on that. Then I think just to reiterate, the fact we've got more content per device now really should lead to less volatility, because we've got more stability going forward and less single socket volatility, which is really what we are trying to drive towards.
Got it. Super helpful. Then a longer-term question. I think you spoke about the $150 million in synergies in fiscal 2027, $250 million-$300 million exit run rate. I'm just kind of curious, how to think about those synergies? How is it spread between COGS and OpEx, and how does the rationalization of the manufacturing footprint kind of come into factor for that?
I think we mentioned about 2/3 of the total 500 will be OpEx-related, about 1/3 will be COGS-related. When you think about the OpEx side, we comment in the prepared remarks, IT integration system, the HR system is already done. A lot of that is time to getting us IT milestones, which will happen in the first part of 2027 as we combine and consolidate our ERP systems and things like that. So I would, on the OpEx side, I would expect things like SG&A to come first, R&D to come later, and then COGS will starting work right away. But most of the COGS benefit will come near the tail end of the period as we talk about factory consolidation and things like that.
Our next question will come from the line of Joe Moore of Morgan Stanley. Your line is open.
This is Ella on the line for Joe. Thank you so much for taking my question. Now that you're one company and with the dividend eliminated last quarter, how are you thinking about capital allocation between buybacks, deleveraging, and strategic M&A?
I would say, we're definitely maintaining our flexibility. We have a bias towards share buybacks. But with the acquisition financing, we also want to build up a cash balance as we look forward. And we're going to be disciplined around accretive M&A that does grow gross margins and diversifies the base. But yeah, we are maintaining some level of flexibility. We were glad to see that we got an investment grade upgrade from Moody's to be Baa3, and Fitch moved us to stable. So good to see that. But maintaining some level of flexibility as we move forward.
Great. For my second question, just at a high level, if we look out two or three years, what does success look like for the combined company, and what milestones should we be watching along the way?
Yeah, thanks. I think, as we look out two to three years, I'd expect investors to say we have achieved delivering on those synergies at that run rate. I think I would expect to see our Diversified Growth Markets continue to grow faster than our smartphone business, resulting in better diversification of our businesses from that side. I think that we should be on track towards hitting our business model target, 50%, 55% gross margin, 30%, 35% operating margin, and 35%, 40% adjusted EBITDA margin. So a more diversified company, attractive growth segments, great financial profile, synergies realized, off to the races.
Our next question will come from the line of Jim Schneider of Goldman Sachs. Jim, your line is open.
Good afternoon. Thanks for taking my question. I was wondering if you could maybe speak to your customers' inventory levels, both your largest customer and then the broader Android market, and maybe kind of give us a sense about what your expectation is preliminarily around how smartphone revenue in the March quarter might trend.
Yeah. Hey, Jim. This is Phil Carter. Yeah, we generally only guide one quarter at a time, but as we look at the current quarter, we're kind of tracking to what we were expecting even at the end of last quarter in terms of our Apple revenue. We're seeing sequential growth with our largest customer at Skyworks standalone. So really no change in terms of what we're seeing in the marketplace for our largest customer in terms of units and volume. But yeah, that's what I would say for that one.
Great. Thank you. Then maybe just a little bit of color. I mean, clearly the consumer electronics end market is softer for all the reasons I think we know. Can you maybe talk about the consumer IoT part of the broader diversified business, and maybe how much of a headwind that represented in the quarter or in the guidance? Thank you.
I don't think we're going down to that level of detail. I think, Jim, you have kind of If we look at that Physical AI-connected edge kind of segment, and we looked at that there, I mean, the Wi-Fi part continues to grow really well from that side. That continues to grow well. That is offset by other sorts of stuff you've got in there, pads and just other sorts of consumer devices, consumer-focused Wi-Fi access points, things like that. So it's a lot of various stuff in there that I think goes on, but I think our Wi-Fi continues to grow well, and that is other softness stuff that is in there.
Yeah, this is Raji. Just to add to that. So, just on a standalone basis for Skyworks, we ended the year in our broad markets business growing 10% year-over-year, despite the softness in the consumer IoT. Our growth engines, whether it's Wi-Fi, data center, automotive, are growing north of 25% year-over-year. So we're seeing a lot of growth in those markets. As we look together as a combined entity, we're confident in the long-term growth rate in Diversified Growth Markets driven by defense, data center, and automotive. So we're excited about the growth trajectory in that business.
Our next question will be coming from the line of Edward Snyder of Charter Equity Research. Your line is open, Edward.
Thanks a lot. Based on your report, it looks like for standalone Skyworks, your largest customer is down about 12% per year. If we subtract broad markets, it could be a little bit better than that, like 10% or so, which is interesting because units year-over-year, because of the staggered release, down substantially more than that. It seems to suggest that maybe your content is a little bit better this year on the models that were released from last year. I am just trying to get clarity on that. Given the fact that you are seeing kind of a different release schedule, this would suggest, I know you do not guide to March, but why should not I expect that you should do better than seasonal for the March period, at least in your largest customer?
Yeah, Ed, I think, appreciate the question. I'm sure you will appreciate the subtlety of my answer, right? It is difficult. We can't really comment on individual SKUs. I think we stand by what we said before in terms of content and content mix. The guide reflects what we think about the current quarter. As you know, depending on how particular models ship and sell and when that things go, then that is how that is going to work. Our guide reflects what we believe is for the quarter, and we'll continue to kind of do that going forward. We just cannot really comment on how models are particularly going to go or individual SKUs and how that does. We just can't comment on that.
Okay. But in the last couple quarters, you said that you expected to be relatively flat on the fiscal year, correct? Do I have that correct?
Yep.
Okay. Given all that's going on in this space, you seem to be doing better than that at this stage. I' m just saying, you are not varying your guidance for the fiscal year yet. We are just going to have to see how results play out. Is that kind of what we should-
Yeah, I think that's fair. Look, there's a lot of turbulence. I mean, you know, there's just a lot of turbulence in the market on this topic, and I think we're just trying to guide one quarter at a time. We feel good about our position. We feel confident about our technology base. We've got great feedback, and we'll just continue to put one foot in front of the other and guide one quarter at a time.
Our next question will be coming from the line of Srini Pajjuri of RBC Capital Markets. Your line is open.
Thank you. Let me echo my congrats on closing the deal. Phil, one question on the gross margin side. When it comes to your internal factories, now that it's a combined entity, can you give us some idea what the utilization levels are and where you see that going? Along the same lines, you talked about supply tightness and cost inflation. Any thoughts on kind of passing through some of those cost increases, especially in your faster-growing markets?
Yeah. As you can imagine, as two separate companies, you can only optimize your footprint so much. But as a single combined company, we can do much, much more in terms of looking at the technology, getting into a smaller footprint, and increasing utilization. So we're going through that process now, as Phil mentioned on the remarks. It takes longer to consolidate factory footprints and look at the technology and merge those together. In terms of passing on costs, Phil talked about the cost headwinds. We're seeing that continue. In the diversified space, we're able to pass that on more quickly and over time. In the kind of handset smartphone space, it's a little bit more challenging because those are kind of annual contracts and sometimes two-year things.
It's a little bit tougher in that market to pass on those costs, and we are continuing to see those kind of cost headwinds come quarter after quarter. But yeah, we have, as Phil mentioned, kind of entered into some deposits and prepays with some of our vendors to lock in cost and secure capacity to reduce some of those shortages and headwinds there as well. So, that's kind of the action we're taking today.
Thank you. Then my follow-up on the Android. Obviously, it's weak. It's well-known. Qorvo was exiting some of the lower-end Android. I'm just curious where in that process we are, and maybe if you could kind of qualitatively talk about what percent of your sales roughly is Android now in terms of mobile, and then where do you see the Android business bottoming if Qorvo is still in the process of exiting that business, the low end of that business? Sorry. Thank you.
Yeah. That's a great question. Yeah, so as we look at the Android business, and specifically when we look at the Qorvo business, we guided down Qorvo 17%. Without the extra week, it was down 10%. Within that, the Android business is down over 20% sequentially, right? So we are seeing a reduction in the Android business. As we look into 2027, with what we can see today, it does seem like we could be getting to a bottom in the Android space. Looking forward, it should represent less than 10% of our overall kind of smartphone business. So, we do think that we have visibility in that kind of bottoming over the next, this coming fiscal year, and that's going to become a smaller and smaller portion of our revenue, so.
Our next question will be coming from the line of Tom O'Malley of Barclays. Your line is open.
Hey, guys. This is Kyle Bleustein on for Tom O'Malley. Thank you for taking our question. I just wanted to double-click on some of the gross margin targets that were kind of laid out there. You guys are guiding for pretty significant expansion to that 50%-55% range, and when I think about the overall market, there is a lot of cost increases and different pressure from memory. I just wanted to see in the short term, can you maybe comment on how you see gross margin in fiscal year 2027 with some of those pressures that are out there in the market?
Yeah. I would say, as Phil mentioned previously, the earlier part of fiscal 2027, we get one quarter at a time, but high level, I would say the earlier part of 2027, because the costs come in early and the price increases come in later in the fiscal year, the earlier part will have lower margins, but we'll start to see that expand as we move through fiscal 2027. Separate from that, the mix shift between, as we just mentioned, the lower-end Android business and the rest of the smartphone business, that mix shift will continue throughout the year. In addition, the diversified business, which is above corporate average in gross margin, will continue to expand at the kind of low double-digit kind of rate over time.
That combination will increase our margins, and then the synergy realization as you kind of exit this year going into the 2028 and beyond, you'll start to see those actually improve our gross margin as well, and that's how we get to our kind of 50%-55% gross margin targets.
Thank you. For my follow-up, I think you guys made a comment earlier on the call that content per device is going up. I just wanted to check, is that pro forma for the consolidated entity? When you add Skyworks and Qorvo together, is content going up outside of just the base combination of what you have today? Just kind of layering on that, when you think about some of the comments you made on 5G Advanced, when does that kind of layer in? What could the size of that content increase be?
Well, I think our overall SAM kind of increases because we have added new capabilities, right, antenna tuners, PMICs, products that we do not have today. So, our SAM per device has gone up, and therefore, our content naturally has gone up as well. Going forward, I would say, for the first time in years, as we start to see, we've got a tailwind of content coming with more transmit bands, more receive bands, more satellite bands, more power devices. So, we see a tailwind of content, more filters that we haven't seen in the past. That' s offset by integration, competitive dynamics, and things like that. We need to execute to deliver that, but that's kind of how we see that going forward.
I think the other part is, because we've got more sockets per device, the single socket variability should go down a lot, which should provide some more stability for that business, which I think is just really important.
Our next question will be coming from the line of Vivek Arya of Bank of America. Your line is open.
Hi. Yes, [certainly] I'm on for Vivek. Thank you for taking my question. You talked about opportunities with the combined company, but I was wondering if you could elaborate more on the specific opportunities that you're most excited about in both iOS and Android, and where you see the most upside relative to each. Thank you.
Well, one of the things, I guess, just a couple weeks ago, we had the opportunity to bring some of the best and brightest engineers from both sides. These are areas that we weren't really able to talk about during the pendency period for obvious reasons. For the first time, we brought the best engineers together, and I got to tell you, I was just really excited about the energy in the room. I think that we've got some of the broadest, if not the broadest, RF talent in the industry, period. We now have the ability to have the entire RF signal chain. So, I'm really looking forward to the opportunities that we could do to deliver more fulsome solutions to our customers. I think it's early days.
That's something that we haven't really talked about in terms of, let's call it, product synergy, upside synergy, revenue synergies. We've really underwritten this deal on, frankly, cost synergies, and I'm really excited to see what the engineers are going to come up with from that side. Then we've got the same opportunity on the Diversified Growth Markets side. Imagine there's some other products we can expand into the defense and aerospace side. How can we expand that portfolio there? So, I think there's a number of opportunities. It's early days. Honestly, I don't want to get ahead of our skis in talking about that, because I want to let the engineers go through a cycle of innovation and get some feedback from customers. But I would say, early days, I'm incredibly optimistic about what can come out of that.
Awesome. Thank you. Given your largest customer's recent long-term agreement with a competitor, is your addressable TAM there in the near to medium term still the same now that you all are a front-end stack? Are there any sockets that the combined company could compete for that Skyworks couldn't separately or Qorvo couldn't separately now that you guys are combined?
I think we view that as a sort of little bit related to the kind of the dynamic that came before. That business is always going to be a hyper-competitive business. There continues to be a competitive environment there. Obviously, with the competitive environment, it's changed a little bit with the number of suppliers in the space. However, it remains to be a competitive environment, and we still need to execute and deliver. Our customer, that largest customer, is not going to just hand us business because all of a sudden we're combined. We need to continue to earn it and earn it every single day, and we got thousands of people that are working hard to do that.
Our next question will be coming from the line of Christopher Rolland of Susquehanna. Your line is open.
Thank you for the question, guys, and congrats on closing this. I guess my first question is, it has been a while since Qorvo has kind of been in limbo as you have been in regulatory. Just the asset that you thought you were buying, and the puts and takes since it has actually sat in limbo, which parts of the business maybe have gotten a little better, and which maybe have gotten a little worse during that time, just since we have not got any Qorvo updates over that time?
Yeah, I will take a high-level view of that, and I'm not going to characterize necessarily as better or worse. I will just say kind of what we see. Obviously, there has been some things. I think in general, as we look, it has been a little less than a month now, I guess. Most excited about the defense and aerospace side. I think that's super exciting. Most excited about the combination on the RF side for smartphones in terms of what we can do together there. I think that's really good and a lot of interesting opportunities there. And we know there are some things to do there because in another major customer, we have more of the RF signal chain, so we know there is some stuff and things we can do. So I'm excited about that.
I think one of the other areas, right, if you look, one of the other things that has happened is that since, I guess, we announced the deal a little over a year ago now, right, the Android market has changed pretty substantially, right? The memory shortages, the Android market, there has just been a lot of turbulence in that space. And that has been pretty well talked about for many years. So I would say that we've seen an increased deceleration in that part of the business, which ultimately isn't bad, actually. It is a richer mix of business. So I don't mind the switch. It is just, matter of fact, I probably like it. It is just more about a change in dynamics, right? So, that is what I would say.
Excellent. Then just getting a little bit into the modeling nitty-gritty, just so that I understand it here. So, if I understand it correctly, in the December quarter, there's little or no synergies, so that should be a clean base, particularly for OpEx. Then, I think you're saying exiting the year, we should be taking, as an exit rate, $250 million-$300 million of synergies this year. So, I think that leaves very little, maybe $50 million for OpEx beyond this fiscal year, if I have that correct. Then lastly, in terms of the 1/3 that's in COGS, should we just put that all in fiscal 2028, or how should we handle that as well?
Yeah. This is Carter. So, starting with the OpEx synergies, to your point, yeah, as you look at where we see that $150 million rolling through the year, it is definitely back-end loaded. We do see a path where OpEx could decline sequentially throughout the year, inclusive of our merit increases during the year. So, we are seeing that benefit improve as we go throughout the year. In terms of the COGS synergies, yeah, I think putting them out beyond this year is- There will be some COGS synergies this year. They might be masked by those cost increases, but we are taking action, being decisive, and making sure we're closely monitoring all the costs within COGS as well. It's just they get masked by the increases that Phil talked about. But the OpEx ones, you will see those grow over time.
Yeah, I think what you said was accurate.
Okay, interesting. Thank you.
I would now like to turn the conference back to Phil Brace for closing remarks.
Great. I'd like to thank everybody for joining on the call today, and we'll look forward to seeing you at upcoming conferences throughout the quarter. Thank you.
This concludes today's program. Thank you for participating. You may now disconnect.