Skyworks (SWKS) 10-Q: Revenue Grows, but Soaring Costs Squeeze Profits

In the world of semiconductors, Skyworks Solutions (SWKS) is a crucial, if not always visible, player. The company designs the high-performance radio frequency (RF) and mobile communication chips that power everything from smartphones to the connected devices in our homes and cars. Digging into their latest quarterly financial report, the 10-Q filed with the SEC, reveals a company posting revenue growth but facing a significant squeeze on its profitability.

Revenue Rises, but Costs Climb Faster

For the quarter ending June 27, 2025, Skyworks reported net revenue of $965 million, a solid 6.6% increase from the $905.5 million generated in the same period last year. Even better, the company’s gross margin—the profit left over after accounting for the direct costs of producing its chips—improved, rising to 41.6% from 40.2%. This suggests healthier profitability on their core products, which the company attributes to higher sales volumes.

To understand how revenue translates into profit, the following flow diagram visualizes the company's income statement for the quarter.

However, the story changes further down the income statement. Skyworks saw a sharp increase in its operating expenses.

• Research and Development (R&D): Spending on future products surged 24% to $199.4 million.
• Selling, General, and Administrative (SG&A): Overhead costs for sales, marketing, and management jumped 25% to $89.3 million.

Because these costs grew much faster than revenue, the company's operating income—a key measure of profitability from core business operations—fell by 15% to $110.6 million. Consequently, net income (the final "bottom line") also declined by 13% to $105 million. In short, while Skyworks sold more, it spent significantly more to achieve those sales and invest in its future, which ultimately hurt its short-term profits.

A Geographic Shift and Big Shareholder Payouts

A closer look at the revenue breakdown reveals a notable geographic shift. The sales growth was almost entirely driven by the United States, which now accounts for a massive 75% of Skyworks' total revenue, up from 73% a year ago. Meanwhile, sales in key Asian markets, including China, Taiwan, and South Korea, all declined. This growing reliance on the U.S. market could be a source of concentration risk down the line.

Despite the dip in profitability, Skyworks has been aggressively returning cash to its investors. Over the first nine months of its fiscal year, the company spent:

• $830 million on stock repurchases
• $327 million on paying dividends

This total payout of over $1.1 billion far exceeded the cash generated from its operations during the same period and was a primary reason for the company's cash balance falling from $1.37 billion to $1.19 billion since the start of the fiscal year.

The Path Forward

Skyworks' latest quarter presents a mixed picture. The company is successfully growing its top line and improving its gross margin, but it's grappling with rapidly rising operating costs that are compressing profits. Adding to the narrative is the recent appointment of an interim Chief Financial Officer, a development that can bring a degree of uncertainty.

Investors will be watching closely to see if the significant investments in R&D will fuel future growth and whether management can rein in costs to improve operating leverage. While the commitment to shareholder returns is clear, balancing that with sustainable, profitable growth remains the central challenge for Skyworks in a competitive and ever-changing market.