Chip manufacturer NXP Semiconductors (NASDAQ: NXPI) met Wall Street’s revenue expectations in Q3 CY2025, but sales fell by 2.4% year on year to $3.17 billion. The company expects next quarter’s revenue to be around $3.3 billion, coming in 1.9% above analysts’ estimates. Its non-GAAP profit of $3.11 per share was in line with analysts’ consensus estimates.

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EINDHOVEN, The Netherlands, Oct. 27, 2025 (GLOBE NEWSWIRE) -- NXP Semiconductors N.V. (NASDAQ: NXPI) today reported financial results for the third quarter, which ended September 28, 2025. “NXP reported quarterly revenue of $3.17 billion, exceeding the midpoint of our guidance. We experienced broad-based sequential improvement across all regions and end markets. Our outlook reflects the strength of our company specific growth drivers and signs of a cyclical recovery. We remain focused on disciplined investment and portfolio enhancement to drive profitable growth, while maintaining control over the factors we can influence,” said Rafael Sotomayor, NXP President and incoming Chief Executive Officer.

Company Overview

Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.

Revenue Growth

A company’s long-term performance is an indicator of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Thankfully, NXP Semiconductors’s 7.5% annualized revenue growth over the last five years was decent. Its growth was slightly above the average semiconductor company and shows its offerings resonate with customers. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

Long-term growth is the most important, but short-term results matter for semiconductors because the rapid pace of technological innovation (Moore's Law) could make yesterday's hit product obsolete today. NXP Semiconductors’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.4% over the last two years.

This quarter, NXP Semiconductors reported a rather uninspiring 2.4% year-on-year revenue decline to $3.17 billion of revenue, in line with Wall Street’s estimates. Despite meeting estimates, the drop in sales could mean that the current downcycle is deepening. Company management is currently guiding for a 6.1% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months. Although this projection indicates its newer products and services will fuel better top-line performance, it is still below the sector average.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, NXP Semiconductors’s DIO came in at 161, which is 40 days above its five-year average. These numbers suggest that despite the recent decrease, the company’s inventory levels are higher than what we’ve seen in the past.

Key Takeaways from NXP Semiconductors’s Q3 Results

It was encouraging to see NXP Semiconductors’s revenue guidance for next quarter beat analysts’ expectations. We were also glad its inventory levels shrunk. On the other hand, its revenue and EPS were just in line. Zooming out, we still think this was a solid quarter given encouraging the outlook. The stock traded up 2.4% to $227 immediately following the results.

Should you buy the stock or not? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.