NXP Shares Slide as Q3 Revenue Forecast Misses Lofty Market Expectations Amid Industry Challenges

Dutch chipmaker NXP Semiconductors (NXPI.US) recently unveiled its third-quarter revenue forecast, which fell short of some investors' optimistic expectations, leading to a decline in its stock price during after-hours trading. The announcement, made on Monday, projected the company's revenue for the quarter to be between $3.05 billion and $3.25 billion. Although the midpoint of this forecast slightly exceeds the average Wall Street expectation, compiled data indicates that some analysts had previously anticipated the company's revenue to surpass $3.3 billion.

This cautiously optimistic outlook highlights the ongoing challenges NXP faces amid industry turbulence. As a major supplier of automotive chips, a segment making up over half of its total revenue, the company continues to grapple with the enduring impact of tariffs enacted under the Trump administration. These tariffs have disrupted global supply chains, adding layers of uncertainty to customer orders.

Analyst Stacy Rasgon from Bernstein noted that while the quarterly earnings were "decent overall," they fell short of the market's higher hopes. Consequently, NXP's stock price dipped over 5% in after-hours trading. On Monday, the stock closed at $228.27, maintaining a near 10% gain year-to-date.

Data shows that NXP's second-quarter revenue fell by 6% year-over-year to $2.93 billion, aligning closely with analysts' expectations. The midpoint of the third-quarter forecast indicates a potential narrowing of the revenue decline to 3% year-over-year.

CEO Kurt Sievers remains optimistic about this quarter's performance, suggesting it will reflect improvements in NXP's core end markets. The company expects adjusted earnings per share to range from $2.89 to $3.30, surpassing the general analyst consensus of $3.06. The second quarter already exceeded expectations, with adjusted earnings per share coming in at $2.72.

Despite Sievers' optimistic predictions during the April earnings call that second-quarter stabilization in customer orders would represent a turning point, NXP, like its peers, continues to wrestle with an oversupply of electric vehicle chips. The weak demand for electric vehicles outside China has prolonged this supply glut, impacting the industry's sales for 18 months.

The diminished demand in automotive and industrial sectors is affecting NXP along with competitors such as Infineon Technologies (IFNNY.US) and STMicroelectronics (STM.US). Last week, Renault (RNLSY.US) revised its full-year profit margin guidance downward due to escalating market competition and a waning car market, while Stellantis (STLA.US) unexpectedly reported a net loss for the first half of the year.