NXP Semiconductors N.V. squeezed past Wall Street’s estimates as it delivered its fourth-quarter earnings results today, sending its stock higher despite revenue declining in all four of its major business segments.

The Dutch chipmaker reported earnings before certain costs such as stock compensation of $3.18 per share, ahead of the Street’s consensus estimate of $3.14 per share. Revenue for the quarter was down 9% year-over-year at $3.11 billion, but it still came in just ahead of the $3.1 billion target.

The earnings beat helped NXP to deliver an overall net profit of $495 million in the quarter, lower than the $697 million profit it generated in the same period one year earlier.

NXP closed out fiscal year 2024 with total revenue of $12.61 billion, down 5% from a year earlier, but Chief Executive Kurt Sievers (pictured) hailed its “resilience” in the face of the weakness it’s seeing in the major markets it operates in. “NXP delivered resilient results throughout 2024, reflecting solid execution, consistent gross margin and healthy free cash flow generation despite a challenging market environment,” Sievers said.

In contrast to some of its rivals in the chipmaking industry, NXP has not been able to capitalize on the surging demand for artificial intelligence applications given its focus on legacy computer chips. The company is primarily focused on making less sophisticated chips for the automotive industry, where it has struggled with low demand during an inventory glut and declining consumer interest in the electric vehicles that are so reliant on its products.

Consumers have increasingly shied away from purchasing expensive electric cars because of the tight economy. Carmakers in Europe – its primary customer base – are struggling to compete with lower-cost alternatives in China, where automotive firms tend to buy their chips from domestic semiconductor manufacturers.

The impact of this can be seen in a breakdown of NXP’s results. Its “Automotive” business unit, which is by far its largest, delivered $1.79 billion in sales during the quarter, down 6% from a year earlier. But it’s not only the automotive sector that’s struggling.

Revenue from NXP’s “Industrial & IoT” segment fell by an alarming 22%, to $516 million, while sales in the “Mobile” segment fell 2%, to $396 million. In addition, the “Communications, Infrastructure and Other” business unit also saw sales decline by 10%, to just $409 million.

Notably, revenue from all four segments was down on a sequential basis, too.

“We rigorously focus on managing what is in our control, to navigate a soft landing while executing our growth strategy,” Sievers added.

Constellation Research Inc. analyst Holger Mueller said investors will be alarmed to see all four of NXP’s business segments in decline, because diversification was supposed to be its main safeguard against the roller-coaster nature of the semiconductor industry.

“All four segments are going backwards and that was never the plan, but NXP’s executive team deserves some credit for managing its cost base well enough that it’s still churning out a profit, albeit less than before,” Mueller said. “The question now is whether or not NXP’s cost structure is going to be sufficient enough to reignite those growth engines, and the next quarter will hopefully provide some answers.”

Unfortunately for NXP, it doesn’t expect to see a turnaround in its fortunes anytime soon. For the quarter in progress, it’s expecting earnings of between $2.29 and $2.79 per share, which is way off the Street’s $2.69 per share forecast. Similarly, its revenue guidance of between $2.725 billion and $2.925 billion is some way short of the $2.92 billion target.

Despite the glum forecast, investors seemed pleased enough with the company’s earnings beat, and NXP’s stock was trading 2% higher after-hours, erasing a slight decline during the regular trading session.

Photo: NXP Semiconductors