NXP Semiconductors N.V.’s stock fell almost 6% in after-hours trading today after it delivered an outlook that fell some way short of Wall Street’s expectations, due to what it said is “macroeconomic weakness” in Europe and the Americas.

The semiconductor manufacturing company delivered third-quarter earnings before certain costs such as stock compensation of $3.45 per share, just ahead of the Street’s consensus estimate of $3.43 per share. Revenue for the period declined 5% from a year earlier, to $3.25 billion, in line with the analysts’ estimates.

The tepid results meant that NXP could only deliver a net income of $729 million for the quarter, down slightly from the $792 million profit it reported a year earlier.

NXP sells a wide portfolio of semiconductors to customers in a host of different industries, with its biggest business being the automotive chip segment, where its chips are used to power car infotainment systems, tire pressure monitoring systems and vehicle-to-vehicle communications. It also sells chips for wireless infrastructure, identification systems, lighting, consumer, mobile and computing applications.

Chief Executive Kurt Sievers (pictured) admitted that the company has been confronted by “increasing macro-related weakness in the Industrial & IoT market.”

Unlike some other chipmakers, which have capitalized on booming demand for artificial intelligence applications, NXP has not really benefited from the trend. Like other chipmakers that are more focused on the automotive sector, it has struggled with problems such as an inventory glut, plus low demand for electric cars that are especially reliant on its products.

Consumers have backed away from buying expensive electric vehicles, and carmakers in Europe are struggling to compete with lower-cost alternatives in China. Meanwhile, Beijing has told local automakers to put more emphasis on the homegrown semiconductor market, reducing the market share of industry stalwarts such as NXP.

The company isn’t alone in these struggles. Another Dutch chipmaker, STMicroelectronics NV, was forced to give a pessimistic outlook for sales in the current quarter, while the U.S. firm Texas Instruments Inc. said last month that the automotive chip sector is still suffering from an inventory glut, hurting its sales.

The impact of these issues was felt in NXP’s results. Its automotive chip business saw revenue decline 3% from a year ago, to $1.83 billion, while the Industrial & IoT segment did worse, with sales down 7%, to $563 million.

The only bright spot was NXP’s Mobile segment, which generated revenue of $407 million, up 8% from a year ago.

For the quarter in progress, NXP is expecting earnings of between $2.93 and $3.33 per share, which is some way below the Street’s forecast of $3.62 per share. In terms of revenue, it’s guiding for between $3 billion and $3.2 billion, short of analysts’ target of $3.36 billion.

“Our guidance for the fourth quarter reflects broader macro weakness, especially in Europe and the Americas,” Sievers said. “We focus on managing what is in our control, enabling NXP to drive resilient profitability and earnings in an uncertain demand environment.”

Although investors were disappointed, the chipmaker deserves some credit for still delivering to expectations, said analyst Holger Mueller of Constellation Research Inc. “That’s no small feat considering the current state of the market and the general volatility of the semiconductor business,” he said.

The analyst said NXP’s biggest problem seems to be the Industrial and IoT segment, which suffered the biggest drop in revenue and is likely to decline further in the current quarter. “NXP needs to find a way to turn around this part of its business, or at least make up for it in other areas,” Mueller said. “On the other hand, it did well to preserve its overall operating income, which was more or less flat from a year ago, despite the lower revenue. That’s remarkable considering Europe’s much stricter employment regulations, which make layoffs all the more difficult to implement.”

Despite today’s after-hours decline, NXP’s stock is still up just over 30% in the last 12 months.

Photo: NXP Semiconductors