NXP Semiconductors (NXPI) reported a softer start to 2025 as macroeconomic and geopolitical headwinds weighed on demand across key end markets. Total revenue for Q1 came in at $2.84 billion, down 9% year-over-year and nearly 9% lower sequentially, marking a broad-based slowdown that affected nearly all segments except China, which posted 2% growth. Despite the revenue dip, NXP remained profitable, with GAAP net income of $490 million and non-GAAP net income of $673 million, reflecting respective year-over-year declines of 23% and 20%. GAAP diluted EPS was $1.92, while non-GAAP EPS stood at $2.64, both down from Q1 2024.

Segment-wise, Automotive—NXP's largest business—generated $1.67 billion in revenue, down 7% from a year ago, driven by weaker demand in automotive processors and analog solutions, partially offset by strength in ADAS Safety products. Industrial & IoT fell 11%, while Mobile declined a milder 3%, helped by growth in mobile wallet processors. The steepest drop came from Communication Infrastructure & Other, down 21% amid weaker processor and secure card sales.

Margin performance, while lower year-over-year, remained healthy. GAAP gross margin was 55.0%, down from 57.0%, and non-GAAP gross margin landed at 56.1%. Operating margins also contracted, with GAAP operating margin at 25.5% and non-GAAP operating margin at 31.9%. On the cash side, cash flow from operations totaled $565 million, down from $851 million, while free cash flow came in at $427 million. NXP continued to reward shareholders, returning $561 million through $303 million in share repurchases and $258 million in dividends.

Geographically, weakness was widespread outside China. Revenue from APAC ex-China fell 18%, while EMEA and the Americas declined 13.5% and 10.7%, respectively. Rising channel inventory levels (now at 9 weeks) and an extended cash conversion cycle (up to 141 days) signaled ongoing supply chain normalization efforts.

Despite the near-term challenges, NXP remains committed to strategic growth. The company continued to invest in R&D, launched new microcontrollers and automotive chips, and announced two notable acquisitions—TTTech Auto for $625 million and Kinara Inc. for $307 million—to enhance its footprint in automotive and edge intelligence. The company also secured a €1 billion loan from the European Investment Bank to bolster its innovation agenda.

CEO Kurt Sievers reaffirmed guidance-aligned performance and emphasized a focus on managing controllables amid uncertainty. He also announced his planned retirement, with Rafael Sotomayor set to take over as CEO in October 2025. Overall, while Q1 was marked by volume and margin pressure, NXP sustained strong profitability and continued strategic execution, positioning itself for long-term resilience.