“Synaptics reported fiscal Q1 2025 revenue of $257.7 million, an 8% year-over-year increase, driven by a 55% surge in Core IoT sales. Non-GAAP earnings per share rose 56% to $0.81, with improved margins. The company highlighted progress in wireless and processor products, while guiding for Q2 revenue around $265 million amid ongoing market recoveries.”
Financial Performance
Synaptics kicked off fiscal 2025 with a solid showing, posting revenue of $257.7 million for the quarter ended September 28, 2024. This marked an 8% rise from the same period a year earlier and a 4% sequential uptick from the prior quarter, surpassing the midpoint of the company’s guidance. The growth was fueled primarily by strength in the Core IoT segment, which contributed 23% of total revenue and jumped 55% year-over-year, thanks to new product ramps and a recovery in wireless offerings.
The Enterprise and Automotive segment, accounting for 57% of revenue, saw a modest 3% sequential increase but declined 5% year-over-year. Within this, PC-related revenue grew in the high-single digits sequentially, benefiting from seasonal factors and market share gains. However, automotive sales were softer due to broader market slowdowns and a decline in legacy display driver ICs. The Mobile segment, making up 20% of revenue, increased 14% year-over-year and 3% sequentially, aligned with demand for high-end Android touch controllers.
On the profitability front, non-GAAP gross margin expanded to 53.9%, exceeding the midpoint of guidance and reflecting a favorable product mix and operational efficiencies. Non-GAAP operating expenses held steady at $95.9 million, right at the expected level. This discipline translated to non-GAAP operating income of 16.7% of revenue, up more than 400 basis points year-over-year and over 200 basis points sequentially. Non-GAAP net income reached $32.5 million, with earnings per share climbing 56% year-over-year to $0.81, also beating the midpoint of projections.
The balance sheet remained robust, with cash and equivalents ending the quarter at $854 million, down $23 million from the prior period due to operational cash usage of $11.4 million, which included a $30 million tax payment related to one-time IP onshoring. Capital expenditures were $9.1 million, and depreciation stood at $7.2 million. Days sales outstanding improved to 47 from 52, while inventory days rose slightly to 93, positioning the company to meet anticipated Q2 demand. Customer concentration was moderate, with two clients each representing about 12% of revenue.
Business Segment Updates
| Metric | Q1 FY2025 | YoY Change | QoQ Change |
|---|---|---|---|
| Revenue | $257.7M | +8% | +4% |
| Core IoT Revenue Share | 23% | +55% (segment growth) | +10% |
| Enterprise & Automotive Revenue Share | 57% | -5% | +3% |
| Mobile Revenue Share | 20% | +14% | +3% |
| Non-GAAP Gross Margin | 53.9% | N/A | Above midpoint |
| Non-GAAP OpEx | $95.9M | N/A | At midpoint |
| Non-GAAP Operating Margin | 16.7% | +400 bps | +200 bps |
| Non-GAAP EPS | $0.81 | +56% | +27% |
| Cash & Equivalents | $854M | N/A | -$23M |
In the Core IoT division, Synaptics emphasized advancements in wireless connectivity and edge AI processors, which are central to the company’s long-term growth strategy. The product funnel has expanded significantly, growing 30% from $2.2 billion a year ago to over $3 billion, underpinning expectations for a 25%-30% compound annual growth rate over the next five years. Wireless products showed particular strength, with high-performance Wi-Fi solutions accelerating design wins—nearly doubling from prior expectations—and spanning a diverse set of customers and applications.
The company is on track to sample its first Wi-Fi 7 device for IoT applications this month, positioning it to capture share in a market transitioning from older standards. In broad markets, focused on lower power and cost-sensitive segments with a serviceable addressable market of about $3 billion, the first chip has returned from fabrication and is set for sampling this quarter. Processors under the Astra brand received industry accolades, including 2024 EDGE Awards for machine learning and deep learning capabilities. The funnel here has increased by $300 million, with traction in areas like home automation, security cameras, and smart appliances. Interest is building in AI-enabled hubs that can serve as plug-and-play replacements for traditional microprocessors, offering competitive pricing and ease of integration.
Shifting to Enterprise and Automotive, the segment is experiencing gradual improvement. PC demand is expected to strengthen in 2025, driven by aging fleets, the end-of-life for Windows 10, and the rise of AI-enabled PCs. Synaptics’ UPD products are projected to double in fiscal 2025, with ramps at a leading customer and inclusion in Intel’s Panther Lake reference design. Video interface products grew double-digits year-over-year but remain 40% below normalized levels; however, upgrades like Thunderbolt 5 and new Carrera solutions for enhanced display support, refresh rates, and charging are anticipated to drive recovery next year. Support for ARM-based PCs via DisplayLink Pro further broadens compatibility across x86 and ARM architectures.
Automotive remains challenged, down year-over-year due to market softness, delays in technology adoption, and a pullback in legacy DDIC sales. The company maintains a cautious stance here, focusing on stabilizing contributions amid broader industry headwinds.
In Mobile, touch controllers are tightly aligned with premium Android devices, contributing to the 14% year-over-year growth. Synaptics is securing replacement wins and exploring opportunities in lower-tier markets, alongside a new frequency-based controller that could expand applications beyond traditional mobile uses.
Forward Guidance and Capital Strategy
Looking ahead to Q2, Synaptics anticipates revenue of approximately $265 million, plus or minus $15 million, implying sequential growth. The expected product mix shifts slightly: Core IoT at 24%, Enterprise and Automotive at 59%, and Mobile at 17%. Non-GAAP gross margin is guided to 53.5%, plus or minus 1%, with operating expenses around $96 million, plus or minus $2 million. Net interest and other income is projected at about $5 million, with a non-GAAP tax rate of 13%-15%. This sets up non-GAAP earnings per share of $0.85, plus or minus $0.20, based on 40.5 million diluted shares.
The guidance reflects continued sequential progress, with inventory levels described as lean and below normal in certain areas, allowing for efficient demand fulfillment. Management highlighted disciplined expense management while prioritizing investments in high-growth areas like Core IoT and Enterprise.
On capital allocation, the company plans to deploy resources this quarter through share repurchases, building on a program that authorized $150 million over the past 12 months—equivalent to 150% of fiscal 2024 free cash flow. Priorities include organic investments in Core IoT and Enterprise, disciplined M&A, and returning capital to shareholders while preserving a strong balance sheet and liquidity.
Insights from Q&A Discussions
Analysts probed deeper into product roadmaps, growth drivers, and market dynamics during the Q&A. On timelines, leadership confirmed consistency, with Wi-Fi 7 IoT sampling on target this quarter and broad markets chips also advancing as planned. The Core IoT funnel’s growth was broken down: near-term upside from high-performance Wi-Fi exceeding expectations, followed by broad markets contributions starting in 2026, and meaningful processor revenue in 2027. Bluetooth Low Energy (BLE) is tracking slightly behind but remains a smaller segment with a $50 million to $100 million target by 2028.
Regarding Wi-Fi upgrade cycles, the pattern mirrors historical trends: rapid initial penetration to 20%-25% in fiscal 2026 for applications like drones and set-top boxes, then a 2-3 year push to 50%, with the remainder slower as newer standards emerge. Wi-Fi 7 is expected to max out at 50%-60% market share, coexisting with Wi-Fi 4 through 6. ASP uplifts for Wi-Fi 7 are estimated at $1-$2 per like-for-like device, with 8%-10% gross margin improvements initially, though competition may erode this over time.
Enterprise recovery was described as dependent on IT budget firming, with early signs of life but primarily driven by internal gains like refreshes and new features. Pricing pressures are minimal due to strong product moats, with limited exposure to China-based competition. Automotive and industrial segments represent smaller portions of Wi-Fi revenue, with the bulk in consumer (65%) and enterprise (35%).
Seasonality in March quarters was acknowledged, with no multi-quarter guidance provided, but green shoots noted in enterprise demand. For the Astra processor platform, engagement is broad across home security, appliances, and industrial uses, with a low-power, low-cost value proposition enabling AI inferencing at 10-12 TeraOPS without significant price hikes. The focus is on flexible, plug-and-play solutions that avoid locking customers into predefined AI use cases.
Overall, the call underscored Synaptics’ strategic positioning in high-growth areas, with emphasis on leading in Wi-Fi for IoT, foundational work in broad markets, and processor ramps set to contribute meaningfully in the coming years. Enterprise improvements are expected to bolster margins, supporting higher earnings and shareholder returns.
Disclaimer: This news report is provided for informational purposes only and should not be considered as investment tips or advice. All sources are publicly available and have been compiled to offer a factual overview.
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