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Qorvo (QRVO -27%) is under heavy pressure following its Q2 (Sep) earnings results/guidance last night. Qorvo went into this SepQ report with a streak of 20 consecutive double-digit EPS beats. That streak has been broken following a small beat last night. Revenue fell 5.2% yr/yr to $1.05 bln, but that was generally in-line. What really surprised us was the Q3 (Dec) guidance, which was well below analyst expectations.

• Qorvo supplies mobile components with Apple (AAPL) being its largest customer at 46% of FY24 sales. However, it sounds like the weakness is more on the Android side. Within the Android ecosystem, Qorvo is a major supplier to the flagship, premium and mid-tier 5G smartphones. While the flagship and premium tiers are holding up well, Qorvo said the mix in the mid and entry tiers has shifted towards entry-tier 5G at the expense of mid-tier 5G.
• What's more, Qorvo does not expect this mix shift in Android 5G for the mid-tier to the entry-tier will reverse. These factors are expected to impact Qorvo's revenue and margins in the second half of FY25 and into early fiscal FY26. As a result, Qorvo is taking some pretty big actions, including factory consolidation and operating expense reductions.
• With Qorvo not expecting this shift to reverse, it now wants to focus its product road map primarily on 5G products for its largest customer (Apple) and the flagship and premium tiers of its Android customers.

We have followed Qorvo for a long time and this quarter surprised us. The company typically reports a healthy beat and tends to provide conservative guidance, which helps fuel the large beats. This reliable pattern has been Qorvo's MO for a long time, so this was a shock to the system for investors. And it sounds like Qorvo is responding by making some pretty big structural changes (focusing more on Apple and upper tier Android; consolidating factories etc.)

We think investors should be cautious with Qorvo in the near term as it's making a lot of changes and there could be more warnings in the future. This is not just a one quarter demand issue, we would want to see its results start to stabilize before going value shopping.