Key Takeaways:
- NXP expects low double-digit revenue growth this year and next as auto demand recovers
- Data center chip sales are on track to triple to $500 million in 2026
- Shares have risen 8 percent in the past week as analysts raise price targets
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NXP Semiconductors rallies 8% as auto demand and data center sales improve
NXP Semiconductors is seeing its strongest demand environment in months, with book-to-bill "solidly above 1" and data center revenue on track to more than double this year.
NXP Semiconductors NV expects low double-digit revenue growth this year and next, driven by a recovery in automotive demand and a tripling of data center chip sales to $500 million, executives said at a conference.
"We are more optimistic than we have been in a while," Jeff Palmer, executive vice president of investor relations at NXP, said at TD Cowen's Technology, Media & Telecom Conference on May 31.
The Eindhoven-based chipmaker reported first-quarter revenue of $3.18 billion, up 12 percent from a year earlier and ahead of the $3.16 billion consensus, with non-GAAP earnings of $3.05 per share topping estimates of $2.98. Palmer said the company's book-to-bill ratio is "solidly above 1," customer backlog through distribution is building, late orders and expedites are rising, and lead times are stretching — all signs of a broadening recovery.
The turnaround matters because NXP derives 58 percent of its revenue from automotive semiconductors, a segment that had been weighed down by inventory destocking and tepid vehicle production. If the recovery holds, NXP's revenue could grow from about $12 billion in 2025 to $19 billion by 2030, representing a compound annual growth rate of roughly 11 percent, according to analyst models.
Data Center Revenue Set to Triple
NXP's data center business, which generated about $200 million last year, is on track to reach $500 million in 2026, Palmer said. The company supplies control-plane chips that manage power, cooling, security and communication inside server racks — a niche growing as hyperscalers expand infrastructure for artificial intelligence workloads. The push puts NXP in competition with Texas Instruments Inc. and Analog Devices Inc., though its data center exposure remains smaller than its core automotive business.
Software-Defined Vehicles Drive Content Growth
The shift toward software-defined vehicles — cars that receive over-the-air updates and run advanced driver-assistance features — is increasing the number of processors, radar chips, Ethernet controllers and security components per vehicle. NXP expects software-defined vehicle revenue to reach about $2 billion by the end of 2027. The company strengthened its position with the $243 million acquisition of Aviva Links, a supplier of automotive connectivity technology, and the sale of its MEMS sensors business for up to $950 million as part of a portfolio optimization.
NXP shares, which have risen 8 percent in the past week to trade near $324, have a consensus analyst rating of Buy with an average price target of $250. Cantor Fitzgerald lifted its target to $380 after the first-quarter report, while Oppenheimer raised its target to $300. At 24.5 times trailing earnings, NXP trades at a discount to Analog Devices' multiple of about 57 times, reflecting the market's cautious view of its automotive exposure — a gap that could narrow if the recovery broadens.
This article is for informational purposes only and does not constitute investment advice.
