Skyworks Solutions Inc

NASDAQ:SWKS

Earnings Call Transcript 2024-Q4

[Operator]

Good afternoon, and welcome to Skyworks Solutions Fourth Quarter Fiscal Year 2024 Earnings Call. This call is being recorded. At this time, I will turn the call over to Raji Gill, Vice President of Investor Relations for Skyworks. Mr. Gill, please go ahead.

[Rajvindra Gill, executive]

Thank you, operator. Good afternoon, everyone, and welcome to Skyworks Fourth Fiscal Quarter 2024 Conference Call. With me today is Liam Griffin, our Chairman, Chief Executive Officer; and President; and Kris Sennesael, Chief Financial Officer for Skyworks.

This call is being broadcast live over the web and can be accessed from the Investor Relations section of the company's website at skyworksinc.com. In addition, the company's prepared remarks will be made available on our website promptly after their conclusion during the call.

Before we begin, I would like to remind everyone that our discussion will include statements relating to future results and expectations that are or may be considered forward-looking statements.

Please refer to our earnings press release and recent SEC filings, including our annual report on Form 10-K for information on certain risks that could cause actual outcomes to differ materially and adversely from any forward-looking statements made today.

Additionally, the results and guidance we will discuss include non-GAAP financial measures consistent with our past practice. Please refer to our press release within the Investor Relations section of our company website for a complete reconciliation to GAAP.

With that, I'll turn the call over to Liam.

[Liam K. Griffin, executive]

Thanks, Raji, and welcome, everyone. Skyworks executed well during the fourth fiscal quarter of 2024. We posted revenue of $1.025 billion. We delivered earnings per share of $1.55 and generated free cash flow of $393 million. Revenue gross margin and EPS met or exceeded the midpoint of our guidance.

Our business model continues to deliver robust cash generation. For the second year in a row, annual free cash flow was well above $1.6 billion, providing a strong foundation to invest in our technology and product road maps to support future growth.

In mobile, our revenue grew 21% sequentially, and we expect further growth in the December quarter as customer orders and channel inventory have normalized, and we continue to support seasonal product ramps.

Based on our technology leadership position and in close collaboration with our mobile customers, we expand our reach, develop best-in-class high-performance connectivity solutions and drive more integration with advanced packaging, reducing the footprint and increasing energy efficiency.

We believe that AI is poised to ignite a transformative smart phone upgrade cycle, propelling the demand for higher levels of RF complexity. As AI capabilities continue to advance, smartphones will evolve into more sophisticated and intelligent companions demanding more powerful solutions to support their enhanced functionalities.

We are in the early stages of this multiyear trend and Skyworks is well positioned to capitalize on it. In broad markets, we have seen signs of stabilization and have grown modestly since the bottom in the December quarter of 2023. Despite uneven demand dynamics and high customer inventory in certain segments.

Long term, we remain bullish on broad markets, given secular trends in Edge IoT, automotive electrification, and advanced safety systems as well as AI-enabled workloads, driving cloud and data center upgrades. In Edge IoT, demand continues to improve as customers adopt WiFi 6E and 7 systems, which carry higher dollar content due to increasing complexity and additional bands. We are in the early stages of a multiyear upgrade cycle with WiFi 7 shipments now ramping.

As we indicated at the beginning of the year, inventory levels in traditional data center and wireless infrastructure remain stubbornly elevated, which is delaying the recovery. We continue to undership natural demand. However, over the medium to long term, we remain bullish on our product road map and design win funnel targeting AI data centers.

Lastly, global demand remains muted in automotive and industrial markets as Tier 1s and OEMs work down excess inventory. Despite near-term headwinds, we continue to convert design wins into revenue across our connectivity, power isolation and digital broadcast solutions for the connected car and EV markets.

Turning to our quarterly business highlights. We secured 5G content for premium Android smartphones, including Google Pixel 9, Samsung Galaxy, Oppo OnePlus and several others. We expanded our WiFi 7 design win pipeline with Linksys, Charter, NETGEAR, CommScope and TP-Link. For emerging IoT applications, we powered advanced audio solutions for wireless gaming and clinical-grade hearing aids.

Lastly, we increased our design win momentum in automotive including 5G front-end modules, infotainment and digital isolators.

In summary, the Skyworks team executed well despite a challenging macroeconomic climate. We intend to leverage our robust cash generation to make critical investments that drive long-term profitable growth while diversifying the overall business.

With that, I will turn the call over to Kris for discussion of last quarter's performance and our outlook for Q1 of 2025.

[Kris Sennesael, executive]

Thanks, Liam. Skyworks revenue for the fourth fiscal quarter of 2024 was $1.025 billion, slightly above the midpoint of our outlook. Mobile was approximately 65% of total revenue up 21% sequentially as we successfully supported the ramp of new products at our mobile customers. Broad markets were approximately 35% of total revenue, up $1 million sequentially. Gross profit was $476 million with gross margin at 46.5%, in line with expectations. Gross margin grew 50 basis points sequentially, reflecting our ongoing cost reduction actions.

Also, during Q4, we further reduced our internal inventory, resulting in 7 consecutive quarters of reductions. Operating expenses were $203 million, reflecting our strategic investments in our technology and product road maps. We delivered $273 million of operating income, translating into an operating margin of 27%. We incurred $2 million of other expenses, and our effective tax rate was 8%, driving net income of $250 million and diluted earnings per share of $1.55, which is $0.03 above our guidance.

During the fourth fiscal quarter, we delivered impressive cash generation, with cash flow from operations at $476 million, capital expenditures at $83 million, resulting in a free cash flow of $393 million or 38% free cash flow margin. For fiscal 2024, we generated well over $1.6 billion of free cash flow, our second year in a row and ended the year with a record 40% free cash flow margin, translating into approximately $10.40 of free cash flow per share and a free cash flow yield of approximately 11.5%. We continue to drive robust cash flow through steady levels of profitability, prudent working capital management and moderating CapEx intensity.

During fiscal Q4, we paid $112 million in dividends. Cash and investments grew to approximately $1.6 billion, and we have $1 billion in debt, providing us with excellent optionality. Now let's move on to our outlook for Q1 of fiscal 2025. We anticipate revenue of $1.050 billion to $1.080 billion, up 4% sequentially at the midpoint.

We expect our mobile business to be up mid-single digits sequentially, driven by seasonal product ramps. In broad markets, we anticipate further modest sequential growth. And a return to year-over-year growth. The pace of the recovery is more measured than we anticipated, given excess inventory in select segments like industrial, automotive, infrastructure and networking.

Gross margin is projected to be 46% to 47%, and we expect operating expenses in the range of $209 million to $215 million, with sequential increases reflecting typical adjustments made at the start of a new fiscal year, including variable compensation accruals. In addition, we are leveraging our strong cash flow generation to invest in technology and product road maps to drive share and increase diversification.

Below the line, we anticipate $3 million in other income an effective tax rate of 12.5% and a diluted share count of approximately 160 million shares. Accordingly, at the midpoint of the revenue range of $1.065 billion we intend to deliver diluted earnings per share of $1.57.

Operator, let's open the line for questions.

[Operator]

[Operator Instructions] And our first question coming from the line of Peter Peng with JPMorgan.

[Peter Peng, analyst]

Good job on the execution. Can you -- on your mobile business, can you talk about your Android portion of this? And what kind of trends are you seeing? I think your peers talked about some weaknesses there. So I know this is a smaller part of your business, but maybe you can elaborate what you're seeing in the Android part of this business?

[Liam K. Griffin, executive]

Sure, absolutely. In fact, we have a very robust pipeline with the Android players, specifically Google. They've been doing a great, great job and also Samsung. So we have incredible design wins there. Fortunately, they are investing in technology, the performance that we're seeing in those devices has been amazing for us. It's a great match for Skyworks. It gives us an opportunity really to demonstrate our technology reach, our scale and also moving in a diversified portfolio as well. So we're doing very well as a business, and we expect much more in that company.

[Kris Sennesael, executive]

Right. And Peter, just to level set, right, our Android revenue in more than $1 billion of revenue we just did in last quarter is less than $75 million of revenue in the quarter. Roughly half of that is with Google, 30%, 40% or so is with Samsung and less than 10% is with the China players. So we definitely have derisked our position with China. We've talked about that before. We are very selective as it relates to that part of the Android business with Samsung in China. We are playing with those valued customers, but only in the areas where they value what we bring to the table which is high-performance RF connectivity.

That plays out really well with Google. Google, who is making a lot of investments in their product road map who are switching the AI-enabled phones that drives a lot more complexity inside the phones, and that's all music to our ears, and that's why we have a strong relationship with them.

[Peter Peng, analyst]

Perfect. And then on the broad market, it's good to see you guys driving , I think, for the December quarter, that will be probably your fourth quarter of sequential growth. I know there's a lot of puts and takes in that business. But as we kind of look into 2025, can you talk about the sustainability of this recovery? Or do you think that there's going to be some seasonality that might impact growth into 2025?

[Kris Sennesael, executive]

Yes. And so you're absolutely right. Our broad markets business bottomed in the December quarter of 2023, and we had now 3 quarters in a row of modest sequential growth, we are guiding to further modest sequential growth in the December quarter and a return to year-over-year growth, again, somewhat in the mid-single digits year-over-year growth in our broad markets business. We do anticipate that at a certain point, the sequential growth is going to accelerate, but we have not really seen that for now. And we all know why that is. There is still some excess inventory in certain markets like automotive, industrial, infrastructure and networking.

We are under shipping natural demand, but eventually, that's going to clear and eventually, our growth is going to accelerate. We are very well aligned with some secular growth engines in our broad markets as we talked about in the prepared remarks, Edge IoT devices where we see an upgrade from WiFi 6 to WiFi 6E and 7, in automotive with advanced safety systems and electrification. And as well in AI data centers and networking where we play with our timing solutions. And so when I put this all together, we still believe that in the longer term, in a neutral macroeconomic environment, our broad markets business can grow mid-teens year-over-year.

[Operator]

And our next question coming from the line of Edward Snyder with Charter Equity Research.

[Edward Snyder, analyst]

Thanks a lot. Maybe if we could touch on guys, obviously with what's going on with your largest customers has caused kind of a little bit of temporary or appears to be temporary upheaval. What's your feeling in terms of 2025, not for specific guidance on that, but it's already clear from our teardown that there's some content changes in the last flagship phone. And from what we can gather, there's going to be some additional changes.

So there's a lot of things moving -- a lot of moving pieces here. What's your view of -- let me put it this way, the long term, say, 2025 to 2026 in terms of your ability to gain back content when they make a big shift and then perhaps grow from there. I know we've talked of AI in the past about its impact on the RFFE, given the road map starts out for 3 years, what are you seeing in terms of generic content growth in that kind of flagship of front end from AI? And then I have a follow-up.

[Liam K. Griffin, executive]

Okay. Okay. I'll unpack that with you, Edward. Yes. I mean, certainly, there's a tremendous opportunity for us to continue to grow in mobile. We've got an incredible technology bench. We have the scale. We have the physical plant, and we have the flexibility to do what our customers need. And I'm sure, as you know, we have a very good partnership with our largest customers.

So that back and forth is always going our way. We've got great people on both sides to make it work, and we expect to have more growth. Certainly, we had the last couple of quarters weren't so great, but we're popping up now. If you look at the road map that we're putting forward, it's very, very potent, and we definitely have the team to make that execution done.

It's going to take a little time, of course, but we have the scale, we have the people. We have the ambition to make it happen. And most important, we have the confidence of our most important customer.

[Edward Snyder, analyst]

Okay. Maybe if I could follow up. First, housekeeping, what was the percentage of your largest customer? And then secondly, you've been underrepresented at Samsung for a while. And again, sands are shifting there in terms of the RFFE. What's the prospect for that in the next, let's say, a year or so in terms of it becoming a larger customer for you given that I think there are more open slots available to you. Are you seeing good design traction in spring or fall? Or do you get any indication of that at all right now?

[Kris Sennesael, executive]

So Edward, in the September quarter, our largest customer was approximately 69% of our total revenue, which was up 21% sequentially. So the team really executed well, supporting our largest customer, ramping up their new products. And I'll turn it over to Liam for the rest of your question.

[Liam K. Griffin, executive]

Yes, sure. I mean, as we spoke, there's just tremendous opportunity there. We're diving much deeper in some of those platforms. And I would say the technology pipeline that we have at Skyworks and the investments that we've been making are really going to yield opportunities for us in growth.

So that's kind of what we're looking at right now. There's a lot of opportunity. We're executing. Our engineers are making incredible progress on the next-generation solutions. There's a lot more going as you get into the AI world. And you can expect that Skyworks is right there ready to go. We're under the hood, so to speak, with some really incredible people on our side and with our partners. So we should look forward to that. That work is being done now, and we look forward to putting that into products very shortly.

[Operator]

And our next question coming from the line of Timothy Arcuri with UBS.

[Timothy Arcuri, analyst]

Kris, can you talk about what's included for the largest customer for December? It seems like you did see some pull-ins into September just like most others did. It was a little higher than what I think you thought it would be. Usually, that -- that customer is about flat in December, but maybe it's down mid because of the pull-ins. Can you kind of talk about that?

[Kris Sennesael, executive]

Yes. First of all, we can't really go into the specifics as it relates with our large customer, but I can tell you that the business and the demand is fully in line with our expectations. So we didn't see any surprise in September, didn't see any or don't expect any surprise in December. The demand is in line with our expectations. And so as I just answered the question before, the large customer was up 21% sequentially in the September quarter, and we expect it to be up further in the December quarter in the 5% to 10% range on a sequential basis.

[Timothy Arcuri, analyst]

Great, Kris. And then I noticed that the repo was quite low despite the strong free cash flow. I might have thought it would have been a little stronger. Can you kind of talk.

[Kris Sennesael, executive]

Yes. Yes, absolutely. So first of all, I want to highlight here as well that we do have very strong free cash flow. And as we indicated in the prepared remarks, right, for the second time in a row, more than $1.6 billion of free cash flow. And that does take into account that we continue to make the necessary investments in our business.

We continue to strengthen our technology and product road maps, and there's no hesitation there. We know where the opportunities are, we are making the necessary investments there to capture those opportunities. In addition to that, we continue to invest in our manufacturing footprint, although at a much more moderate pace as we have seen in the last couple of years, but we continue to invest there as well, and so our free cash flow is very strong.

Our balance sheet is very healthy. We have $1.6 billion of cash on the balance sheet and only $1 billion in debt with no near-term maturities, and so we have plenty of optionality. We have optionality to do M&A, although you know us, we're going to remain disciplined, but we have that optionality. And we have optionality to return excess cash back to the shareholders through a combination of our dividend program and our share buyback program.

On the dividend program, we just recently increased the dividend 3% to now $0.70 per share and so that's turning into a really nice dividend yield. And we have the optionality to do buybacks. The Board and the management team are taking into account and into consideration multiple elements. But as a matter of policy, I can't really share the details of those considerations. Having said that, it's our intent to continue to return all the excess cash back to the shareholders over time.

[Operator]

And our next question coming from the line of Krish Sankar with TD Cowen.

[Sreekrishnan Sankarnarayanan, analyst]

Liam and Kris, thanks for the color on the December quarter, your large customer. I'm just kind of curious, when you look at the December quarter compared to history, how is the demand linearity trending? And what does that imply for March quarter seasonality? I had a follow-up.

[Kris Sennesael, executive]

So again, I will repeat what I just answered on the previous question, right? It is fully playing in line with what we expected, a strong ramp in September followed with further ramp going into the December quarter. Obviously, March is seasonally down, and we expect here again, our March quarter, especially in mobile to be seasonally down.

Obviously, we only guide one quarter at a time. So it's too early to be more specific. We do, however, our broad markets business to continue to grow sequentially, and we expect broad markets to be up modestly in the March quarter and beyond. But as combined, of course, for Skyworks, we will have normal or expect normal seasonal declines into the March quarter.

[Sreekrishnan Sankarnarayanan, analyst]

Got it. Really appreciate that. And then a quick follow-up on the WiFi 7 upgrade cycle. It seems like it's been pretty good for you. I'm just curious like historically, how long has the growth inflection lasted for a WiFi upgrade cycle? And how should we think about how this profile would be versus prior cycles?

[Liam K. Griffin, executive]

Sure, sure. Yes. I mean, actually, you're right, the WiFi cycle had been somewhat muted here for a while. Fortunately, with the Skyworks team, we're in great position. The next generations WiFi solutions, WiFi 7. We're working with companies like Motorola. We're looking at companies like Logitech. We've got some automotive plays in there as well.

So the broad market businesses are coming up. It's been -- it had been kind of a rough ride there, but we're starting to look better. NETGEAR is another play we're in there, Charter Communications, we're in industrial markets. We're engaged with Mercedes-Benz even on the auto side. So there's been a lot of activity and strength here in the broad markets. It's just that the design win pipeline is filling, and we'll get that through revenue. So we're very encouraged about the signs we're seeing there.

[Operator]

Our next question coming from the line of Vivek Arya with Bank of America Securities.

[Michael Mani, analyst]

This is Michael Mani on for Vivek Arya. To start, just across the various end markets that broad markets plays in, which areas have become maybe incrementally worse or better over the last 90 days? And just where are you still undershipping to demand?

[Kris Sennesael, executive]

So in broad markets, right, there's 3 parts. There is the Edge IoT connectivity where we play mostly with WiFi, but any other wireless connectivity protocol. We've definitely seen improvements in that area, again, in part driven by a big step-up in content as the transitioning -- the multiyear transitioning is happening from WiFi 6 to 6E and 7. I think we're still somewhat undershipping natural demand there, but there is definitely improvement in that area.

Second part is our networking infrastructure and cloud. I think that's very well documented there. There is excess inventory that's being worked down. That will take multiple quarters. I think we started seeing some improvements there. Bookings is improving. Backlog is improving, but it's still shipping way under natural demand. And then last but not least, you have automotive and industrial. I think that's very well documented as well by many of our peers who talked about that part of the business.

We're definitely undershipping natural demand there. Again, we are -- I think we're doing fairly well given some design wins that we have able to put on the book a year or 2 years ago. Those design wins continue to ramp up and turn into revenue, but it's a soft environment. And so I think that will continue to improve over time here. And that's why, as a whole, we are pleased on one hand that our markets continue to grow sequentially, although modestly. But eventually, that sequential growth will accelerate. Again, December year-over-year growth and that year-over-year growth will accelerate over time as well.

[Michael Mani, analyst]

Great. And then just on gross margins. Given that broad markets might be taking a more measured upturn expected previously, what are the puts and takes for gross margin expansion from here? I know you guided December contract essentially flat at the midpoint, but how do you think about expansion into 2025? And then maybe more broadly, as you think about an eventual return to 50% or greater gross margins, what would you rank order as the most important drivers to achieve this between utilization, product mix and a recovery in broad markets or any other factors?

[Kris Sennesael, executive]

Yes. So as it relates to gross margin, we did 46.5% in September, which was up 50 basis points, so that's a step in the right direction. For December, we guide 46% to 47%, so kind of flattish at the midpoint, but the range is 46% to 47%. Looking ahead to fiscal '25 and longer term, as you called out correctly, we drive gross margin improvements through better factory utilization through cost reductions, and we have a mix tailwind because broad markets has above-average gross margin compared to the mobile.

I think the team continued to execute well. We start seeing some improvement on the factory utilization. The team is executing well on cost reductions internally as well as externally. But as we talked already, the mix tailwind is not blowing as strong as we initially anticipated, right? I think over time, broad markets will accelerate. But currently, the sequential growth is modestly. And so the mix tailwind there is not as strong as expected.

As a result of that, for now, we think that fiscal '25 on a full year basis, gross margins is going to be flattish compared to fiscal '24. It will, of course, start improving towards the end of fiscal '25 and set us up well for further gross margin expansions in fiscal '26 and beyond. We want to get as fast as we can back to the 50% gross margin. And then we're going to keep grinding to our long-term target model of 53%.

[Operator]

And our next question coming from the line of Karl Ackerman with BNP Paribas.

[Karl Ackerman, analyst]

Kris, I just want to follow up on that gross margin comment with regard to fiscal '25. I guess, do you have an inventory days target because you continue to make good strides in reducing inventory days now in the 130 range, broad markets continues to improve. And so if inventory days are at normal, presumably margins should go up. So again, maybe tying the inventory days comment with what your comments just were around gross margins and how we see that stepping up over the next couple of quarters?

[Kris Sennesael, executive]

Yes. First of all, we have been reducing our internal inventory for 7 quarters in a row now. It peaked at well above $1.2 billion, and we are down now to less than $800 million. I think we can continue to drive inventory down a little bit more. Obviously, that's not helping from a factory utilization point of view. It's not helping from a gross margin point of view. But I think it's the right thing to do.

We want to rightsize the inventory. And I think we still can reduce that a little bit. And so again, when you put it all together there, I think gross margin is going to be flattish in fiscal '25 start improving towards -- and we will have seasonality there, right? We will have seasonality.

Typically, gross margins go down in the March and June quarter and then start improving in the September and December quarter. Inventory days, again, there is seasonality, and so revenue goes up and down. The inventory doesn't follow necessarily the seasonality on the revenue side. But from an absolute dollars point of view, we're sub $800 million, continue to drive it down a little bit further.

[Karl Ackerman, analyst]

Got it. As my follow-up, do you believe the M&A environment is more favorable from a regulatory and funding perspective in '25? And if not, because of your very strong free cash flow generation and perhaps ability to further reduce inventory, can you be more aggressive on the buyback, if so?

[Liam K. Griffin, executive]

Yes. I mean there's all kinds of options that we have with the cash flow that we've been putting forth, which is a great, great tool for us. So we're always looking for the optimal mix, whether it's an M&A play or whether another factor. And so those are great options for Skyworks, and it's a testament of the ability to drive that cash, and it's going to be a hallmark of this company.

So we look at everything. We're very disciplined. We think about our shareholders. We think about the longevity of the technology, and it's been a strategy that's worked quite well, and I think it will continue to be really purposeful for us as we go forward.

[Operator]

And our next question coming from the line of Ruben Roy with Stifel.

[Ruben Roy, analyst]

Liam, I had a question on Edge IoT to start with. And just wondering, how are you thinking about AI impact, if any, on the Edge IoT business? You've talked a lot about the smartphone side of it. Just wondering if there's anything investors should be thinking about in terms of AI and potential impacts as we look out over the next 12, 18 months?

[Liam K. Griffin, executive]

Yes, absolutely. So I think we've got a couple of things. Certainly, on the smartphone side, we are deeply entrenched with the most important customers learning together, executing and driving excellence. So that's really, really key, and we're doing great work there. And then -- but then now flipping back to the broad markets, we're doing very, very well in the IoT space and really engaging with companies that are real hallmarks in the business.

We talked about Google and Samsung, but also the broad markets businesses. We've got design wins with Mercedes. We have design wins with NETGEAR, Cambium Networks, Motorola, really, really meaningful companies that are now part of that portfolio that we have in broad markets. And I'm 100% confident our team will continue to drive that with more opportunities, more diversification and more cash and more earnings for us. So look forward to that, but things look much better there in that market.

[Ruben Roy, analyst]

And a couple of quick ones for Kris. Kris, can you tell us about the impairment charge during the quarter and what that was related to? And then finally, on CapEx ticked up a little bit. Any initial view on how we should think about CapEx for fiscal '25?

[Kris Sennesael, executive]

Right. So we did take an impairment charge in Q4 of fiscal '24, which was related to in-process R&D related to the I&A acquisition we did with Silicon Labs. As you probably know, at the time of an acquisition, you have to identify all the in-process R&D projects and have to put a valuation around that.

As time goes by, some projects are being accelerated. Some projects are being pushed out. Some projects are being redefined. And so that's all being taken into account and could potentially result in an impairment charge, which we took in Q4.

The business itself that we acquired is part of our broad markets business. We are going through some inventory correction there because a lot of that business plays in the industrial automotive area. But we are still very pleased with that business. That business has great technology, great people, good customer contacts. And as we get through the inventory correction is well positioned for growth.

As it relates to CapEx, CapEx is running in fiscal '24 on or about 3% to revenue, which has been one of the lowest in many, many years. Part of that, of course, is we didn't have to do any capacity expansion CapEx during fiscal '24, but all the CapEx we did was mostly for technology reasons. Going forward, we think CapEx will remain moderate mid- to longer term in the mid-single digits as a percent to revenue.

[Operator]

And our next question coming from the line of Srini Pajjuri with Raymond James.

[Srinivas Pajjuri, analyst]

A couple of follow-ups. Kris, on the broad market side, there are a lot of moving parts in there. Just trying to understand how big auto, industrial and IoT and infrastructure businesses are individually. And also, you talked about some inventory on the infrastructure and cloud networking. I think you have a bit more exposure on the telco side. I just want to make sure because from everything that we see and hear, the cloud business is very strong right now. So I'm just curious as to what's causing that inventory build.

[Kris Sennesael, executive]

Yes. So our broad markets, it's roughly 40%, 50% is the Edge IoT connectivity, 35%, 40% or so is our networking infrastructure and cloud and then 20%, 25% is industrial and automotive. As it relates to cloud and data center, we do see some good traction in the AI-related investments that -- where we play with our timing solutions, but investments in the more traditional cloud and data is somewhat muted, and there is still some ongoing inventory correction in that part of the market.

[Srinivas Pajjuri, analyst]

Okay. That's clear. And then on the -- I guess, on the December guidance, you talked -- you kind of mentioned that everything is kind of tracking as you expected originally, but it is slightly below your normal seasonality. I think historically, you have done kind of high single digits in December. So my question is, is that primarily on the Android side, the weakness or broad markets? And then given the lower base, should we expect your March quarter to be slightly above seasonal?

[Kris Sennesael, executive]

Right. So the revenue and the business with the large customer is fully in line with expectations and more normal from a seasonal point of view. The -- we're guiding slightly below Street expectation mostly because of broad markets. Again, on one hand, pleased that we continue to see for the fourth quarter in a row sequential growth, but the sequential growth is less than what we anticipated 3 or 6 months ago.

[Operator]

And our next question coming from the line of Vijay Rakesh with Mizuho Group.

[Vijay Rakesh, analyst]

Kris, just wondering on 2025, if you were to take a look at how do you see handset growth year-on-year and within that 5G? And then a follow-up.

[Kris Sennesael, executive]

So we only guide one quarter at a time, and we're going to stick to that. I mean visibility is, I think, okay. It's not bad or great. But as a matter, we only guide one quarter at a time, and we're going to stick to that.

[Vijay Rakesh, analyst]

Got it. I was talking more of the industry. But as you look at -- one of the things that one of your peers have talked about is in China, there's been a trend towards entry level and some of the RF side moving to discrete. Are you seeing any of that? That's it.

[Liam K. Griffin, executive]

Yes. We actually don't do much in China in those markets. And if we were, they're really low-end stuff. And so we're naturally kind of out of that space and upgrading more with some of the other players that we talked about earlier, the Googles and Samsungs, et cetera. So we still have a great Android business. It just happens to be a much more important strategic one.

[Operator]

And our next question coming from the line of Nicolas Doyle with Needham & Company.

[Nicolas Doyle, analyst]

You mentioned tremendous opportunity in Android. Can you be any more specific in terms of products or maybe the connectivity, if it's RF or WiFi type opportunities? And I guess I assume that's mostly with Google.

[Liam K. Griffin, executive]

Yes. I mean you have 2 really strong players here that we're engaging with Google and Samsung. And what I really like about those companies is that they are -- these are enterprise companies. It's great that they're smartphone players, and we can engage, that's wonderful, but they're also technology companies.

They are companies that play in AI and other markets. So it's really a great opportunity for us. We're pleased that we're able to engage at that level. We're learning a lot from those customers, very, very smart people with a lot of ideas and a lot of applications. So it's a broad market business of its own within the portfolio. So you should expect more from us with those companies. We're making great progress and looking forward to continuing to raise the bar. And so we're happy to be there.

[Nicolas Doyle, analyst]

Okay. And maybe just a broader strategy question. You've seen broad markets grow modestly quarter-over-quarter, yet you've been under shipping kind of this whole time. So why not halt those shipments more aggressively at the beginning of the year and kind of burn through that inventory quicker? Is there any sort of business strategy around that decision? Or that's just how business goes?

[Kris Sennesael, executive]

I mean we're always very careful. And when we talk about inventory, we talk about inventory in the channel and at the customer level. And we're always trying to get a good read about that. And there's no advantage or any good reason to go and build up channel inventory or excess inventory at the customer level.

We're always trying to ship in line with real end customer demand. Now sometimes our customers don't have it right either, and they are pounding the table to get more parts and then their end customer demand doesn't materialize and you end up with excess inventory somewhere in the channel could be at the distribution or could be at the end customer. Nobody wants that, and we're always trying to manage that very carefully.

[Operator]

Ladies and gentlemen, that concludes today's question-and-answer session. I will now turn the call back over to Mr. Griffin for any closing comments.

[Liam K. Griffin, executive]

Thanks for participating on today's call. We look forward to talking to you at upcoming investor conferences during the quarter. Thank you.

[Operator]

Ladies and gentlemen, this concludes today's conference call. We thank you for your participation, and you may now disconnect.