NXP Semi forecasts revenue below estimates on auto weakness, shares tumble

(Reuters) -NXP Semiconductors forecast third-quarter revenue below analysts' estimates on Monday, as it battles sluggish demand from automotive customers and rising geopolitical risks, sending its shares down about 8% in extended trading.

The company recorded its worst decline in quarterly revenue in four years in the second quarter and its automotive sales slumped the most in more than three years, according to LSEG data.

The Dutch company forecast revenue in the range of $3.15 billion to $3.35 billion, compared to analysts' average estimate of $3.36 billion.

Clients in the automotive industry - NXP's biggest segment - have been pulling back on orders on tepid demand as customers await an improved macroeconomic environment and interest rate cuts by global central banks.

Revenue in the automotive segment fell 7% to $1.73 billion in the second quarter while total revenue of $3.13 billion was in line with estimates.

Chipmakers are also gauging the impact of China's straining trade relations with the U.S. and the European Union.

With tightening export restrictions, Chinese companies have been investing heavily in expanding production of older chips, known as legacy chips, Reuters reported earlier in July.

Increased competition in the market may hurt NXP's sales to China - the largest contributor to its revenue in 2023, accounting for about 33% of total annual revenue.

Automotive declines offset growth in the company's mobile segment. The division recorded a 21% jump in revenue to $345 million, as artificial intelligence-linked upgrades fueled a rebound in demand from the smartphone industry.

The company expects adjusted earnings with a midpoint of $3.42 per share for the third quarter, missing estimates of $3.61.

NXP has made significant investments to diversify its manufacturing base beyond China, pouring $1.6 billion into a 40% stake in a joint venture with TSMC-backed Vanguard to produce silicon wafers in Singapore.

(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sriraj Kalluvila)