Synaptics at JPMorgan Tech Conference: IoT Drives Growth

On Tuesday, 13 May 2025, Synaptics (NASDAQ:SYNA) presented at the 53rd Annual JPMorgan Global Technology Conference, outlining its robust financial performance and strategic direction. The company highlighted its strong focus on the Internet of Things (IoT) segment, projecting significant growth despite challenges in the smartphone market.

Key Takeaways

• Synaptics reported Q3 revenues of $267 million and earnings per share of $0.92, with Q4 guidance projecting further growth.
• The core IoT segment is expected to drive growth, with a projected 50%+ year-over-year increase in fiscal year 2025.
• Gross margins are anticipated to improve, with June guidance at 53.5%.
• Strategic expansion focuses on connectivity solutions, AI for the far edge, and high-performance Wi-Fi.
• Challenges remain in the smartphone sector, but new touch controllers aim to boost the high-end Android market.

Financial Results

• Q3 revenues reached $267 million, with earnings per share at $0.92.
• Q4 guidance suggests revenues of $280 million and earnings per share around $1.00.
• Year-over-year earnings grew approximately 70%.
• Gross margins are projected at 53.5% for June, with potential for further improvement.

Operational Updates

• Minimal impact from tariffs due to global supply chain adjustments by customers.
• Strong visibility into the June quarter with healthy backlog levels for September.
• Core IoT design win pipeline expanded by 30% year-over-year.
• Wi-Fi 7 and Astra IoT Compute Platform are positioned for significant market uptake.
• The broad market chip targets a $3 billion serviceable addressable market.

Future Outlook

• Core IoT growth is targeted at 25% to 30%, driven by advancements in connectivity and AI solutions.
• Fiscal year 2027 is expected to see revenues from AI native solutions for the far edge.
• Expansion into enterprise and automotive segments aims to leverage the PC refresh cycle and return-to-office trend.

Q&A Highlights

• Tariffs could potentially impact end demand, although current effects are minimal.
• Enterprise segment is expected to return to 2019 revenue levels with upcoming PC refresh cycles.
• New touch controllers are set to accelerate growth in the high-end Android smartphone market.

In conclusion, Synaptics remains optimistic about its growth prospects, driven by strategic initiatives in IoT and connectivity solutions. For a detailed understanding, refer to the full transcript below.

Full transcript - 53rd Annual JPMorgan Global Technology:

Unidentified speaker: Tape out our first AI native solution for the far edge. That will start to sample here and we’ll start to get revenues as we move through our fiscal twenty twenty seven and into our calendar twenty seven timeframe. So very exciting story. And just to step back, Peter, if you look at our most recent results here in our fiscal Q3, which ends in March, we printed $267,000,000 in revenues, about $0.92 in terms of our earnings profile. Our guidance here for our fiscal Q4, our June, the midpoint is at $280,000,000 so nice growth sequentially, nice growth on a year over year basis and the midpoint in terms of our guidance for earnings was about $1 So the biggest drivers in terms of that growth have been around this core IoT segment, where if you look at our Q3 results, that business was up substantially on a year over year basis.

And based on our Q4 guide, core IoT will have six sequential quarters of growth, which is goodness in terms of where the business is.

Peter, Analyst: Okay. Why don’t we just kind of start with the near term stuff because that’s been kind of more topical and at the top of investors’ mind. Your first half revenue is better than expected, right? And you’re seeing signs of continued traction, but some could argue that this is driven by some of these pull in ahead of the expiration of the ninety day reciprocal tariff reprieve. So maybe if you can walk us through the process of how you differentiate between pull ins and genuine order improvements.

Unidentified speaker: Yes. So I would say if you look at our commentary over the last few quarters, a couple of things and just maybe I’ll just level set everybody in terms of some of the backdrop on the fundamentals. So we look at a couple of things from a financial perspective. One, if you look at the distribution inventory for our customers and through the supply chain that we can see, that inventory level has continued to lean out over the last six to eight quarters. And I would say it’s now stabilized at levels that are pre COVID level.

So very lean overall in terms of the supply chain. That’s one metric that we continue to look at. And so now any orders that are on us really flow through to the business versus taking sales from the inventory channel. That’s one positive. Number two is if you look at overall backlog levels and we track that on a weekly basis and what does that backlog look like entering any quarter.

Entering our June quarter, we have very healthy backlog levels. And then the third piece is just overall bookings rate and that’s through all of the products that we sell to our customer base and continue to look at the crawl charts and looking at how bookings are progressing not only for this quarter, but as we look out into our September and beyond. I would say if we step back, the visibility is very, very good as we think about our June and visibility remains very healthy as we think about our September as well. In terms of your specific comment in terms of pull ins and potential push outs, we’re not seeing that here today. As we look at our guidance for our June, if we look out in time, could that happen?

I think the answer is potentially, but in terms of the very near term, our June, would say that is real demand. Part of that is just because of the backlog levels entering the quarter and the backlog when I even look out a month ago or so, the backlog levels were very healthy pre any tariff discussions in the April timeframe.

Peter, Analyst: Great. It’s encouraging to see the team beginning to build good visibility into the September. How would you describe the customer discussion and how they have evolved since Liberation Day in early April?

Unidentified speaker: Yeah, so the customer dialogue continues to evolve over time. So even if we step back, right, there was a period of time, I would say through mid April where there was more uncertainty in terms of how the customers were going to react. And they were also trying to figure out how they would adjust their supply chains to service demand around the globe. But if I just step back and look at the tariff impact, one, there is no impact to us on a very, very, very minimal impact to us on a direct basis because all or most of our solutions go into subsystems or systems servicing a global customer base and servicing large OEMs that typically have a very much of a global supply chain. And so that’s what we’re seeing is the global customers figuring out and adjusting their supply chains throughout the world to see where they can best service their end customer base.

And so for us, we have to be agile, we have to be nimble, we have to be disciplined in terms of servicing those customers and where they’re going to flex their supply chains around the globe.

Peter, Analyst: Got it. And one more near term question for you. So current fundamentals sounds like it’s pretty strong, positive booking trends, lean customer inventories, strong sell through activity. I think that said, there’s kind of a lot of uncertainty. So just considering these two factors, how’s the team thinking about the second half of the year?

Unidentified speaker: Yes. So we guide one quarter ahead, right, in terms of the visibility we provide. And as we’ve talked about earlier today, visibility into our June, our Q4 is very, very healthy. And so very strong visibility there. As we think about even the September, what I can say is the backlog levels as a starting point today are very healthy for the September and the bookings continue to progress.

I think the one comment and it’s not a surprise and it probably impacts, I would say all semiconductor companies is if you think about two quarters ahead or three quarters ahead, all the fundamentals that we’ve talked about in terms of the backlog levels, the bookings rate, the fact that the channel inventories are lean are all very good signs. I think the one question that we all have is, is there any impact to the end demand? And so that’s what we continue to monitor. We continue to work closely with our customers in regards to that. Will the tariffs have an impact to end demand and then who ultimately will pay for those tariffs?

Is it going to be the end consumer? Is it going to be the end enterprise and how that can impact end demand. Now if you step back though and you look at where the products are being consumed, not all products are either consumed here in The U. S. And not all products are consumed in China as an example.

Rest of the world is such a large market And for the most part, there’s very little impact to tariffs on a direct basis in those end markets.

Peter, Analyst: Just on the longer term, your design win pipeline, think that’s a good reflection of what the long term revenue growth could look like, right? Last year, your core IoT funnel grew at a rate of 30% year over year. Have you continued to see that strength into 2025? And maybe on that, can you just kind of rank the top three or four end markets where you’re seeing the strongest design activity?

Unidentified speaker: Sure, happy to do it. So I think you’re spot on. If you look at it and we look at our overall pipeline, we talk about the pipeline strength essentially once a year we give an update. But we talked last about it in the September and you could assume that things continue to progress nicely. And from a fundamental basis, if I look at our fiscal twenty five, which ends in June and you take the midpoint of our guidance for the June and we provide some of the detail by each of those markets, you can see that core IoT is going to have a very healthy year over year growth profile.

So fiscal twenty twenty five versus fiscal twenty twenty four, you’re talking something like 50% plus type of growth on a year over year basis. And so that is where we expect to see continued strength as we think about over the next three to five years. That’s where the pipeline continues to build in two primary categories. So the two big drivers for our core IoT business are one on the wireless side and that is more near term as we think about not only our calendar year 2025, but into calendar year 2026, that’s going to be a driver. There’s two components there.

There’s one on the high performance WiFi side. So when we think about WiFi seven and for applications that require a high level of rate over range or just video applications or higher throughput, for the IoT space, we think we’re leaders there. That’s a product set that we are sampling here. It should contribute towards the back half of this calendar year in terms of revenue, but really a calendar year ’26 and into 2027 story. The other piece in terms of the pipeline build and where we’re going to see growth as we think about calendar year ’26 and beyond is on the broad market side or embedded IoT side for WiFi.

And so if we look at that space, it’s about a 3,000,000,000 SAM that we have not addressed before. And so today we’re coming out with our first solution targeting that embedded IoT or broad market IoT space with connectivity solutions with our 04/2012 solution, same timeframe. That’s the latter part of this calendar year in terms of early revenues, but really a ’26 and ’20 ’7 story. That’s where the pipeline’s also building on various applications. It can be on the home appliance side, it can be on wearables, those types of applications.

Whereas the high performance WiFi can be in areas such as set top boxes, streamers, drones, video cameras, security cameras and the like. And then if we think more on a mid term basis on the processor side, there’s really kind of two levers as we think about the next three to five years. I would say the first lever is around operator solutions where we have a strong business position today. We’ve talked about wins with folks like Deutsche Telekom and the like. Those should begin ramping as we move into our calendar year 2026.

But it’s really this Astra platform in our first AI native solution that is taping out here this year and sampling and should have revenues as we move through and into our fiscal twenty twenty seven, which is not too far away. And that’s where there’s a tremendous amount of excitement because we believe we’re going to have a solution that will have kind of world class inferencing per watt. So if you look for AI at the edge and at the far edge, the ability to deliver significant compute power at a very low power usage is going to be very beneficial for a lot of battery powered applications. And so that is an area that we’re focused on. That’s, I would say, more of a storyline as we head into fiscal ’twenty seven and beyond, but very exciting.

And you look at those two solutions, you look at the connectivity solution, you look at the compute solution, those will be harmonized on a long term basis and we think we have a unique position to prosecute that over the next three to five years.

Peter, Analyst: Got it. Why don’t we just kind of touch on some of those specific growth drivers that you mentioned in your core IoT. So with the Wi Fi seven upgrade cycle, the ASPs is significant increase versus your Wi Fi six or 6E. So as you kind of value your design win pipeline, how should we kind anticipate the customer adoption curve over the next call it twelve months?

Unidentified speaker: Yeah, so we’re early days, but what’s exciting is typically for some of these video intensive applications within the IoT space, you can see somewhere call it 20% to 25% of that market will want the next generation connectivity solution. So they’ll want that high performance solution whether it’s in drone applications, surveillance applications, video intensive applications, they’re going to want that uptake. So that’s where we should see that initial uptake. It’s probably for that 20% to 25% of the marketplace. And then from there, it can proliferate into other devices over time.

Is there anything else to add there?

Mujal, Synaptics: No, that’s true. And then there’s an ASP uplift also in the initial as you highlighted. So it’s a combination of some penetration as Ken mentioned and then from an ASP.

Peter, Analyst: And then just regarding your Astra IoT compute platform, you have an early mover advantage. Correct. And you guys previously disclosed a $300,000,000 pipeline and your recent commentary from earnings call suggests the momentum continues to be strong. Maybe if you can provide some details on what kind of applications are getting designed and if you have any updates on pipeline.

Unidentified speaker: Yeah, so we won’t give any specifics on the pipeline. We’ll do that kind of on a yearly basis, but it continues to grow from what we quoted in that September timeframe. And if you look at the applications, where is it? It’s going to be on applications such as wearable, home appliances, same thing, security cameras, video applications, set top boxes and the like. That’s where we’re seeing traction with the customer base today because we have a unique capability within the company not only with this next gen architecture, but if you look at some of the foundational elements that we have in terms of video, in terms of voice, those are all very core to what AI needs in the future.

If we think about AI and you think about the consumer experience, you want to be able to speak to the application, you want to be able to have it recognize you from a video standpoint. Those are all capabilities we have inherently in the company.

Peter, Analyst: Perfect. Let me just stop here and see if there’s any questions.

Unidentified speaker: Okay.

Peter, Analyst: And then the other big growth driver is the broad market. You leveraged your high performance wireless technology into a more power optimized solution with the launch of your broad market chip. Maybe if you can provide some insight into the initial applications that you’re ramping up with this

Unidentified speaker: new solution. Yeah, so the broad market is one where if you just step back and look at our overall wireless team, we have, call it 500 plus engineers that are focused on developing connectivity solutions for the IoT market. And so we think that’s one of the largest teams out there dedicated to this IoT space. We built it up from scratch here over the last five or so years. Have a lot of that headcount in lower cost regions, so very cost effective over time.

The broad market solution, that’s our first entree. So it opens up this $3,000,000,000 SAM that we’ve never targeted. It’s our first solution. If you look at the die size and the performance aspects still very much smaller die, which means a lower cost, but still at a very high performance spec for the IoT market. And so right now in terms of where we are, this is really a calendar year ’26 story.

We’ll start to see some early revenues in the back half of this calendar year, but really calendar year ’26 and into ’27 story. And it’s going into applications very similar for like other IoT applications. So think about the wearables, think about consumer appliances, think about security cameras. All of these devices that we touch and use every day, those are the types of applications. But it really enables our customers to have a relatively high performance solution on the connectivity side at a much more cost effective price point.

Peter, Analyst: You’ve traditionally been very focused on the consumer segments of IoT, right? But you possess all the technology that can be leveraged into other vertical end markets like industrial and so forth. Maybe if you can discuss some of the go to market initiatives and how the team plans to replicate this success in consumer IoT to other end markets?

Unidentified speaker: Yeah. So I would say if we think about both and this probably ties both to our processor business as well as the connectivity solutions business as well. One of the areas that we’re looking at, we’ve been very good I would say on a one to one relationship with very large customers. That’s been the history, been very strong at supporting and building out that customer base over the last twenty plus years. If you look at the IoT space and you look at these solutions and where and how we’re going to continue to expand, it is really beyond, let’s say, the top 20 customers that we service very well today and really going into the top forty, fifty, 60 customers.

And in order to do that, one of the areas that we have been investing in and we will continue to invest in as we think about the next twelve, eighteen, twenty four months is this go to market engine. And that’s not just feet on the street in terms of the sales team, but it’s really building out the system architects, the FAEs, the collateral, the software that you need to support that larger customer base over time. So building out reference designs on the connectivity side, on also the computer, the processor side, building out overall solutions. These are all things that we’re starting to invest in over the last twelve months I would say from a rec standpoint in terms of where we’re making some initial and incremental investment. It has been on that go to market side.

We’ve hired a team on the BD side to help expand with the processor business. And now we’re starting to fill out some of those system architects as well to build some of these models and some of these solutions and reference designs for specific customers and specific applications. So that’s where you’ll start to see us continue to invest. That’s what we need for the broad market space for the connectivity solutions as well as when we think of our Astra platform targeting the far edge.

Peter, Analyst: Moving on to your enterprise and automotive segment, right? In your notebook PC, you have some content stuff with your user presence detection technology. You’re ramping up with your lead customer. It appears to be making pretty good progress with the second OEM. The content lift is approximately like $3 to $4 Maybe you could just talk about or help us understand what the expected attach rate over the next several years for the computers for this presence detection technology and how will you think about the revenue opportunity?

Unidentified speaker: Yes, sure. So first, I mean, team has done a great job in terms of essentially sweeping the house at one of the large OEMs and now we’re making our entree into the second OEM. From a customer standpoint, we’re able to offer them a solution because it’s essentially an ASIC that has a much lower power consumption than other architectures out there and also enables the software. So one of the things that we showcase at CES, and if any of you are attending Computex you’ll see it as well, is really what this application can do. So it enables you not only from a power standpoint but also from a security standpoint, it enables the computer to recognize your face, recognize various characteristics from a video standpoint, hand motions and the like that enable you to really interface more easily with your computer.

Now this is still early days, so I think that’s part of the thing that’s very exciting. If you look at the uptake, it’s probably in that, call it 10%, fifteen %, twenty % range in terms of the uptake today with one of the large three OEMs on the PC side. And I think over time as AI becomes more relevant at the edge and the far edge, you’re going to see this proliferate into more of the PCs on a go forward basis. So early days today, but this is another significant opportunity in a verticalized solution of what we can do and deliver for AI at the edge and the far edge. And so this is one of the exciting pieces of our story and one of the exciting technologies that the team’s been able to develop, enhance and execute on with two of the large OEMs.

I’m hopeful here as we think about the next two years, we’ll have all three.

Peter, Analyst: Got it. And then within your enterprise segment, also have the stuff that’s kind of leveraged to your traditional enterprise IT budgets like your docking station, enterprise audio headsets and those segments have improved, but they’re still kind of 30% to 40% below the peak levels of 2019. I understand that enterprise IT budgets are constrained given the reprioritization to AI, but is there anything structurally that would prevent you from returning to those 2019 revenue levels?

Unidentified speaker: Yes. So if you look back and you look at our position in the enterprise space, so whether it’s on the PCs or any of these enterprise applications like video interface and the like, we have a strong position. So in those core markets, automotive, even in the mobile side for the areas that we compete, I would say these are franchise businesses for Synaptics. We’re number one or number two in many of these markets. And so it’s really a question of what those units come back to.

And I would say, you look at the pre COVID levels, we should get back to those unit volumes over time. One of the things that we’ve highlighted here on the last couple of calls is we still haven’t seen this PC refresh cycle, right? There’s a lot of potential for that to happen, whether that’s the back half of this year or into 2026, just based on the fact that the last refresh really occurred during COVID, during that 2021 timeframe and maybe into calendar year 2022. And so whether it’s Windows 10 coming offline, whether it’s the fact that there are more AI PCs that are coming online, these are all opportunities for us. And so that would help in terms of overall consumption, not only for PCs but peripherals that are attached to the PCs.

And one of the things that excites me is we have this RTL, return to office that is starting to happen when we think about the workforce. I think about where we’re based in Silicon Valley, but also whether it’s here in Boston or any of the metros in The US and around the globe, you have a lot more folks going back into the office. And one of the things I noticed in what we’ve invested in at Synaptics is if you think about the conference rooms, if you think about the workspaces for individuals as we have people coming back to the office, I think that’s an area that we should see further investments by the enterprise as people come back into the office on a global basis, but here in The US. So those are some nice potential tailwinds. We haven’t seen that today, but I think as we think about the next twelve to twenty four months, those can be some nice tailwinds to our business in overall enterprise spend.

Peter, Analyst: And then your final segment, smartphone segment, the iOS headwind is finally weighing. So now you’re really just concentrated on the high end Android space. You are introducing your next generation touch controllers, which offers lower power consumption and lower latency. And maybe if you can just give us provide some expectations on how this might actually accelerate your revenue growth and either through new share gains or content step up.

Unidentified speaker: Yeah, so Peter, spot on. If you look at it, we did have that headwind on that specific customer. That’s behind us as of December in terms of our last sales to that customer of any size or scope. And so our focus on a go forward basis where we’ve made great inroads and entree in terms of expansion is on the high end Android market. So on the high end Android, think of Korea, think of China, we’ve done a great job.

That business continues to grow. I would look at it if I look at where we are today relative to where we were expecting to be at the end of our last fiscal year. So not too long ago in July of last year, we’re well ahead of the pace that we were expecting. And that’s kudos to the entire team at Synaptics. But a lot of it is the fact that we are the leaders from a technology standpoint.

Customers come to us because we differentiate where they need a high level of precision quality in their solutions that they come to us and really want to partner with us on the high end touch side because that’s been one of the foundational elements and technologies of Synaptics over the last twenty plus years. On a go forward basis, this multi frequency touch solution, we’re in these POCs here. We’ve had POCs, but in this POC phase here in this quarter and into next quarter. And those have great traction with customer base. And in essence, if you look at our solution today, we’re in a lot of the candy bar phones.

So your normal Android high end smartphones, We’re also in vertical solutions. So vertical fold devices where you have the vertical folds. What this architecture allows us to do is on the horizontal solution. So when you think about a horizontal phone or any large screen touch, it’s a new technology that essentially allows us to be not only a leader from a technology standpoint, but be a very cost effective. And so just in terms of the horizontal foldable phones, can see that it will essentially double our content that we have versus today because typically what happens is on those horizontal foldable phones you have the one screen in the middle, but on the outer edge you also have another screen.

And the customers tend to use one supplier for both. And so we’re very excited about this technology. We’ll have some revenue as we move through calendar year ’26 and beyond. But this architecture is very unique and it allows us to, over a period of time, develop technologies for large screen touch. And it could be in the PC, it could be in the automotive space.

That’s the areas that you’ll see us continue to spend some of our R and D dollars to leverage this technology from just the foldable phones. But it’s very good on any large screen touch devices. And so that’s where we’re going to start to use the technology over a three to five year period.

Peter, Analyst: Got it. Well, it’s exciting time for Synaptics. We talked about so much new product cycles. Maybe if you just kind of tie it all up and just help us understand how over the next twelve to eighteen months as these new product cycles begin to ramp, how that begins to layer into your top line revenue?

Unidentified speaker: Yeah, sure. I mean, so we guide typically just one quarter ahead, Peter. But if you look at the long term potential in these businesses, I would say for a lot of our franchise businesses, so that is around the PC, around a lot of the enterprise applications, automotive, mobile. These historically given that we are and we have these franchise positions where we are number one, number two, these are GDP plus businesses. On top of that, however, I think we have an ability to gain some incremental share which we have shown here in the last couple of quarters, but also develop products that expand the same.

We know these customers if you look at the PC supply chain, if you look at the mobile supply chain, the automotive supply chain. And so we’re developing technologies that continue to expand our SAM in those markets and grow above those entitled growth rates over a long term period. That’s our goal. And then when we think about core IoT, historically that market has grown on a market basis in the neighborhood of that 15% range. And our goal is to grow much, much higher than that.

What we’ve talked about at our last Analyst Day, I think in 2023 was could we grow at a rate that’s call it 25% to 30%. And that can happen and the big drivers for us to execute to those types of growth rates is around the technologies that we outlined before on the connectivity side, not only to continue to expand our capabilities on the high performance side, but opening up this new SAM with our broad markets solution for embedded IoT applications. And then finally on the processor side where we’re, as I mentioned, just developing and taping out this year our first AI oriented solution for the far edge. And so that will really drive the growth as we think about 2020, our fiscal twenty twenty seven and beyond, not too far away. And so those will be the main drivers of our growth as we think about the next three to five years, Peter.

Don’t Mujal, anything to add there? No, I

Mujal, Synaptics: think you covered that very well.

Peter, Analyst: Margin implications of all these new products, how does that are these richer mix? How does that play into the gross margins?

Unidentified speaker: Yeah, would say if we think about especially when we think about the processor business and the capabilities there and we think about the broad market space, those are nice margins in terms of the overall profile. So today, right, we guided to the March sorry, the June at 53.5% gross margins plus or minus a bit. I think it’s going to be for us to drive the margins further. It’s going to be somewhat dependent on the mix and also kind of mix within the mix. So even within the enterprise space, we have certain products that have a richer mix overall.

And so it’s just driving those mix profiles over a long term period. But what I would just say, if you just step back and look at the execution by the company on a year over year basis, one, you look at the core IoT segment that’s been growing at a substantial rate. And as I mentioned before, you just take the midpoint of our guidance that would show that we’re able to grow that business fiscal twenty twenty five to fiscal twenty twenty four by 50% plus, which significant. And two, if you look at the earnings power, I think this last quarter we talked about our year over year earnings grew something like 70%. And so I think that’s substantially you’re seeing nice fall through from the revenue growth that we’ve been able to showcase over the last twelve months.

Peter, Analyst: Perfect. So that ends the session.

Unidentified speaker: I really appreciate it. Thanks everybody for joining. Thanks, appreciate it.

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