Semiconductor manufacturer Magnachip Semiconductor (NYSE:MX) met Wall Street’s revenue expectations in Q1 CY2025, but sales fell by 8.9% year on year to $44.72 million. On the other hand, next quarter’s revenue guidance of $47 million was less impressive, coming in 1.6% below analysts’ estimates. Its non-GAAP loss of $0.10 per share was 54.5% above analysts’ consensus estimates.
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Magnachip (MX) Q1 CY2025 Highlights:
- Revenue: $44.72 million vs analyst estimates of $44.5 million (8.9% year-on-year decline, in line)
- Adjusted EPS: -$0.10 vs analyst estimates of -$0.22 (54.5% beat)
- Adjusted EBITDA: -$2.07 million vs analyst estimates of -$3.3 million (-4.6% margin, 37.2% beat)
- Revenue Guidance for Q2 CY2025 is $47 million at the midpoint, below analyst estimates of $47.75 million
- Operating Margin: -14.1%, up from -27.4% in the same quarter last year
- Free Cash Flow was -$4.88 million compared to -$4.64 million in the same quarter last year
- Inventory Days Outstanding: 84, up from 59 in the previous quarter
- Market Capitalization: $119.9 million
Company Overview
With its technology found in common consumer electronics such as TVs and smartphones, Magnachip Semiconductor (NYSE:MX) is a provider of analog and mixed-signal semiconductors.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Magnachip’s demand was weak over the last five years as its sales fell at a 17.6% annual rate. This was below our standards and suggests it’s a low quality business. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Magnachip’s annualized revenue declines of 11.5% over the last two years suggest its demand continued shrinking. 
This quarter, Magnachip reported a rather uninspiring 8.9% year-on-year revenue decline to $44.72 million of revenue, in line with Wall Street’s estimates. Company management is currently guiding for a 11.6% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to decline by 10.9% over the next 12 months, similar to its two-year rate. This projection is underwhelming and implies its newer products and services will not catalyze better top-line performance yet.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Magnachip’s DIO came in at 84, which is 24 days above its five-year average, suggesting that the company’s inventory has grown to higher levels than we’ve seen in the past.
Key Takeaways from Magnachip’s Q1 Results
We were impressed by how significantly Magnachip blew past analysts’ EPS and EBITDA expectations this quarter. On the other hand, its revenue guidance for next quarter missed significantly and its inventory levels increased. Overall, this print was mixed but still had some key positives. The stock traded up 4.8% to $3.50 immediately after reporting.
So do we think Magnachip is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.