Grade: C — Some Red Flags, Investigate
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K/A (Filed 2026-01-30, Fiscal Year Ended October 3, 2025) + Yahoo Finance
Auditor: KPMG LLP (Irvine, California; Auditor Firm ID: 185) — Unqualified opinion
One-line verdict: Skyworks is a stable analog semiconductor company navigating a revenue decline cycle while maintaining fortress-like balance sheet health. Revenue dipped 2.2% to $4.09B, but gross margin held rock-steady at 41.2%, CFFO/NI of 2.73 is outstanding, and cash of $1.4B fully covers $1.2B in debt. The single red flag — goodwill-plus-intangibles at 52% of equity — barely exceeds the 50% threshold and reflects legacy acquisitions. The real risk is not balance sheet manipulation but business concentration: Skyworks' heavy dependence on Apple and the mobile handset market creates revenue fragility that no amount of financial engineering can disguise.
| Metric | Result |
|---|---|
| Red Flags | **1** (goodwill at 52% of equity) |
| Watch Items | **2** (AR outpacing revenue, CapEx surge) |
| Checks Completed | **17/18** |
| Beneish M-Score | **-2.90** (clean, well below -2.22 threshold) |
| F-Score (Fraud) | **0.38** (predicted probability 0.1%, exceptionally low) |
| Altman Z-Score | **7.05** (safe zone) |
| Auditor | KPMG LLP — Unqualified opinion |
The Business: Analog RF Semiconductors for Mobile and IoT
Skyworks designs and manufactures analog semiconductors that connect people, places, and things. The company's products handle radio frequency (RF) filtering, amplification, and signal conditioning for mobile devices, IoT applications, automotive, and infrastructure markets.
The 10-K was filed as a 10-K/A (amendment), which is worth noting. The company's fiscal year ended October 3, 2025. Revenue and non-GAAP operating income targets from the compensation plan provide useful context: the threshold was $3.75B revenue / $800M non-GAAP operating income, target was $4.0B / $912M, and maximum was $4.4B / $1.137B. Actual results of $4.087B revenue and $995M non-GAAP operating income came in at 129% of target payout.
The critical business risk is customer concentration. While the 10-K does not disclose specific customer percentages in the sections reviewed, Skyworks has historically derived approximately 50-60% of revenue from Apple — a concentration level that makes it effectively an Apple supplier with a semiconductor license.
Profitability: Controlled Decline
| Metric | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|
| Revenue | $5,486M | $4,772M | $4,178M | $4,087M | -2% YoY, decelerating decline |
| Net Income | $1,275M | $983M | $596M | $477M | -20% YoY |
| Gross Margin | 47.5% | 44.2% | 41.2% | 41.2% | Stabilized |
| Net Margin | 23.2% | 20.6% | 14.3% | 11.7% | Declining |
| ROE | 23.3% | 16.2% | 9.4% | 8.3% | Declining |
Revenue has declined from a $5.5B peak in FY2022 to $4.1B — a 26% decline over three years driven by the post-COVID mobile handset correction and content-share dynamics. Gross margin stabilized at 41.2% for two consecutive years, suggesting the pricing and cost structure have found a floor.
Net margin compression from 23.2% to 11.7% over three years reflects operating deleverage — fixed costs being spread over a smaller revenue base. The non-GAAP operating income of $995M suggests $912M in GAAP adjustments (stock-based compensation, intangible amortization, restructuring), which is substantial.
Cash Flow: Outstanding Conversion Despite Revenue Decline
| Metric | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|
| Operating Cash Flow | $1,425M | $1,856M | $1,825M | $1,301M |
| Net Income | $1,275M | $983M | $596M | $477M |
| **CFFO / Net Income** | **1.12** | **1.89** | **3.06** | **2.73** |
| Free Cash Flow | $915M | $1,620M | $1,642M | $1,076M |
| CapEx | $510M | $236M | $183M | $225M |
CFFO/NI of 2.73 is exceptional — $2.73 in operating cash flow for every $1 of reported profit. This extreme ratio occurs because net income includes large non-cash charges (depreciation, amortization of acquired intangibles, stock-based compensation) while the underlying business generates very strong cash.
Free cash flow of $1.08B on $477M net income means FCF/NI of 2.26. The cash flow profile is the strongest signal in Skyworks' financials — even as the top line shrinks, the company generates massive free cash flow.
Capital Allocation: Conservative Balance Sheet
| Item | FY2025 | Notes |
|---|---|---|
| Cash | $1,374M | Covers debt fully |
| Total Debt | $1,203M | Modest |
| FCF | $1,076M | 2.26x net income |
| Debt/EBITDA | 1.2x | Conservative |
| Z-Score | 7.05 | Deep in safe zone |
The balance sheet is a fortress. Cash exceeds debt, leverage is minimal at 1.2x EBITDA, and the Z-Score of 7.05 is among the highest we've seen. There is essentially zero solvency risk.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO | PASS | 53 days, +9 days YoY. Moderate increase |
| A2 | AR vs Revenue | WATCH | AR +17.6% while revenue -2.2% |
| A3 | Revenue vs CFFO | PASS | Revenue -2.2%, CFFO -28.7%. Cash follows revenue |
A2 is the meaningful flag. AR growing 18% while revenue declined 2% is a divergence worth understanding. Possible explanations include timing of shipments near quarter-end, extended payment terms for key customers, or changes in channel mix. The 9-day DSO increase to 53 days supports this — collections are slowing.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory | PASS | Inventory -3.8% vs COGS -2.1%. Normal |
| B2 | CapEx | WATCH | CapEx +22.8% vs revenue -2.2% |
| B3 | SG&A Ratio | PASS | SG&A/Gross Profit = 22.1%. Excellent |
| B4 | Gross Margin | PASS | 41.2%, flat YoY |
B2: CapEx growing 23% while revenue declines could signal overinvestment. However, semiconductor fabs require ongoing capital maintenance, and the absolute CapEx of $225M is modest relative to the $1.3B CFFO.
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs NI | PASS | Ratio 2.73. Outstanding |
| C2 | FCF | PASS | $1.08B. FCF/NI = 2.26 |
| C3 | Accruals | PASS | Accruals ratio -10.4%. Excellent |
| C4 | Cash vs Debt | PASS | Cash $1.4B covers debt $1.2B |
All four cash flow quality checks pass convincingly. The -10.4% accruals ratio is particularly strong, indicating cash flow substantially exceeds reported earnings.
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | FAIL | $3.0B = 52% of equity |
| D2 | Leverage | PASS | Debt/EBITDA = 1.2x |
| D3 | Soft Assets | PASS | Other assets -1.0% vs revenue -2.2% |
| D4 | Impairment | N/A | No data |
D1: Goodwill at 52% of equity barely exceeds the 50% threshold. The goodwill is from acquisitions dating back years — the decline of -3% YoY indicates normal intangible amortization, not new acquisition risk.
Acquisition Risk & M-Score
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer | PASS | FCF after acquisitions positive |
| E2 | Goodwill Surge | PASS | Goodwill -3% YoY |
| F1 | M-Score | PASS | -2.90. Clean |
M-Score components:
| Component | Value | Signal |
|---|---|---|
| DSRI | 1.202 | Slightly elevated (AR growth > revenue) |
| GMI | 1.001 | Perfectly neutral |
| AQI | 1.041 | Normal |
| SGI | 0.978 | Revenue declining |
| DEPI | 0.938 | Normal |
| SGAI | 1.263 | Elevated (SG&A not declining with revenue) |
| TATA | -0.104 | Excellent (strong cash > earnings) |
| LVGI | 1.192 | Slight leverage increase |
No component is alarming. The SGAI at 1.263 reflects the operating deleverage of a declining-revenue business — fixed SG&A costs don't shrink as fast as revenue.
Key Risks from the 10-K
1. Apple Concentration
The single greatest risk. If Apple reduces Skyworks' content share in future iPhone models, shifts to in-house RF components (as it did with modems), or experiences a significant sales decline, Skyworks' revenue would be materially impacted. No financial screening metric captures this dependence adequately.
2. Mobile Market Secular Trends
The broader shift from component proliferation to integration threatens Skyworks' long-term value proposition. As handset makers and Apple in particular integrate more RF functionality onto their own silicon, Skyworks faces gradual content erosion.
3. 10-K/A Filing
The 10-K was filed as an amendment (10-K/A), which sometimes indicates corrections or additional disclosures required after the initial filing. While not necessarily alarming, investors should verify what was amended.
4. Revenue Decline Trajectory
Three consecutive years of revenue decline (from $5.5B to $4.1B, -26%) is a structural concern. Even with margin stabilization, a declining top line eventually compresses absolute profitability.
Summary
Grade: C. One technical red flag on goodwill, with the real risk being business concentration rather than financial manipulation.
Skyworks' financial health is genuinely strong: Z-Score of 7.05, CFFO/NI of 2.73, cash exceeding debt, minimal leverage, and a clean M-Score at -2.90. The F-Score probability of 0.1% is the lowest we've seen — this company is about as far from financial fraud as the quantitative models can determine.
The grade reflects:
The unscreened risk that matters most is Apple dependence. No amount of balance sheet analysis captures the binary risk of losing your largest customer's business. For Skyworks, that is the investigation that matters most.
**Disclaimer**: This report is based on Skyworks' FY2025 10-K/A (SEC EDGAR) and public financial data. This is NOT investment advice.
Data: SEC EDGAR 10-K/A (Fiscal Year Ended October 3, 2025, Filed 2026-01-30) + Yahoo Finance