NXP revenue rose 19.5% to $3.50B with all end markets growing and GAAP EPS up 73% to $3.02, but distributor sales (+26.7%) outpaced direct sales (+9.4%) as channel inventory rose to 11 weeks.
Revenue
$3.5B
+19.5% YoY
Net income
$767M
+72.4% YoY
Diluted EPS
$3.02
+72.6% YoY
Operating margin
30.6%
Revenue up 19.5%, with most of the extra revenue reaching profit
NXP's revenue for the second quarter of 2026 (ended June 28) was $3,496 million, up 19.5% from $2,926 million a year earlier and up 9.9% from the first quarter. Every end market and every region grew. The profit side grew much faster than revenue. Operating income (profit from the business before interest and tax) rose 56% to $1,071 million. Net income attributable to shareholders rose 72% to $767 million, or $3.02 per diluted share against $1.75.
Much of the size of that jump comes from what Q2 2025 looked like. Revenue then was falling 6.4% year over year, near the bottom of the chip industry's inventory correction, and gross profit carried a $61 million restructuring charge. This quarter is a real recovery, and the figures show it. It is also being compared against a weak quarter, which makes the percentage gains look bigger.
Key figures
Metric
Q2 2026
Q2 2025
YoY Change
Revenue
$3,496M
$2,926M
+19.5%
Gross margin (GAAP)
57.3%
53.4%
+3.9 pts
Gross margin (non-GAAP)
58.0%
56.5%
+1.5 pts
Operating margin (GAAP)
30.6%
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GAAP figures follow standard US accounting rules. NXP's "non-GAAP" figures leave out items such as share-based pay, amortization from acquisitions and restructuring charges. Source: Q2 2026 Form 10-Q and the July 28, 2026 earnings release.
GAAP vs. non-GAAP: why the two growth rates differ so much
GAAP EPS grew about 73%, but non-GAAP EPS grew about 33%. Most of that gap comes from one-time costs in last year's quarter rather than from this year's operations:
Restructuring in the prior-year quarter. Q2 2025 gross profit included a $61 million restructuring charge. Q2 2026 had essentially none. That is why GAAP gross margin rose 3.9 points while the non-GAAP measure, which excludes restructuring in both years, rose only 1.5 points. More than half of the GAAP margin improvement comes from not repeating that charge.
Smaller total adjustments. Net-income adjustments between GAAP and non-GAAP fell from $245 million in Q2 2025 to $151 million this quarter.
Non-GAAP EPS growth of about 33% on 19.5% revenue growth is the better measure of how the business is actually running. That is still a lot of profit gained on each extra dollar of revenue.
Where the extra revenue came from
End market
Q2 2026
Q2 2025
YoY
Share of revenue (Q2 26 / Q2 25)
Automotive
$1,938M
$1,729M
+12.1%
55.4% / 59.1%
Industrial & IoT
$755M
$546M
+38.3%
21.6% / 18.7%
Communication Infrastructure & Other
$452M
$320M
+41.3%
12.9% / 10.9%
Mobile
$351M
$331M
+6.0%
10.0% / 11.3%
Automotive is still more than half the company. It grew 12.1%, which the 10-Q says was "predominantly due to growth in processors, with mixed-signal products also growing." This is NXP's slowest-growing big market, but it added $209 million, as much as Industrial & IoT did.
Industrial & IoT (factory automation, smart-home and other connected devices) grew 38.3% "due to strong growth in processors and mixed-signal products." It is also the market that bounced back hardest from the 2024–25 downturn: it was up 20.2% from Q1 alone.
Communication Infrastructure & Other grew 41.3%, "predominantly due to growth in processors." Management's press release names Data Center as "an additional growth engine." This is now NXP's fastest-growing segment, although at 13% of revenue it is small.
Mobile grew 6.0% year over year but fell 10.2% from Q1. Mixed-signal growth was partly offset by lower processor sales.
By region, the Americas grew 34.0% and China 25.5%. China was up 31.5% from Q1 alone, which is a very steep sequential rise.
Watch the sales channel: distributors grew almost three times as fast as direct sales
Revenue sold through distributors rose 26.7% to $2,072 million. Revenue sold directly to large customers, mainly automakers and their suppliers, rose 9.4% to $1,375 million. At the same time, NXP's channel inventory (how many weeks of NXP chips distributors hold on their shelves) rose from 9 weeks a year ago to 11 weeks. It was also 11 weeks in Q1.
This matters because the chip industry is cyclical. When distributors are filling their shelves, a chipmaker's reported sales can grow faster than what end customers actually use. The 2023–25 downturn was largely that process running in reverse. Eleven weeks does not by itself mean there is too much inventory. But more of the growth is now coming from the channel, where sales are less closely tied to end demand. Direct sales, the steadier measure of real demand, are growing at a high single-digit rate, not 20%. If channel inventory keeps rising above 11 weeks while direct sales stay near 9%, that would suggest distributors are running ahead of demand.
NXP's own inventory is moving the other way. Days of inventory (DIO, roughly how many days of sales NXP holds as inventory) fell to 156 from 165 in Q1 and 158 a year ago.
Margins: factories running fuller, costs held down
Gross profit rose by $440 million on $570 million of extra revenue, meaning about 77 cents of each additional revenue dollar became gross profit. The 10-Q gives the reasons as "higher sales volumes and lower manufacturing costs resulting from improved factory utilization and manufacturing cost-efficiency initiatives." Chip factories have large fixed costs, so running them closer to capacity spreads those costs over more units. That is the main way a chipmaker's margins improve in a recovery.
Operating expenses rose only 5.7% to $926 million, falling from 29.9% to 26.5% of revenue. The increase that did occur was mostly bonuses. Variable compensation rose $38 million in R&D and $24 million in SG&A "due to improved company performance." Other personnel costs were roughly flat, because ongoing cost cuts offset headcount added through the TTTech Auto, Aviva Links and Kinara acquisitions.
Below operating income, net financial expense rose to $97 million from $86 million. Interest income fell by $10 million because of lower rates and lower cash balances. The effective tax rate was steady at 19.4%. Diluted shares were flat at about 254 million, so buybacks contributed nothing to EPS growth this quarter.
First-half results include a large one-time gain
Year-to-date net income attributable to stockholders was $1,889 million, double last year's $935 million. However, Q1 included a $627 million gain on selling the MEMS Sensors business to STMicroelectronics, which closed on February 2, 2026 for $878 million in cash plus up to $50 million more in performance-based payments. That gain is also why operating income fell 28.8% from Q1 to Q2. Excluding the gain, operating profit grew between the two quarters. On a non-GAAP basis it rose 17%, from $1,052 million to $1,228 million.
Cash and balance sheet
Operating cash flow was $860 million. After $69 million of net capital spending, free cash flow (cash left after investing in the business) was $791 million, or 22.6% of revenue. NXP returned $360 million to shareholders: $256 million in dividends and $104 million in buybacks. In April it repaid $750 million of notes at maturity using cash. Net financial leverage (net debt divided by trailing-twelve-month adjusted EBITDA, a measure of how many years of cash earnings it would take to pay off net debt) improved to 1.5x from 1.8x a year earlier. After the quarter, on September 1, NXP signed a $250 million loan facility with the European Investment Bank. The money will fund an expansion of its assembly and test plant in Kuala Lumpur, Malaysia.
Takeaway: NXP's recovery is real, and it shows up in the margins as well as in revenue. Gross margin is at 58%, and operating costs grew less than a third as fast as revenue. The detail to watch is the sales channel. Distributor sales grew 26.7% compared with 9.4% for direct sales, and channel inventory rose from 9 to 11 weeks. More of the growth now depends on distributors continuing to stock up. The direct-sales rate, not the headline 19.5%, is the better guide to underlying demand.
Outlook
Management guidance for Q3 2026: revenue of $3,650–3,850 million, up 4–10% from Q2 and 15–21% year over year (midpoint $3,750 million, +18%). The non-GAAP gross margin midpoint is 58.5% and the non-GAAP operating margin midpoint is 36.9%. At the midpoint, NXP expects diluted EPS of $3.43 on a GAAP basis and $4.11 on a non-GAAP basis. The GAAP midpoints are 57.9% gross margin and 32.1% operating margin.
Our read: The guidance calls for margins to expand again next quarter, which fits a factory-utilization recovery that is not finished yet. The main risk is not the next quarter but whether distributor demand is ahead of real demand. The Q3 report will show whether channel inventory stays near 11 weeks, and whether direct revenue growth (9.4% this quarter) improves or distributor growth slows. That will separate a lasting recovery from restocking. A second thing to watch is Automotive. It is 55% of revenue but grew only 12%, so NXP's overall growth rate will slow if Industrial & IoT and Communication Infrastructure cool off without automotive speeding up. The 10-Q also lists changes in global trade policy, including US and China tariffs, among its risk factors. China was the fastest-growing region from Q1 to Q2, so NXP is exposed there.