What happened

Shares of Skyworks Solutions (SWKS 1.85%) were down 6% as of 1:11 p.m. ET on Tuesday following disappointing guidance issued in its fiscal second-quarter earnings report. The supplier of analog and mixed-signal semiconductors posted another sequential decline in revenue amid challenging conditions in the chip industry.  

The shares are trading 49% off their all-time high set in 2021. However, the stock's positive return year to date going into the earnings report suggests the market was expecting a better outlook for demand.

So what

After posting robust growth over a year ago, Skyworks has reported declining revenue for two consecutive quarters. Revenue was down 12% year over year in the quarter ending in December before falling nearly 14% in fiscal Q2.

The stock is trading at a more attractive valuation, so investors were hoping that a better outlook in the near term would drive the stock higher. Instead, management guided for next quarter's revenue to be between $1.05 billion and $1.09 billion, representing a sequential drop of nearly 7% at the midpoint of guidance.

Now what

The good news is that Skyworks has successfully navigated cyclical industry conditions before, and the company's high margins should allow it to skate through this downturn without any problem.

Through the first half of this fiscal year, Skyworks has generated record free cash flow of $1.1 billion, a margin of 43% on revenue.  The company also pays out about a third of its free cash flow in dividends and just declared another dividend payment of $0.62 per share payable to shareholders of record on May 30. That brings the stock's yield to an attractive 2.5%, which is well above the market average. 

Investors will have to be patient here, but Skyworks' profitability and dividend should give the stock some support at these cheaper share prices. When the industry turns around, this growth stock should be very rewarding, as Skyworks continues to invest in supplying chips for electric vehicles, wearables, connected home, and artificial intelligence applications.