NXP Semiconductors N.V. (NXPI) Cash Flow Statement

The wide quarterly swings in OCF/NI, from 0.66x to 1.96x, indicate that working capital movements and non-cash items heavily influence reported earnings. Q2 2026's ratio of 1.12x, while above 1, is below the trailing average, suggesting that the strong net income growth may not be fully translating into cash. Investors should monitor whether the gap between net income and operating cash flow narrows as revenue growth normalizes.

The FCF margin trajectory shows a clear upward trend, with Q2 2026's 26.9% nearly quadrupling the 2024Q4 trough. This improvement is supported by a 19% YoY revenue increase and a capex-to-revenue ratio that has fallen to 2.3% from 8.3% in early 2024. The robust FCF generation provides ample headroom for capital returns and debt reduction, though the sustainability of this margin depends on maintaining revenue growth and controlling capex.

The sharp reduction in capex as a percentage of revenue, from 8.3% to 2.3%, suggests that NXPI is relying more on external foundries and less on internal capacity expansion. This strategy may enhance near-term free cash flow but could increase exposure to foundry pricing and capacity constraints. The low capex intensity relative to peers like TXN (which has a higher internal manufacturing footprint) may indicate a structural advantage in cash generation, but it also implies less control over the supply chain.

Persistent negative working capital changes indicate that NXPI is investing in receivables and inventory to support growth, which consumes cash despite strong profitability. The Q2 2026 outflow of -$301M is the largest in the period, suggesting that the 19% revenue growth is requiring significant incremental working capital. This trend may continue if growth remains robust, but it could pressure free cash flow if not managed efficiently.

NXPI has consistently returned capital to shareholders, with dividends stable around $256M per quarter and buybacks varying from $54M to $426M. In Q2 2026, total capital returns of $360M were well covered by FCF, but the cumulative payout ratio over the trailing year is high, leaving limited room for increased returns unless FCF grows. The company's ability to maintain this pace will depend on sustaining the recent FCF margin expansion.

The cumulative OCF of $7.19B versus net income of $6.0B over the ten-quarter period suggests that NXPI's earnings are well-backed by cash generation, with a cumulative OCF/NI ratio of 1.20. This divergence is partly due to significant non-cash charges like D&A and SBC, which are added back in OCF. The consistency of this positive gap supports the view that reported earnings are not artificially inflated by aggressive accruals.