Conferencia de resultados del T3 de 2026 de NXP (NXPI): ingresos récord, crecimiento de SDV y recompra de acciones por 5.000 millones de dólares

Puntos clave

• NXP registró ingresos récord en el tercer trimestre de 2026 de 3.790 millones de dólares, lo que supone un aumento del 19% interanual y del 8% respecto al trimestre anterior. Excluyendo el negocio de sensores MEMS, los ingresos aumentaron un 22% interanual.
• El margen operativo no GAAP alcanzó el 37,1%, con un aumento de 330 puntos básicos en tasa interanual, mientras que el EPS no GAAP subió un 35% hasta los 4,20 dólares.
• Los ingresos del sector automotriz superaron los 2.000 millones de dólares por primera vez y aumentaron un 17% interanual excluyendo los sensores. La dirección afirmó que los ingresos derivados de vehículos definidos por software (SDV) se situaron por encima de una tasa anualizada de 1.500 millones de dólares.
• Los ingresos de Industrial e IoT aumentaron un 39% hasta los 802 millones de dólares, impulsados por los centros de datos, la automatización industrial y la atención sanitaria. Los ingresos de Infraestructura de Comunicaciones y Otros aumentaron un 54% hasta los 503 millones de dólares.
• NXP proyectó unos ingresos para el cuarto trimestre de 3.850 millones de dólares en el punto medio y un EPS no GAAP de 4,36 dólares. La directiva también prevé un crecimiento de los ingresos a doble dígito y una expansión del margen bruto hasta el 60% a lo largo de 2027.
• El consejo de administración autorizó 5.000 millones de dólares adicionales para recompra de acciones, lo que eleva la autorización total a aproximadamente 6.300 millones de dólares. NXP planea acelerar las recompras a partir del cuarto trimestre y durante todo 2027.

Datos financieros principales

Rendimiento operativo y del negocio

Automoción se mantuvo como el mayor negocio de NXP. Los ingresos superaron los 2.000 millones de dólares por primera vez y crecieron un 17% interanual excluyendo los sensores, a pesar de un entorno de producción de vehículos prácticamente estancado. La dirección atribuyó el crecimiento al mayor contenido de semiconductores derivado de la adopción de los SDV.

NXP afirmó que los ingresos por SDV se situaron por encima de una tasa anualizada de 1.500 millones de dólares en el tercer trimestre y se mantuvieron en camino para alcanzar su objetivo de 2.000 millones de dólares en 2027. La empresa prevé que los procesadores zonales S32K5 y de cálculo central S32N de próxima generación comiencen a enviarse en 2027, y se espera un escalado de volumen más amplio en 2028. La directiva calcula que las nuevas arquitecturas pueden aportar entre dos y tres veces más contenido de NXP por vehículo que las arquitecturas actuales.

Los ingresos del segmento Industrial e IoT alcanzaron los 802 millones de dólares, un 39% más. La parte industrial creció casi un 50%, impulsada por los centros de datos, la automatización de fábricas y la atención sanitaria, y representó aproximadamente el 70% del segmento. La dirección prevé que los procesadores con capacidades de IA representen aproximadamente el 15% de los ingresos de procesadores de Industrial e IoT en 2026, más del doble que el año anterior. NXP prevé que su NPU discreta ARA entre en producción a gran escala en 2028.

Los ingresos de Infraestructura de Comunicaciones y Otros aumentaron un 54% hasta los 503 millones de dólares, impulsados por los centros de datos y las tarjetas seguras. NXP prevé ahora que los ingresos por centros de datos en 2026 superen las previsiones anteriores de 500 millones de dólares y alcancen más de 1.000 millones de dólares en 2028 a medida que aumente la producción de los nuevos productos del plano de control.

Los ingresos de Móvil cayeron un 4% interanual hasta los 411 millones de dólares. En toda la empresa, cada región registró un crecimiento interanual de doble dígito, según la dirección.

Previsiones de la dirección

Para el cuarto trimestre, la dirección prevé que los ingresos de Automoción aumenten un porcentaje de rango bajo de dos dígitos interanual y un dígito bajo respecto al trimestre anterior. Excluyendo la desinversión en sensores, el aumento interanual implícito de Automoción se sitúa en la parte alta de la franja del 10% al 20%.

Se espera que Industrial crezca en la parte alta del rango del 20% interanual y a un dígito bajo respecto al trimestre anterior. Se prevé que Infraestructura de Comunicaciones y Otros aumente más del 50% interanual y a un dígito bajo respecto al trimestre anterior. Se espera que Móvil disminuya en un porcentaje en torno al 15% interanual, mientras que aumentará ligeramente en comparación con el tercer trimestre.

Para 2027, la dirección prevé un crecimiento de los ingresos de doble dígito y espera que el margen bruto alcance el 60% durante el año. Se prevé que los gastos operativos representen alrededor del 23% de los ingresos en la primera mitad y se sitúen por debajo del 23% en la segunda mitad. Se espera que las inversiones de capital aumenten hasta aproximadamente el 5% de los ingresos a medida que NXP añada capacidad de back-end y construya su planta de ensamblaje y prueba en Malasia para iniciar la producción en 2028.

Riesgos y aspectos a vigilar

• NXP no está observando una reacumulación generalizada de inventario por parte de los clientes de automoción. Algunos fabricantes de equipos originales (OEM) han planteado añadir existencias de seguridad, pero la directiva señaló que esto aún no se ha producido.
• Las condiciones de suministro se están estrechando. Aproximadamente el 80% de los plazos de entrega superó las 16 semanas, frente al 25% de un año antes, mientras que las reclamaciones de los clientes aumentaron significativamente en comparación con el trimestre anterior.
• La dirección describió la capacidad de back-end como muy ajustada y prevé que la capacidad de front-end se ajuste a lo largo de 2027. Las adiciones de capacidad planificadas están destinadas a respaldar el crecimiento, pero la programación del tiempo sigue siendo un factor clave.
• Los costes de los insumos están aumentando. NXP tiene la intención de trasladar los costes inflacionarios a los clientes para proteger los márgenes brutos, mientras que cualquier ajuste de precios adicional derivado de los desequilibrios entre la oferta y la demanda sigue siendo incierto.
• La expansión en centros de datos depende del escalado de producción de productos, la conversión de victorias de diseño (design-wins), la aceptación de los clientes y el despliegue de software.
• Móvil sigue siendo el mercado final más débil en las perspectivas a corto plazo, previéndose una caída interanual en torno al 15% en el cuarto trimestre.

Puntos destacados del turno de preguntas de los analistas

La dirección afirmó que la relación entre pedidos y facturación (book-to-bill) se mantuvo holgadamente por encima de 1 en todos los mercados finales y regiones. La cartera de pedidos aumentó en valor y se extendió más adentrado 2027, lo que respalda la confianza de la empresa en un crecimiento de doble dígito el próximo año.

En cuanto al margen bruto, el director financiero Bill Betz afirmó que la mejora era estructural y reflejaba mayores ingresos, un mayor nivel de utilización, la mezcla de productos y eficiencias operativas. Actualmente, los incrementos de precios compensan la inflación en lugar de ampliar directamente el margen. NXP prevé que la utilización aumente hasta la franja alta del 80% en 2027 y observa beneficios adicionales en el margen derivados del escalado de la empresa conjunta VSMC en 2028.

Respecto a los precios, la dirección prevé ahora que los precios en 2026 sean neutros, frente a su expectativa inicial de un descenso de un dígito bajo. El consejero delegado, Rafael Sotomayor, señaló que el patrón histórico de erosión anual de los precios de los semiconductores podría moderarse a medida que los chips representen una mayor cuota del valor del sistema y de la innovación.

NXP prevé que el crecimiento en centros de datos se centre en el plano de control en lugar de en el plano de datos. Sus productos incluyen procesadores, microcontroladores, redes, seguridad e interfaces utilizados en conmutadores top-of-rack y sistemas de gestión de tarjetas. La directiva considera los centros de datos como un tercer gran motor de crecimiento junto con los SDV de Automoción y la IA física de Industrial.

En cuanto a la fabricación, VSMC va por delante de lo programado, con el proceso de cualificación por parte de NXP ya en marcha y una producción inicial prevista para el segundo semestre de 2027. La mayor contribución en volumen se prevé para 2028. NXP también está aumentando la capacidad de back-end en la primera mitad de 2027 y preparando una nueva planta en Kuala Lumpur para su entrada en producción a principios de 2028.

Transcripción completa de la llamada de resultados

Transcripción completa de la conferencia de resultados

Comentarios de la dirección

Operator

Good day, and thank you for standing by. Welcome to the NXP Third Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to turn the conference over to Mike Lucarelli, Senior Vice President, Vice -- excuse me, Senior Vice President, Investor Relations. Please go ahead.

Michael Lucarelli

Thank you, Lisa, and good afternoon, everyone. Welcome to NXP's Third Quarter Earnings Call. With me on the call today are Rafael Sotomayor, NXP's President and CEO; and Bill Betz, our CFO. The call today is being recorded and will be available for replay from our corporate website.

Today's call will include forward-looking statements that involve risks and uncertainties that could cause NXP's results to differ materially from management's current expectations. These risks and uncertainties include, but not limited to, statements regarding the macroeconomic impact on the specific end markets in which we operate, the sale of new and existing products and our expectations for the financial results for the fourth quarter of 2026. NXP undertakes no obligation to revise or update publicly any forward-looking statements.

For a full disclosure of forward-looking statements, please refer to our press release. Additionally, we will refer to certain non-GAAP financial measures, which are driven primarily by discrete events that management does not consider to be directly related to NXP's underlying core operating performance. Pursuant to Regulation G, NXP has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in our third quarter 2026 earnings release, which will be furnished to the SEC on Form 8-K and is available on NXP's website in the Investor Relations section at nxp.com. I will now turn the call over to Rafael.

Rafael Sotomayor

Thank you, Mike, and good afternoon. In we exceeded our outlook across all end markets and every region grew double digits year-on-year. Growth was led by our company-specific growth drivers in automotive and industrial, which grew 30% year-over-year and represent roughly 1/3 of our total revenue as well as continued strength in data center infrastructure. Revenue was $3.79 billion, up 19% year-over-year or up 22%, excluding the MEMS Sensor business. Non-GAAP operating margin was 37%, up 330 basis points and non-GAAP EPS was $4.20, up 35% year-over-year. These results are translating into strong free cash flow generation, enabling us to invest in the business and return cash to shareholders.

To that end, our Board has authorized an incremental $5 billion for share repurchases, bringing total authorization to around $6.3 billion.

Now turning to end market performance. Automotive revenue crossed $2 billion for the first time, up 17%, excluding sensors. This growth is driven by content gains led by our SDV portfolio in a flattish unit production environment. SDV revenue in Q3 is running above $1.5 billion annualized and remains well on track to reach our $2 billion 2027 target. We view the transition from the main base architectures to Sono and centralized compute as a multiyear upgrade cycle that will enable physical AI and autonomous capabilities in the vehicle.

These new architectures create a need for system solutions that drive higher content across NXP's portfolio, including additional processing ag nodes, connectivity and power management. This results in 2 to 3x higher content per vehicle compared to today's architecture. This evolution is still in its early stages. In 2027, we will begin shipping our next-generation SDV processors, including the S32K5 Sono and S32N central compute platforms. We are starting to see material proof points of the SDV transition. [indiscernible] BTEC, the joint venture Volkswagen [indiscernible] announced yesterday, he has standardized its Sono platform on NXP S32K5 across both companies. This is a clear signal of the leadership of NXP's SDV portfolio and where the industry is heading. Engagements with our new platform continue to expand globally, and we now expect our first S32KF5 shipments in China as early as the first quarter of 2027.

Software-defined vehicles are one of the first deployments of physical AI and the opportunity to reach as well beyond the car. The same building blocks of central compute sensing, networking and secure control are moving into robotics and other intelligent systems at the edge. This quarter, we secured our first S32K5 design win in human robotics with a leading U.S. global technology company.

Now moving to industrial and IoT. Revenue was $802 million, up 39% year-over-year. The industrial portion of this end market grew nearly 50%, led by data center, factory automation and health care and now represents about 70% of industrial and IoT. As we mentioned in our Q2 call, AI-enabled processors will represent approximately [ 15% ] of industrial and IoT processor revenue in 2026, more than doubling from last year.

Given market adoption of Intelligent Systems, we expect growth to continue in 2027. ARA, our discrete NPU is a key component of our AI portfolio. It continues to gain traction across industrial automation and automotive AI applications, and we expect to be in volume production in 2028.

Now let me give you an update on our data center business. Given the strength we've seen year-to-date, we now expect our revenue to exceed the $500 million outlook provided earlier this year. Given the new products we're developing, combined with expanding customer engagements, we now expect this business to be over $1 billion in a couple of years. Going to communication infrastructure and other. Revenue was $503 million, up 54% year-over-year, driven by data center and secured cars. And lastly, mobile revenue was $411 million, down 4% year-over-year.

Turning to our Q4 outlook. We're guiding revenue to $3.85 billion, up 2% sequentially and up 15% year-over-year or 18% excluding sensors. This would represent our fourth consecutive quarter of double-digit annual growth. At the midpoint, we expect the following trends in our business during Q4. Automotive is expected to be up in the low double-digit percent range year-over-year and up low single digits sequentially. Adjusted for the sale of the MEMS sensor business, our guidance implies a high teens percentage growth year-over-year. Industrial is expected to be up in high 20% range year-over-year and up in the low single-digit range sequentially.

Mobile is expected to be down in the mid-teens percent range year-over-year, and up slightly on a sequential basis. And finally, communication infrastructure and other is expected to be up over 50% range year-over-year and up low single digits sequentially. And now I'd like to pass the call to Bill for a review of our financial performance.

Bill Betz

Thank you, Rafael, and good afternoon to everyone on today's call. As Rafael has already covered the revenue drivers, I will turn to the financial highlights. Q3 was another strong quarter with record revenue, operating margin and non-GAAP EPS. Revenue grew 19% year-over-year and 8% sequentially to $3.79 billion. The growth was led by our company-specific growth drivers across software-defined vehicles electrification, connectivity, radar and industrial edge processing as well as continued momentum in our emerging data center business.

Non-GAAP gross margin was 58.6% up 160 basis points year-on-year. Our gross margin performance reflects improved factory utilization and solid fall through higher revenues. Non-GAAP operating expenses were $810 million or 21.4% of revenue, reflecting strong operating leverage. This led to a non-GAAP operating margin of 37.1%, up 330 basis points year-on-year. Below the line, non-GAAP interest expense was $85 million, tax rate was steady at 18%, noncontrolling interest was $15 million, and results from our joint venture equity accounted investees were a $4 million loss. This resulted in non-GAAP earnings per share of $4.20, increasing 35% year-over-year or about 2x our revenue growth rate.

Turning now to the balance sheet, cash flow and capital returns. Our balance sheet remains strong, providing flexibility to invest in our strategic growth priorities advance our hybrid manufacturing model and return capital to shareholders. We ended Q3 with $3.94 billion of cash and $10.98 billion of debt resulting in a net leverage ratio of 1.3x. Days of inventory declined to 148 days from 156 days in Q2, including approximately 13 days of prebuilt inventory related to our planned front-end factory consolidations. We expect to have approximately 15 days of prebuild inventory at the end of 2026. For the quarter, operating cash flow was strong at $1.26 billion, and net CapEx was $50 million, resulting in free cash flow of $1.21 billion or approximately 32% of revenue.

During Q3, we invested $218 million between equity and access fees in VSMC and ESMC. A detailed breakdown of our joint venture investments is available in our historical financial model on our Investor Relations website. We expect to be over 75% complete with our JV investments by year-end. On a trailing 12-month basis, free cash flow was approximately $3.5 billion or 25% of revenue, in line with our long-term target. Over that same period, we returned $1.7 billion to shareholders through dividends and share repurchases. Most recently, shareholder returns have been below our long-term target as we prioritize deleveraging strategic acquisitions and investments in our manufacturing joint ventures to support future growth and gross margin expansion.

Moving forward, we plan to accelerate our buyback activity in Q4 and 2027. Consistent with that commitment, the Board authorized a new $5 billion share repurchase program bringing total authorization to $6.3 billion, representing around 10% of our current market capitalization. Overall, we remain committed to returning 100% of our excess free cash flow to shareholders over the long term.

Now turning to our expectations for Q4. We expect revenue of $3.85 billion, plus or minus $100 million, which is up 15% year-on-year or up 18% adjusted for the sale of our sensors business and up 2% sequentially. We expect non-GAAP gross margin of 59%, plus or minus 50 basis points, driven by higher revenue and manufacturing utilizations. We expect operating expenses of $830 million, plus or minus $10 million. The increase sequentially is primarily driven by our new product tape-outs to support our trusted physical AI strategy. At the midpoint, the results in a non-GAAP operating margin of 37.5%. Below the line, we expect non-GAAP financial expense to be $79 million and our non-GAAP tax rate to be approximately 17.5%. We expect noncontrolling interest to be $14 million and $5 million of losses in our joint venture equity accounted investees. This implies Q4 non-GAAP earnings per share of $4.36 at the midpoint, an increase of 30% year-over-year, demonstrating continued earnings power.

Turning to Q4 uses of cash. We expect capital expenditures to be approximately 3% of revenue and equity payments to VSMC of $86 million and ESMC of $60 million. Looking ahead into 2027 and for your model and considerations. We will continue to drive double-digit growth in revenue. We plan to expand our gross margins to 60% during 2027. We expect operating expenses for the first half to be around 23% of revenue driven by new product introductions and second half be below 23%. Assuming a non-GAAP annual effective tax rate of 17.5%, we now expect joint venture investing losses to be around about $80 million for the full year and suggest using about a $10 million loss for Q1 and a $20 million loss for Q2. Capital expenditures to be around 5% as we plan to bring on more back-end capacity online in 2027 and build out our new assembly and test facility in Malaysia to be ready for production in 2028. Lastly, we will continue to generate healthy levels of cash and we plan to accelerate capital returns to our owners.

Next, to better understand our business, we plan to realign our end market revenues beginning in 2027. In addition, we plan to host our Investor Day on March 3 in Boston, where we will update our strategic and long-term financial model. And finally, I'd like to thank Jeff Palmer, who has served us as the Head of Investor Relations for the past 16 years and thank him for his many contributions to NXP.

I would like to now turn the call back to the operator for your questions.

Operator

[Operator Instructions]

Our first question will be coming from the line of Jim Schneider of Goldman Sachs.

Preguntas y respuestas

James Schneider

I was wondering if you can maybe talk a little bit about the customer behavior you're seeing across your OEM customers specifically, are you seeing signs of them restocking at all in a more aggressive way than they had in past quarters? And give us a sense of the customer commentary in terms of what's happening with lead times and how they're responding to that.

Rafael Sotomayor

Yes. So Jim, thank you for the question. I assume this is an auto question. So in the context of auto, we're not seeing anything noticeable that would suggest to broad-based restocking. Now from a visibility perspective, I think visibility is greatly improved. And so lead times have extended, but also has resulted in better visibility. The other kind of, I would say, the other trend in the market in automotive is OEMs are getting more involved in providing that guidance directly to companies like us. And so there's a lot more intimacy from a customer relationship perspective with respect to the needs throughout the year. So I feel like we have good visibility on what that supply is going to be required in the top of products we're going to need to deploy.

James Schneider

Yes, yes. And then as a follow-up, I just wanted to sort of ask, it's very helpful to see the solid guidance for 2027. Can you maybe give us a sense about by end market, some of your -- the places where you have greatest underlying confidence in sort of outperforming that overall double-digit outlook you provided and other areas where you see there's a little bit more uncertainty.

Rafael Sotomayor

Sure. Well, I think what is working in -- when it's working in 2026, that will continue in 2027. I mean what your question is what's driving our confidence in the growth in double digits in 2027 and continues to be the areas that we're focused on, SDV adoption continues. As a matter of fact, it's just barely starting, and we see several ramps, especially in the second half of 2027, we have very important ramps in our SDV portfolio. The same thing goes to industrial and IoT. The adoption of AI continues to add content gains in industrial and IoT and it's quite strong. And the deployment that we're barely starting on the control plane and data center continues to play out for us.

Operator

Our next question will be coming from the line of Thomas O'Malley of Barclays.

Thomas O'Malley

Maybe this is for Bill. When I look at December guidance, I think you guys are guiding to 59% gross margin. It's a pretty big step up in incrementals from September. I think it's 85% quarter-over-quarter, close to 70% year-over-year. Obviously, volume is some component of that, but maybe walk through some other things that are driving that, just as that's a big step up from what you've seen over the last 3, 4 quarters.

Bill Betz

Absolutely, Thomas. A couple of points on gross margin. First, they're performing to our expectations and as we share the -- continue to expand into Q4. And I would say our gross margin improvements are very structural in nature. They're driven by a combination of the higher revenues the higher utilization. As I mentioned, we're running last -- I gave guidance running in the mid-80s. They are running in the May 80s now. We expect them to continue in Q4 in the mid-80s. And we're actually, in 2027, expect them to run in the high 80s. Clearly, product mix plays a role and then obviously, improved operational efficiencies. I would also say our gross margins have nothing to do with the price increases that we're seeing at the moment because all we're doing with the price increases is offsetting the higher inflationary costs that we're passing on to our customers.

And then I think overall, we expect gross margins to continue to expand, achieving that 60% during 2027. And furthermore, I think they'll expand above 60% in 2028 with the ramp of our VSMC joint venture that we shared about in the past.

Michael Lucarelli

Do you have a follow up?

Thomas O'Malley

I do. Just some seasonality. So I'm sure everyone will have slightly different numbers. But by my numbers, auto was a little ahead of seasonal in September. And then your guide is kind of low single digits sequentially my December traditional seasonality is close to like mid- to high single digits. Any reason why the delta there? Is it because of some of the stronger quarters that you bought in June, September? Or are you calling out anything in particular that's worth noting?

Rafael Sotomayor

I think you're talking about auto specifically. Is that correct? If that's so ...

Thomas O'Malley

Auto specifically into December.

Rafael Sotomayor

So you're right, auto has been quite strong this year and above seasonal, I would say, almost every quarter this year. Looking at 4Q, I'm not sure there's a lot of range on seasonality, a lot of different years be years, 3, 5, 7, 10 years. I think it's seasonal in auto is probably flat to up slightly. So I think that 2% growth is above seasonal. That's how I would view that. So I would say strong trends continue in auto. So that's a straightforward answer on the automotive market specifically.

Operator

And our next question is going to be coming from the line of Joshua Buchalter of TD Cowen.

Joshua Buchalter

Maybe following up on Tom's one. Any help you can give us on what you're seeing in the overall pricing environment now? And then as we look into 2027, I know in some prior years, there's been sort of a step down in gross margins due to the annual pricing resetting. Should we be expecting a step down in 1Q again looking into 2027 this year?

Bill Betz

Yes. Let me start off with the pricing. Going into 2026, we expected a low single-digit price decline. Now as we plan to exit 2026, we expect pricing to be neutral for the year for '26. Clearly, for 2027, we continue to see higher input costs in many areas. And unfortunately, we will pass those to our customers to ensure our gross margins are not impacted. I think we expect revenue to also be supported by the mix of our products, as Rafael shared, especially in the SDV portfolio with our new solutions that drive higher average selling prices in 2027 because of the portfolio where SDVs carry 2 or 3x more value than our traditional portfolio. But in the short term, I would say pricing is doing what we expect and we're pass them along. Neutral, I'd say, Q3 maybe plus 1%. 1% was pricing in Q3, another 1% in Q4. So it keeps it neutral for the whole year for 2026.

Rafael Sotomayor

Josh, maybe let me add -- this is Rafael. Let me add a high level perspective here and put aside the variable input cost for a second here. The way we see this is we see a structural shift in the industry with respect to pricing, right? I like the past decade where annual price erosion was common. Today, I think semiconductors account for a larger share of the value and the innovation and the systems. And I think that creates opportunities for much better value capture, right? This has nothing to do with input costs, right? It's just the shift in value with respect to semiconductors and ultimately on the systems.

Sure, competitive pressures will always remain. But I think what we expect is the historical pattern of annual price erosion to actually moderate over time. And I think it's going to -- over time, I think it's going to make pricing less of a headwind year-over-year.

Joshua Buchalter

And to follow up, you mentioned that you're not seeing any signs of widespread restocking. It seems like there's been pretty mixed commentary from the industry over the last couple of quarters about whether restocking is going on or not. How much of, I guess, what you're seeing is proactive conservatism on your part similar to how you handle the previous cycle? Or is there anything different about your portfolio or products that would -- or exposure that would give you a different cadence of restocking than some of your peers that are saying that they're seeing it already.

Rafael Sotomayor

Josh, we're not seeing it, right? I can only tell you what we see. We're just not seeing it. And the fact that our core products are at the core of the software-defined vehicle I don't see how we -- if there was restocking, we would see it, right? What it has, it has been conversations by some OEMs, right, to be able to actually have some safety stock put in place given the tightness in the supply right now, but it's yet to occur, right? So I mean I acknowledge some of the headlines by some Tier 1 OEMs, but we have not seen the restocking. And given the fact that our products are core to the core function of the vehicle, if there were any restocking, we will see it.

Bill Betz

Yes. Maybe just to add, remember, for automotive distribution, we service that by about 40%, and we have a really good control on that.

Operator

And the next question is coming from the line of Blayne Curtis of Jeffries.

Blayne Curtis

I just want to start on the auto segment. Obviously, you have a lot of structural drivers with SDV. I was curious on the electrification side, what are you seeing? I think Texas saw an uptick, curious with gas prices. maybe start with that.

Bill Betz

Yes. This is Bill. We are seeing strength across all our company-specific growth drivers in automotive, and last year, electrification was going through inventory digestion and our new products were delayed a bit. But those are performing quite well this year and catching up and I would say, growing above that growth rate that we provided during Investor Day, specifically in electrification. If I step back and look at total SAAR total SAAR is slightly down, but the penetration of EVs, including hybrids, combine that, that's actually growing. I mean I think total production this year is forecasted to be about 47.5% roughly of SDVs and next year is expected to be across the 50% mark to about 55%. So the 47% this year compared to last year was 41% is growing 12%. The forecast is to grow another 15% of that penetration rate.

So from a macro standpoint, we do see SDVs continuing to grow globally. And as you know, it carries 2 to 3x more semi content in the industry compared to a regular ICE vehicle.

Blayne Curtis

And then Bill, don't kill me for this, but I wanted to ask you any early thoughts on March, either kind of by segment overall.

Bill Betz

For the first quarter, you're saying? Sure. Yes. So I knew someone asked the question, Blayne. I thought [indiscernible] but it was you, Blayne, you are ahead of the queue. So again, this is not a guidance, a wide range on these expectations, give my normal caveats there. But typically, 1Q for us is down about mid-single digits. What drives that mid-single-digit sequential decline is mobile down mid-teens sequentially. In automotive, industrial IoT and CONDIPRA is down kind of low to mid-single digits, call it, 3%, 4%, 5% sequentially. Again, this is not guidance. This is just overall trends over the past 5, 10 years in our business.

Operator

Our next question is coming from the line of Harlan Sur of JPMorgan.

Harlan Sur

Thanks for the near-term trends you're seeing in your auto franchise. Obviously, you guys have many other company-specific drivers in your other segments that are firing edge AI, physical AI data centers to name with you. So if you look across your overall business, was book-to-bill greater than one in Q3? And if so, did backlog grow across all your segments? And did overall customer escalations continue to rise just given the tight supply environment?

Bill Betz

Yes. Let me take that question. I would just say all signals continue to improve from 90 days ago. So the book-to-bill remains well above 1 across all end markets and regions. Our backlog continues to grow in dollars and extend further into 2027. Lead times, I would say, continue to extend, just to give you a feel I would say 80% of our lead times are above the 16 weeks compared to a year ago when it was only 25%. And customer escalations continue to increase and they're up sizable quarter-over-quarter.

Michael Lucarelli

Do you have a follow-up, Harlan?

Harlan Sur

I appreciate -- yes. On the supply side, on the 300-millimeter expansion initiatives, primarily driven to your ESMC and VSMC 300-millimeter JVs. I believe VSMC, I think that's targeted for analog power mixed signal products. I think VSMC just started with production/qualification with production shipments targeted for the first half of next year. And if I recall, ESMC for your MCU and embedded products, those were targeted for production sort of end of next year. Can you guys just give us an update on these initiatives in a tight supply environment, it seems like 300-millimeter programs are layering in just like right at the perfect time.

Bill Betz

Yes, absolutely. As you all know, it's happening both in the front end and the back end. So front end, recently, we just celebrated the opening of VSMC and that is ahead of schedule. And the first thing that's going to ramp is actually our partner side, which is ramping the interposers. On our side, we are in the process of qualifying our first set of technologies, which we will start that material in the first half and expect out in the second half. So we do see some outcoming ahead of schedule, but really -- the big bulk where we see a lot of volume pickup is in 2028 for us, obviously, also helping to expand our gross margins. As you know, you get the 2 benefits from that. You get the benefit for moving 200 millimeters to 300, but you also get a benefit of not paying that margin stacking, like you buy from an end outside foundry partner.

Related to the back end, as I mentioned in my prepared remarks, we are increasing our CapEx to about 5% versus, I would say, we've been spending around 2% this year. And there's 2 factors there. There's one is we are adding capacity into Q1 and Q2 to support our revenue in the back end as we have a little space and we're doing that. And so that will hope drive the double-digit growth. But more importantly, we're building out and getting production ready of a whole new facility in KL that we broke ground in August and that will be up and running in the beginning of 2028. And that will also service a lot of revenue and also help support our gross margin expansion as well.

Operator

Our next question is coming from the line of Matthew Prisco of Cantor.

Matthew Prisco

I guess, first, on the SDV side. With these increased engagement, can you kind of give more color on what's driving those wins today? And how do we think about the ramp timing and potential inflection given those wins? Is that more of a '27, '28 story than any ancillary opportunities you're seeing that Volkswagen partnership seems centered on the MCU side, but obviously, you're selling these systems with other components as well. So any opportunity beyond that core.

Rafael Sotomayor

Yes. So what is driving some of the sign is a massive adoption that we've been discussing about software-defined vehicle, right? And the whole concept that is just revolutionary is transforming the way vehicle is made and the 2 architectures is a sonar architecture and the central compute architecture, and I'm simplifying it a little bit. The Volkswagen press announcement was surrounded about their Sonal architecture, which uses our high performance as 32K5.

Having said that, we also have plenty of engagements in our S32 and central computer architecture as well. I would say that we already have design wins in North America we have a recently designed win in South Pacific and Asia. And we have different -- several POCs in China and in Europe. The early ramps of the central compute S32 and are likely to happen at late 2027 and the full volume ramps for both the K5 and the S32 and we should expect that in 2028. So we're quite bullish what is happening there because it's not only content gain that is happening through SDV, but this design wins and as we provide more and more transparency between now and the next year, it will show that the compound -- this content gave compounds with share gain.

Michael Lucarelli

And you have a follow-up?

Matthew Prisco

Helpful. Yes. And then maybe just on physical AI. Quick last time -- last call, I think you started talking about a pipeline you were seeing there and talk about your system-level approach. So maybe an update on how you're thinking about that physical AI opportunity kind of sizing that into the future. maybe a percentage of process or revenues as you think about '27 and beyond, like how quickly this market can grow?

Rafael Sotomayor

Well, that is the core -- what we're discussing the physical AI. AI is the main driver for content gain in industrial and IoT. I think we provided a -- I think in the last call that AI-enabled processors without the discrete NPO was approximating 15% of total process of revenue and we expect that to -- from doubling from a year ago, right? So we expect that to continue to go very strongly into 2027. The MPU, the discrete MPU [indiscernible] we're now getting significant traction with different POCs both in industrial and IoT and automotive, and we now expect early production in 2028.

Operator

And our next question is coming from the line of Vivek Arya of Bank of America Securities.

Vivek Arya

Rafael, one of the pushbacks against NXP has been that the company doesn't have enough exposure to the data center. And I think you mentioned this year's target of $500 million plus, that's like low single digit. Even the $1 billion would be less than 10% versus many of your peers that have anywhere between 10% to 20% data center exposure. So the question is, is data center not an imperative for NXP? And if it is, then do you think you can go after it organically? Or -- because you're suggesting that the use of cash will be more towards buybacks rather than something [indiscernible]. So just strategically, how do you think about the data center business? And how important is it and how big of an exposure should NXP have for that end market?

Rafael Sotomayor

Yes. Maybe Vivek, thanks for the question, maybe summarize it a little bit, right? So today, we provide another outlook that said data center was going to be about $500 million. And we just said that it's going to -- we're going to probably close the year exceeding that number. And now with the new products that we're developing, and the engagements that we have, we now expect that revenue to grow to $1 billion in 2028.

Now the thesis -- and the answer to the question, the thesis of our playbook and data plane is that -- sorry, the control plane is if the data plane is going up in performance. And therefore, the control plane needs also more performance. And that means not just performance and processing, more more networking, more security, more safety. And that's where the core competency of NXP is. And so because there's zero tolerance for downtime, right? Reliable industrial grade control process are required.

So the way you got to look at it as a portfolio as top of rack switches, and that's starting to actually kind of role. And then controllers and processes for board management, where there are secure elements, there are processors and microcontrollers and also interfaces. And so we're developing right now, more and more products to be able to expand the SAM.

We are using the core companies of NXP to address the control plane and data center. And I think the growth that we're going to see between $500 million and $1 billion in the next 2 years with actually new ramps in products, it's quite impressive.

Bill Betz

Yes. And Vivek, I wouldn't read into the buyback of saying we're not investing in data centers. We're generating, as you can see, a lot of cash. And we are going to invest in the data center. And you'll probably hear more about that during our Investor Day in March.

Michael Lucarelli

Vivek, I'll add most things. I think you should look at it, and I think it's a very negative question you asked in my opinion. If you look at it, I think [indiscernible] has become another leg of the stool of our growth story. We have auto as a core franchise. We talk about SDV, and that's winning, that's fantastic. We have data centers a new opportunity, emerging opportunity. Rafael outlined some things that we're doing to drive that growth faster in the future. Then you have the industrial and IoT market and physical AI is another opportunity. So we really have 3 legs is growth tool for NXP. We're not hooked on 1 thing. We have multiple growth drivers is a net positive for the company.

Vivek Arya

And for my follow-up, on your comms infrastructure and other, what is the right way to think about growth there as we look into next year. Because this year, it was, I think, the fastest-growing segment or has been the fastest-growing segment after declining for the last 2 years. So what are kind of the puts and takes, Rafael, as we look at that specific segment for next year?

Bill Betz

Yes. Let me take you and just remind you how that segment is broken up. And clearly, as I mentioned in my prepared remarks, we are going to realign the segment starting in 2027. So we are more transparent in how to understand this business and the right components. At 2025 -- exiting 2025, roughly 50% was secure card business. 25% was DN, Digital Networking, and 25% was RF power. As we look at the end of 2026, obviously, and we shared this is that the data center or half of it is coming from DN. So expect the comms and infra for DN to be above 30%. And then we've exited next-generation RP power type of business and expect that to be below 20% as we exit 2026. And I think what you'll see that continued trend along with nice growth continuing in our secured card business. But we're going to break that out and make it much more transparent in the future in our Q4 earnings when we release.

Operator

And the next question will be coming from the line of Francois Bouvignies of UBS.

Francois-Xavier Bouvignies

And so I have 2 quick questions, maybe a follow-up of the data center part. I mean you mentioned $1 billion for 2028 from the $500 million this year. I mean if we look at your peers -- and I mean, most of them are looking at doubling the revenues into next year already. When you look at the gigawatt additions in different data you can see that it's going to double in '27, maybe potentially versus '26. So all the data you said that the data center market should double almost next year already. So I was just wondering for your $1 billion on '28, that would suggest a slower growth in '27. Is it you being conservative here? Or can you reach $1 billion as early as next year? Or should should we be aware about any drag into next year?

Rafael Sotomayor

Francois, I think the first thing we look at our data center business is the type of products that we are deploying. We're not in discretes, we're not power. We are in the control plane, anything that is an MCU, a microprocessor in the rack, we consider that our market, right?

We started this business almost this year. And so right now, the growth relies on product ramps. The growth relies on acceptance and design wins and also relies on customers deploying software into our products. And so it's a different type of portfolio. I believe that it's even more sticky than some of the products and some of the companies that you were mentioning. So we feel quite excited about the ramp of our business in data centers because these are processors.

These are core competencies of NXP has and networking on security and and processors. And I think this is going to be something that NXP is going to do quite well.

Francois-Xavier Bouvignies

And maybe my follow-up would be on the pricing. I mean you mentioned build input costs, the driver of pricing. Rafael, you mentioned the mix as well impact that will impact pricing into next year. One other area of pricing could be the supply-demand environment and many people are starting to talk about the tightness and that could lead to a COVID-like environment. Now when I look at the utilization rate of your peers, I mean, Renesas at 660 percent, TI has new fabs jumping up. I mean, Infineon has a new fab ramping up. You have a new fab ramping up. And you didn't mention the tightness pricing. Is it fair to say that it's not as tight as people think maybe you have a lot of capacity coming. Maybe it's a timing issue, it's a lead lead times issue, but it's temporary, not really fundamental like COVID was. Is that fair to say?

Bill Betz

Yes. Let me hit that question, Francois. Obviously, it's very well known that the back-end capacity today is very, very tight. We do see into the future that the front end gets tight and the folks that are having capacity come online like ourselves, like some of the others will help that, obviously, but we do see capacity and that's the next phase of any supply-demand imbalance. We see that happening sometime next year. But we're very fortunate of the investments that we have placed both in the back end and the front end that we'll be able to service it. Right now, the pricing is only related to inflationary costs. Could there be pricing related to demand and supply imbalances like COVID like we saw? Absolutely. But we'll wait and see how that plays out.

Rafael Sotomayor

And then Francois, the demand environment is very different, right? So you mentioned COVID, but the demand environment that is happening now is real. It's driven by transformation, SDVs transformation, physical transformation, data, CapEx investment, transformation. And so it's a much different environment. And I think that the demand is going to feel value creation, value capture and potentially pricing power.

Operator

Thank you. And that does conclude today's Q&A session. I would like to turn the call over to Rafael for closing remarks. Please go ahead.

Rafael Sotomayor

Thank you, everyone. I want to leave you with 3 takeaways: First, our growth is structural, software-defined vehicles, the intelligent industrial edge and data center are multiyear drivers and wins like rvTech show we are positioned for the next leg of growth. Second, this growth is broad-based with every region growing in automotive, industrial and IoT in comps and infrastructure all growing double digits year-over-year. And last, our growth results in robust free cash flow, enabling us to invest in the business and return cash to shareholders.

As disclosed today, we have a new $5 billion repurchase authorization positioning us to accelerate our buybacks beginning in Q4. Thank you all for joining us today.

Operator

Thank you for joining us today. You may now disconnect. This concludes today's program.