Qualcomm sees earnings below Street as smartphone market sags

On Thursday, Qualcomm Inc. issued a second-quarter revenue and profit forecast that was below Wall Street expectations as the chipmaker battles the combined effects of a supply glut and lacklustre demand for smartphones, a condition that is anticipated to last through the first half of this year.

The stock dropped 3% after originally increasing 2.7% in after-hours trading.

According to Cristiano Amon, CEO of Qualcomm, “the smartphone market continues to see lower demand, and we are now anticipating elevated channel inventory levels to endure at least into the first half of calendar 2023.”

He declared that the business would further reduce costs and streamline operations to cope.

While Qualcomm has been partially protected by the fact that it focuses on premium smartphones, analysts said even that market has been impacted by inflation and macroeconomic uncertainty, which have hampered sales of consumer electronics.

Samsung Electronics unveiled its newest Galaxy S23 series smartphone on Wednesday. The device now uses 100% Qualcomm processors worldwide, but the launch coincides with a challenging period for the market.

Additionally, Qualcomm has expanded into new, rapidly expanding industries including the automotive industry. Although the company anticipates that revenue would be flat sequentially in the current quarter, it increased 58% year over year to $456 million in the first quarter of the current fiscal year.

Qualcomm

In contrast to analysts’ projections of $9.55 billion, the chipmaker projected current quarter revenue in the range of $8.7 billion to $9.5 billion, according to Refinitiv data.

Revenue for the company’s fiscal first quarter fell 12% year over year to $9.46 billion, falling short of Wall Street’s forecast of $9.60 billion.

The majority of sales at Qualcomm come from its handset division, and first-quarter revenue from this division decreased by 18% year over year to $5.75 billion, as opposed to a 40% increase in the prior quarter.

Compared to analysts’ projections of $2.26 per share, it anticipates adjusted earnings per share to be in the range of $2.05 to $2.25.

According to Refinitiv statistics, Qualcomm reported adjusted profits per share in the first quarter of $2.37, which is lower than the $2.34 expert consensus.

During the earnings call, Qualcomm also stated that it does not anticipate that news that the U.S. Commerce Department has stopped granting export licences to Huawei will have an impact on its current licences to export 4G, Wi-Fi, and other chips to the Chinese telecom giant.

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