UPDATED 19:48 EST / FEBRUARY 02 2023

INFRA

Revenue miss and weak guidance send Qualcomm’s stock down

Shares of Qualcomm Inc. fell in extended trading today after the smartphone chipmaker delivered lower-than-expected fiscal first-quarter revenue and offered weak guidance for the coming quarter.

The company reported earnings before certain costs such as stock compensation of $2.37 per share on revenue of $9.46 billion, down 12% from a year earlier. Net income for the period came to $2.24 billion, down 34% from a year ago. Wall Street had been looking for the company to report earnings of $2.34 per share on higher revenue of $9.6 billion.

Echoing other chipmakers reporting results in the past week, company officials blamed the results on the macroeconomic environment and higher channel inventory.

Cristiano Amon (pictured), president and chief executive of Qualcomm, said the company was able to deliver results consistent with its guidance amid a challenging environment. “The long-term trends driving demand for our differentiated technologies and solutions that enable digital transformation are intact,” he said, adding that he remains “focused on executing our diversification strategy.”

The bulk of the company’s revenue comes from the Qualcomm CDMA Technologies business segment, which covers chips for smartphones, automobile and “internet of things” devices, as well as radio frequency front-end components. QCT delivered $7.89 billion in revenue during the quarter, down 11% from a year earlier and below Wall Street’s target of $8.03 billion.

Within the QCT segment, revenue from mobile handsets topped $5.7 billion, down 18% from a year earlier but ahead of consensus expectations. International Data Corp. recently put out a report that said smartphone shipments fell 18% during the fourth quarter, the biggest decline in the history of the industry.

On a conference call, Amon told analysts that the company is expecting “elevated channel inventory levels” to persist throughout the first half of calendar 2023 as a result of reduced demand from consumers. He added that demand is weaker in the lower-end and midtier market segments.

To deal with that, Amon said, Qualcomm would be implementing yet more spending cuts in the coming months, though he didn’t elaborate. Last November, the CEO announced the company had instituted a hiring freeze and would be making reductions to its operating expenses. Since then, Qualcomm cut 153 jobs at its San Diego headquarters, and followed by laying off “dozens” of workers in Israel last month. However, the company has so far avoided the more widespread job cuts some of its technology industry peers have done.

As for the Qualcomm Technology Licensing segment, which covers revenue from patent licensing, it delivered $1.52 billion in sales, down 16% from a year ago. It came in just below Wall Street’s forecast of $1.54 billion.

“Qualcomm is being dragged down by slumping smartphone sales, and the gains in its automotive and IoT segments cannot make up for the revenue loss in the handset business,” said Holger Mueller of Constellation Research Inc. “Earnings per share are a dollar down and the outlook remains weak, so no surprise to see that more cost-cutting is on the horizon.”

Looking to the second quarter, Qualcomm said it’s expecting earnings of between $2.05 and $2.25 per share on revenue of $8.7 billion to $9.5 billion. At the midpoint, that implies a revenue decline of 18.5%. Wall Street is targeting earnings of $2.26 per share and sales of $9.55 billion for the current quarter.

Qualcomm’s stock was down just over 3% in after-hours trading, adding to a loss of almost 2% during the regular trading session.

Photo: Qualcomm

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