Qualcomm gives light forecast, phone chip sales fall 17%

Qualcomm reported second-quarter earnings on Wednesday that were in line with analyst expectations, but sales from handset chips, a core business for the company, declined 17% from a year earlier.

Qualcomm shares fell over 4% in extended trading.

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Here’s how the chipmaker did versus Refinitiv consensus estimates:

• EPS: $2.15 per share adjusted vs. $2.15 per share expected
• Revenue: $9.28 billion vs. $9.1 billion expected

Net income during the quarter ended in March fell 42% to $1.70 billion, or $1.52 per share, from $2.93 billion, or $2.57 per share, in the year-earlier period, the company said.

Qualcomm said it expected around $8.5 billion in sales in the current quarter, short of Wall Street expectations of $9.14 billion. Analysts were expecting current-quarter earnings guidance of $2.16 per share, but the company said it would be around $1.80.

Qualcomm CEO Cristiano Amon in a statement blamed the results on a challenging environment, and the company said it had not seen evidence that smartphone sales are recovering in China. The smartphone market is looking at a tough 2023, with shipments for the global market declining over 14% in the first quarter, according to IDC.

“The evolving macroeconomic backdrop has resulted in further demand deterioration, particularly in handsets, at a magnitude greater than we previously forecasted,” Amon said on a call with analysts.

Total revenue declined 17% to $9.28 billion from the year-earlier quarter, the chipmaker said.

Qualcomm’s chip segment, called QCT, sells smartphone processors, automotive chips and other parts for advanced electronics. QCT revenue declined 17% to $7.94 billion during the quarter.

The biggest part of the segment’s revenue comes from handset chips, which are the processors at the heart of most Android phones. Qualcomm reported $6.11 billion in handset sales, down 17% from last year.

The company said it expected a larger-than-normal decline in the third quarter for QTL revenue, saying it was related to “the timing of purchases by a modem-only handset customer.” QTL is the company’s licensing segment, which sells access to technologies needed for cellular service.

Qualcomm rarely discusses its business with Apple, and didn’t name the company, but Apple does purchase modems from the company for its iPhones and other devices.

“Given the weaker handset forecast, until demand normalizes and visibility improves, we anticipate that customers will remain cautious with purchases,” Qualcomm finance chief Akash Palkhiwala said on the call.

The automotive business, which includes chips and software for cars, is still small, although it showed 20% growth during the quarter to $447 million in revenue.

QTL reported an 18% annual decrease in revenue to $1.29 billion.

Qualcomm said it made $900 million in share repurchases and paid $800 million in dividends during the quarter.