Qualcomm sales and forecast come up light as smartphone chip sales fall 25%

Qualcomm reported third-quarter earnings on Wednesday that beat Wall Street expectations, but revenue and guidance for the fourth quarter came up short.

Qualcomm stock fell over 2% in extended trading.

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Here’s how the chipmaker did for the quarter ending on June 25:

• Earnings: $1.87 per share, adjusted, versus $1.81 per share expected by Refinitiv consensus estimates.
• Revenue: $8.44 billion, versus $8.5 billion expected by Refinitiv consensus estimates.

Qualcomm said it expected earnings of between $1.80 and $2.00 per share on between $8.1 billion and $8.9 billion in sales in the fourth quarter, short of Refinitiv consensus expectations of $1.91 in earnings on $8.7 billion in revenue.

Net income during the quarter fell to $1.8 billion, or $1.60 per share, a staggering 52% drop from the $3.73 billion or $3.29 per share reported at the same time last year.

Qualcomm is exposed to the slumping smartphone industry because it makes the processors at the heart of most high-end Android devices.

Shipments of new devices are expected by analysts to decline in 2023 and Qualcomm repeated that it expects handset units to decline a “high-single digit percentage” this year, partially due to a slow China recovery.

QCT, Qualcomm’s biggest division that sells processors for smartphones, cars, and other smart devices, reported $7.17 billion in sales, down 24% on an annual basis.

Handset chip sales are the biggest part of QCT, and those declined 25% year-over-year to $5.26 billion.

The company’s automotive business, which sells chips and software for autonomous cars, was a bright spot, rising 13% to $434 million in revenue during the quarter. However, the company’s internet of things business, which makes lower-cost chips for low-power devices and industrial uses, declined 24% to $1.48 billion in sales.

Qualcomm’s profitable licensing business, QTL, declined 19% to $1.23 billion in revenue.

Qualcomm CEO Cristiano Amon highlighted the chipmaker’s AI strategy in a statement as semiconductor firms seek to capitalize on the industry focus on the chips needed to run software like OpenAI’s ChatGPT. He said that Qualcomm’s ability to run AI models on its phone gives the company a chance for an “inflection point” that could drive growth in the future.

Qualcomm said it paid $893 million in dividends and repurchased $400 million in stock during the quarter.