Qualcomm gives weak forecast, signalling slump will drag on
QUALCOMM, the largest maker of smartphone processors, gave a tepid revenue forecast for the current period, indicating that demand for mobile devices remains weak even as the industry emerges from a glut.
Sales will be US$8.1 billion to US$8.9 billion in the fiscal fourth quarter, Qualcomm said on Wednesday (Aug 2) in a statement. The midpoint of that range is well below the US$8.79 billion average analyst estimate. Minus certain items, profit will be US$1.80 to US$2 a share, compared with a US$1.94 projection.
The shares slid about 4 per cent in late trading after the report was released.
The outlook renews concerns about a smartphone industry contending with its worst downturn in years. Qualcomm and its chipmaking peers saw a steep drop in orders from handset makers, which suddenly had more inventory than they needed. Even Apple’s prized iPhone suffered a slowdown, contributing to a broader sales decline at the company.
While chip inventory is now moving towards more normal levels, growth will likely prove elusive until consumers start showing more appetite for new phones.
Qualcomm also said that demand in China, the biggest market for phones, hasn’t returned to projected levels. That region provides the company with more than 60 per cent of its sales.
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Overall, handsets shipments will be down in at least the high single-digit percentage range this year, compared with 2022, Qualcomm said in its earnings presentation, indicating that the outlook has dimmed slightly.
“Since it remains difficult to predict the timing of a sustained recovery and customers remain cautious with purchases, we continue to operate under the assumption that inventory drawdown dynamics will be a factor through the end of the calendar year,” it said in the presentation.
Chief executive officer Cristiano Amon is working to make his company less dependent on an unreliable smartphone market. The San Diego-based company is now selling more chips for cars, networking, computing and wearable devices, but it still gets more than half of its revenue from the handset industry.
The company’s main product is a processor that runs many of the world’s best-known phones. It also sells the modem chips that connect Apple’s iPhone to high-speed data networks. An additional chunk of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks – fees that phone makers pay whether they use Qualcomm-branded chips or not.
Before the earnings report, Qualcomm’s stock had increased about 18 per cent this year. That underperformed a broader rally for the chip industry, with the Philadelphia Stock Exchange Semiconductor Index gaining about 47 per cent in 2023.
In the fiscal third quarter, which ended Jun 25, profit was US$1.87 a share. Revenue fell 23 per cent to US$8.45 billion. Analysts had estimated profit of US$1.81 and sales of US$8.51 billion.
Phone-related sales were US$5.3 billion, compared with an average estimate of US$5.48 billion. Automotive revenue rose from a year earlier to US$434 million, short of an estimate of US$448 million. Sales from connected devices were in line with estimates at US$1.5 billion. BLOOMBERG
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