Qualcomm (QCOM) earnings report Q3 2023

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 6% in extended trading.

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

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

Qualcomm said it expected earnings of between $1.80 and $2 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 a year earlier.

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

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. However, the chipmaker said it sees growth in handsets starting in the holiday season.

QCT, Qualcomm’s biggest division that sells processors for smartphones, cars, and other smart devices, reported $7.17 billion in sales, down 24% from a year earlier.

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

“Handset remains difficult to predict the timing of a sustained recovery and customers remain cautious with purchases,” Qualcomm finance chief Akash Palkhiwala said on an earnings call with analysts.

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 internet of things business, which makes lower-cost chips for low-power devices and industrial uses, fell 24% to $1.48 billion in sales. The segment also includes chip sales to Meta for its Quest VR headsets.

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

Qualcomm CEO Cristiano Amon highlighted the chipmaker’s artificial intelligence 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 Qualcomm’s ability to run AI models on phones, instead of on cloud servers, gives the company a chance for an “inflection point” that could drive growth in the future.

“In summary, we are uniquely positioned to help shape and capitalize on the upcoming on-device Gen AI opportunity,” Amon said.

Qualcomm said it had reduced costs by 5% so far this year relative to its spending in 2022. In June, it cut 415 jobs at its San Diego headquarters, the San Diego Union-Tribune reported. The company said that it will implement more cost-saving programs in the first half of next year.

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

Correction: An earlier version didn’t indicate that Qualcomm’s quarterly revenue of $8.44 billion was adjusted.