Qualcomm shares gloomy market forecast as smartphone sales decline again
(Reuters) – Qualcomm Inc on Wednesday forecast third-quarter revenue and profit below Wall Street estimates, citing the smartphone industry taking longer to shed excess supply before new orders come in.
The chip designer’s shares fell 4% in extended trading after it said its forecast was also affected by macroeconomic headwinds, weaker global mobile phone sales and reduced channel inventory.
“As we navigate this challenging environment, we remain focused on the critical factors we can control to emerge stronger from this downturn,” Qualcomm CEO Cristiano Amon said in a statement. “Our top priority remains to execute on our diversification strategy and invest in areas that deliver long-term value.”
The company said the larger-than-normal drop in its chip revenue forecast from the previous quarter was mainly due to “the timing of modem customer purchases.”
Qualcomm did not name the client, but Summit Redstone Partners analyst Kinngai Chan said it was Apple. Apple is the largest buyer of its standalone modem chips, rather than Qualcomm’s main flagship chip, which includes the modem and application processor. Apple makes its own application processor.
Qualcomm predicts chip revenue of $6.9 billion to $7.5 billion.
The smartphone market was one of the first to be affected by the drop in demand after high inflation curbed consumer spending on discretionary items such as electronics, prompting vendors to reduce new chip orders.
Demand for smartphones has remained weak despite campaigns and price reductions. According to research firm Canalys, global smartphone shipments fell 13% in the first quarter.
The easing of COVID-19 restrictions in China has not significantly boosted demand, as sales of Apple and its Android rivals fell during the first quarter in the world’s second-largest economy.
Widespread economic weakness has also forced device manufacturers to limit chip orders. Growing competition, especially from Taiwan’s MediaTek, is a cause for concern.
The company expects third quarter revenue to be 8.1–8.9 billion dollars. Analysts polled by Refinitiv were expecting revenue of $9.14 billion.
It estimated adjusted earnings per share of $1.70 to $1.90, compared with analysts’ expectations of $2.16.
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