Qualcomm shares fall more than 7% after poor outlook, months of chip glut

Qualcomm Inc. shares fell in the extended session on Wednesday after the chipmaker’s poor outlook and estimates of about two months or more of inventory it needs to clear in its core business.

Qualcomm QCOM,
shares fell 4.1% in the regular session to close at $112.50, down 7.6% after hours. In late July, the San Diego-based chip maker cut its forecast due to weakness in the smartphone market, which has yet to enter the premium phone market.

In a meeting with analysts, Chief Executive Cristiano Amon said the accelerated weak demand was due to “macroeconomic headwinds and lingering COVID in China” and “a rapid deterioration in demand and easing of supply constraints in the chip industry”. it would take about 80 cents a share from first-quarter earnings.

“That’s the key factor,” Amon told analysts on the call. “It’s basically a phone consumer story.” Profit for the first quarter will eventually reach 80 cents per share, he said.

Another big factor is that companies are spending less. Amon said, “companies across the board had higher inventory policies, the supply chain was unraveling, and you’ve got this macroeconomic uncertainty, there’s a drawdown trying to get your inventory to a different level than it was during the demand constraint.”

Qualcomm had estimated first-quarter earnings of $3-$3.30 per share on $9.2-$10 billion, while the Street had estimated $3.43 on revenue of $12.02 billion.

Read: Meta spending is taking a toll on Facebook stock, but there are chip stocks benefiting here

Chief Financial Officer Akash Palkhiwala told analysts that the channel has about eight to 10 weeks of upside. Meanwhile, Qualcomm has been implementing a hiring freeze and looking for cost-saving measures, executives told analysts.

While phone chip sales rose 40% from a year ago to a record $6.57 billion, beating the Street’s estimate of $6.55 billion, the company forecast a huge glut in Qualcomm’s CDMA Technologies division, which includes phone and RF chips. shows that as well as chips for cars and the Internet of Things.

Qualcomm expects QCT sales of $7.7 billion to $8.3 billion and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast QCT sales of $10.42 billion and QTL revenue of $1.71 billion.

Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, up 28% from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5-10.1 billion.

In the fourth quarter, auto chip sales rose 58% to a record $427 million, while Internet of Things, or IoT, sales rose 24% to $1.92 billion. The Street expected auto sales at $362.4 million and IoT sales at $1.82 billion.

QTL segment revenue fell 8% to $1.44 billion, based on the company’s forecast of $1.45 billion to $1.65 billion, compared with Wall Street estimates of $1.58 billion.

Read about: Intel’s quarterly results, AMD’s quarterly results

The company reported fourth-quarter net income of $2.87 billion, or $2.54 per share. The chipmaker reported adjusted earnings before stock-based compensation expense and other items of $3.13 per share, compared with $2.55 in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.

Analysts had expected earnings of $3.13 per share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 per share on revenue of $11 billion to $11.8 billion.

Qualcomm shares are down 38% year to date, compared with a 41% decline for the PHLX Semiconductor Index SOX.
S&P 500 down 21% by SPX,
and a 33% decline with the tech-heavy Nasdaq Composite Index COMP,

Advanced Micro Devices Inc. AMD stock,
The chip maker outperformed the broader market on Wednesday after it said it would clear excess inventory by the end of the year and forecast sales of data center and internal products would continue to rise.

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