Chipmaker Analog Devices Inc has forecast its fiscal fourth quarter revenue above analysts’ prior estimates in spite of an anticipated slowdown in the sales of chips for 5G networks.
The chipmaker has forecast $1.44 billion for its fiscal fourth-quarter revenue, plus or minus 10%, and adjusted earnings per share of $1.32 per share, plus or minus 10 cents.
Both of these forecasts are above analyst expectations of $1.41 billion in revenue and adjusted earnings per share of $1.24, according to Refinitiv’s IBES data.
ADI makes a wide range chip, including ones that go into 5G networking gear.
The company said it expects sales to a company, believed to be China’s Huawei Technologies Co Ltd, to drop to zero in the current fiscal fourth quarter, following issuance of new rules by the United States.
During a conference call, ADI’s Chief Financial Officer Prashanth Mahendra-Rajah said, a slowdown in 5G chip sales stemmed from “normal operating lumpiness of the communications business” in which carriers buy up chips and deploy equipment in spurts and was unrelated to Huawei.
In an interview, ADI’s CEO Vincent Roche said, revenue from “a formerly large Chinese customer” had dropped into the “very low single” digits as a percentage of ADI’s revenue in recent quarters and is expected to drop to zero.
He went on to add, new rules issued by the U.S. on Monday, meant any U.S. chip company, or any non-U.S. chip company using U.S. technology to create chips, can no longer sell to the Chinese company; ADI officials have not named the Chinese company but analysts opine it to be Huawei.
“We support all our customers with great equality, but we stay on the right side of the regulations,” said Roche.
New U.S. rules allow companies to apply for licenses to sell to Huawei.
Roche said, ADI intends to seek licenses for its formerly large Chinese client.