On Wednesday, Qualcomm released third-quarter earnings that above Wall Street forecasts, but fourth-quarter revenue and guidance fell short.

In extended trade, Qualcomm’s stock dropped more than 6%.

The chipmaker performed as follows for the quarter that ended on June 25:

Earnings: $1.87 per share, adjusted, compared to the $1.81 per share consensus expectation from Refinitiv.

Adjusted revenue was $8.44 billion compared to consensus projections from Refinitiv of $8.5 billion.

In contrast to Refinitiv average projections of $1.91 in earnings on $8.7 billion in revenue, Qualcomm said it projected fourth-quarter earnings of between $1.80 and $2 per share on between $8.1 billion and $8.9 billion in sales.

A startling 52% decrease in net income from the $3.73 billion, or $3.29 per share, recorded a year earlier resulted in the quarter’s net income falling to $1.8 billion, or $1.60 per share.

Because Qualcomm produces the chips that power numerous low-end phones as well as the majority of high-end Android handsets, the company is exposed to the sinking smartphone market.

Analysts predict a fall in new device shipments in 2023, while Qualcomm reiterated that it anticipates a “high-single digit percentage” decline in handset sales this year, largely as a result of a sluggish Chinese recovery. The chipmaker did claim that it expects a rise in smartphone sales to begin during the holiday season.

Sales of processors for smartphones, automobiles, and other smart devices were reported by Qualcomm’s largest subsidiary, QCT, at $7.17 billion, a 24% decrease from the previous year.

The largest component of QCT is sales of handset chips, which fell 25% from the previous 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 division, which provides processors and software for autonomous vehicles, was a bright light, with quarterly revenue increasing 13% to $434 million.

The internet of things sector, which manufactures cheaper chips for low-power gadgets and industrial applications, had a 24% decline in sales to $1.48 billion. Additionally, chip sales to Meta for its Quest VR headsets are included in this area.

QTL, Qualcomm’s lucrative licencing division, had a 19% fall in revenue to $1.23 billion.

In a statement, Qualcomm CEO Cristiano Amon emphasised the company’s artificial intelligence strategy as semiconductor companies look to profit from the industry’s attention on the chips required to operate programmes like OpenAI’s ChatGPT. He claimed Qualcomm has a possibility for a “inflection point” that might spur future growth because it can run AI models on phones rather than on cloud servers.

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

According to Qualcomm, prices have been down 5% so far this year compared to 2022. According to the San Diego Union-Tribune, it slashed 415 workers at its San Diego headquarters in June. The business announced that it will roll out additional cost-cutting initiatives in the first half of 2019.

Qualcomm reported that it repurchased $400 million worth of stock during the quarter and paid dividends totalling $893 million.

(Adapted from BeamStart.com)