Qualcomm Inc. shares fell in Wednesday’s extended session after the chipmaker’s poor outlook and estimates of about two months or more of inventory it needs to clear at its core business.
Qualcomm QCOM shares, -4.12%, are down as much as 7% after the close, after falling 4.1% in the regular session to close at $112.50. In late July, the San Diego-based chipmaker lowered its forecast due to weakness in the smartphone market, which has yet to creep into the premium handset market.
Speaking to analysts, Chief Executive Cristiano Amon said the accelerating weak demand is related to “macroeconomic headwinds and the ongoing COVID in China” and “the rapid deterioration in demand and easing of supply constraints” across the chip industry. would take out about 80 cents a share of first-quarter earnings.
“That’s the main factor,” Amon told analysts on the earnings call. “It’s mostly a cellphone consumer story.” First-quarter earnings would take a hit of 80 cents a share as a result, the company said.
Another important factor is that companies simply spend less. Amon said: “Companies across the board have had much higher inventory guidelines, the supply chain has been resolved and you have this macro uncertainty, you have a drawdown trying to take inventory to a different level than it was during the demand constraint situation was.”
Qualcomm forecast Q1 earnings of $3-$3.30 per share on revenue of $9.2-$10 billion, while The Street forecast $3.43 per share on revenue of 12, 02 billion US dollars estimated.
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Chief Financial Officer Akash Palkhiwala told analysts the channel is elevated around eight to 10 weeks. Meanwhile, Qualcomm has imposed a hiring freeze and is looking at cost-saving measures, executives told analysts.
While cell phone chip sales rose 40% year over year to a record $6.57 billion, beating the Street’s estimate of $6.55 billion, the company’s forecast points to a major inventory glut in Qualcomm’s CDMA technology division, which includes cell phones and RF chips, as well as chips for cars and the Internet of Things.
Qualcomm expects QCT revenue of $7.7 billion to $8.3 billion and revenue from Qualcomm’s Technology Licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast QCT revenue of $10.42 billion and QTL revenue of $1.71 billion.
Qualcomm reported QCT revenue of $9.9 billion for the fourth quarter, up 28% year over year. Analysts had put it at $9.84 billion based on the company’s guidance of $9.5 billion to $10.1 billion.
Autochip sales rose 58% to a record $427 million in the fourth quarter, and Internet of Things, or IoT, sales rose 24% to a record $1.92 billion. The Street expected $362.4 million in auto sales and $1.82 billion in IoT sales.
QTL segment revenue declined 8% to $1.44 billion compared to Wall Street’s estimate of $1.58 billion based on the company’s guidance of $1.45 billion to $1.65 billion -Dollar.
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The company reported net income of $2.87 billion, or $2.54 per share, for the fourth quarter, compared to $2.8 billion, or $2.45 per share, in the same period last year. The chipmaker reported adjusted earnings, which excludes stock-based compensation expense and other items, of $3.13 per share, compared to $2.55 per share in the year-ago period. Total revenue increased to $11.4 billion in the third quarter from $9.34 billion in the same period last year.
Analysts had estimated earnings at $3.13 per share on revenue of $11.32 billion based on Qualcomm’s guidance of $3 to $3.30 per share on revenue of 11 to 11.8 billion dollars.
Year to date, Qualcomm shares are down 38% compared to a 41% decline in the PHLX Semiconductor Index SOX, -3.09%, a 21% decline in the S&P 500 Index SPX, -2.50% and a 33% decline in Tech-heavy Nasdaq Composite Index COMP, -3.36%.
Shares of Advanced Micro Devices Inc. AMD, -1.73%, outperformed the broader market on Wednesday after the chipmaker said it would shed excess inventory by the end of the year and forecast that data center and embedded sales would increase products would continue to rise.