On Wednesday, Qualcomm revealed third-quarter earnings that were higher than anticipated by Wall Street, however, revenue and the company's projections for the fourth quarter were not as strong. Qualcomm is affected by the weak smartphone market, as it manufactures the processors in most high-end Android devices. Sales of the handset chips slipped 25% during the year and amounted to $5.26 billion.
On Wednesday, Qualcomm reported third-quarter earnings that beat Wall Street expectations, but the announcement of revenue and guidance for the fourth quarter were below analyst forecasts. This news caused Qualcomm stock to fall more than 6% in after-hours trading.
The chipmaker reported adjusted earnings of $1.87 per share on revenue of $8.44 billion for the quarter ended June 25. This was compared to Refinitiv consensus estimates of $1.81 in earnings on $8.5 billion in revenue.
Qualcomm stated that it anticipates a “high-single digit percentage” decrease in handset units for the year, due in part to a slow recovery in China. Further, the company's guidance for the fourth quarter included expectations of $1.80 to $2.00 in earnings on $8.1 billion to $8.9 billion in revenue, which is below Refinitiv consensus forecasts of $1.91 in earnings on $8.7 billion in revenue.
Qualcomm had a net income of $1.8 billion, or $1.60 per share, for the quarter, a 52% drop from the $3.73 billion, or $3.29 per share, reported a year earlier. The largest division at Qualcomm, QCT, experienced a 24% drop in sales, to $7.17 billion. This was mainly due to a 25% decline in handset chip sales to $5.26 billion.
Predominantly, the chipmaker’s automotive business saw a rise in revenue of 13%, bringing in $434 million, while the IoT business had a decline of 24%, for total sales of $1.48 billion. Additionally, QTL, Qualcomm's profitable licensing segment, declined 19% to $1.23 billion in revenue.
CEO Cristiano Amon pointed out Qualcomm’s artificial intelligence strategy in a statement. He believes it will provide the company with an “inflection point” to drive future growth. The chipmaker has also implemented cost-cutting measures, including 415 job cuts in San Diego and the reduction of spending by 5% year-over-year. Additionally, Qualcomm paid out $893 million in dividends and repurchased $400 million in stock during the quarter.
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