Qualcomm’s stock loss accelerates after hours as revenue growth is tied to smartphone and China recovery

Qualcomm Inc. shares fell further in Wednesday’s extended session as the chip maker’s forecast was on the low side of Wall Street estimates following an earnings beat.


shares, which had been down 2% after hours following the release of results, dropped 7% during the conference call with analysts, as Chief Financial Officer Akash Palkhiwala told analysts that revenue growth will depend upon a recovery in handsets, or phone sales, and a recovery in China, both of which have yet to materialize. The stock closed down 2.1% at $129.27 in the regular session.

On the call, Palkhiwala told analysts the company expects fiscal fourth-quarter sales of CDMA technologies, or QCT, of $6.9 billion to $7.5 billion. QCT includes handset and radio-frequency, or RF, chips as well as chips for cars and the Internet of Things. Analysts had forecast QCT sales of $7.45 billion. For the third quarter, Qualcomm reported handset revenue of $5.26 billion, a 15% drop from a year ago, while analysts had forecast $5.31 billion.

The company also forecast sales of Qualcomm’s technology licensing, or QTL, of $1.15 billion to $1.35 billion on a slight sequential increase in handset sales. Analysts had forecast $1.26 billion.

Palkhiwala told analysts that the company’s fourth-quarter earnings forecast of $1.80 to $2 a share, on revenue of $8.1 billion to $8.9 billion, included expected handset growth in the holiday season. Meanwhile, Wall Street estimated $1.92 a share for the fourth quarter along with revenue of $8.74 billion.

“As we approach fiscal 2024, our revenue growth will largely depend on the macroeconomic environment, global handset units and China recovery,” Palkhiwala said.

“We continue to estimate that calendar 2023 handset units will be down at least a high-single-digit percentage relative to calendar 2022, reflecting the macro environment and a slower recovery in China,” the CFO told analysts, adding that the forecast includes anticipated holiday sales for handsets.

The company reported fiscal third-quarter net income of $1.8 billion, or $1.60 a share, compared with $3.73 billion, or $3.29 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $1.87 a share, compared with $2.96 a share in the year-ago period.

Total revenue for the third quarter fell to $8.45 billion from $10.94 billion in the year-ago period. Analysts surveyed by FactSet forecast third-quarter earnings of $1.81 a share on revenue of $8.51 billion.

Qualcomm reported QCT revenue of $7.17 billion and QTL revenue of $1.23 billion, while analysts had forecast $7.23 billion and $1.25 billion, respectively.

Year to date, Qualcomm shares are up 17.6%, compared with a 22% gain by the PHLX Semiconductor Index
a 17.6% gain by the S&P 500

and a 46.8% gain by the tech-heavy Nasdaq Composite Index

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