Qualcomm forecast indicates smartphone slump will drag on
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Qualcomm forecast indicates smartphone slump will drag on

Qualcomm forecast indicates smartphone slump will drag on

Revenue will be $8.1bn to $8.9bn in the fiscal third quarter, Qualcomm said, falling well short of the $9.25bn average analyst estimate


Qualcomm, the largest maker of smartphone processors, gave a disappointing sales and profit forecast for the current period, signalling that demand for mobile devices remains sluggish.

Revenue will be $8.1bn to $8.9bn in the fiscal third quarter, Qualcomm said Wednesday in a statement, falling well short of the $9.25bn average analyst estimate. That sent the shares sliding in late trading.

The outlook shows the challenge the firm faces in navigating an industrywide downturn. Weak demand for phones has led to a buildup in handset chips — the company’s main source of revenue.

Chief executive officer Cristiano Amon has promised investors that once phone makers have worked through their inventory, the orders will bounce back. But that’s taking longer than feared.

In the longer run, the San Diego-based company is looking to decrease its reliance on smartphones by selling more chips for cars, networking, computing and wearable devices.

“As we navigate this challenging environment, we remain focused on the critical factors we can control to emerge stronger from this downturn — our leading technology road map, best-in-class product portfolio, strong customer relationships and operational efficiencies,” Amon said in the statement. “Our top priority remains to execute our diversification strategy and invest in areas that drive long-term value.”

Excluding certain items, third-quarter earnings will about $1.70 to $1.90 a share. That compares with an average projection of $2.20.

Qualcomm fell more than 4 per cent in extended trading following the announcement. The stock had increased 2.6% this year through the close, trailing broader gains by semiconductor-related shares.

In the fiscal second quarter, which ended March 26, revenue fell 17 per cent to $9.3bn, Qualcomm said. It posted a profit, minus certain items, of $2.15 a share, matching estimates.

Handset-related sales fell 17 per cent to $6.1bn, compared with an average estimate of $5.3bn. Automotive revenue jumped 20 per cent from a year earlier to $447m, topping projections. And sales from connected devices were in line with estimates at $1.39bn.

Qualcomm’s large portion of sales

Qualcomm gets a large portion of its sales from Chinese manufacturers that serve domestic customers — the world’s biggest buyers of chips. Pandemic lockdowns in that country restrained consumer spending, and Qualcomm said there’s been no quick rebound yet.

The company’s main product is the processor that runs many of the world’s best-known phones. It also sells the modem chips that connect Apple’s iPhone to high-speed data networks.

An additional chunk of Qualcomm’s profit comes from licencing the fundamental technology that underpins all modern mobile networks — fees that phone makers pay whether they use Qualcomm-branded chips or not.

Read: Samsung is first to start mass production of 3-nanometre chips

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