Qualcomm Earnings Could Fall 40% on Weak Handset, Chipset Demand

Attendees walk by the Qualcomm booth during CES 2019 at the Las Vegas Convention Center.
Justin Sullivan / Getty Images.

Qualcomm Inc. (QCOM), one of the top nine semiconductor companies by market capitalization, will likely report net income plunged by 40% in the second quarter of its 2023 fiscal year, amidst a drop off in demand for its chipsets, handsets, and internet of things (IoT) products and services.

Key Takeaways

  • Qualcomm will probably report adjusted EPS of $1.77 for Q2 FY 2023 vs. $2.57 a year earlier.
  • Revenue likely fell for a second consecutive quarter, with declines widening 700 basis points to 19%.
  • Qualcomm's handset, chipset, and IoT businesses face weakened demand due to economic issues.

Qualcomm is likely to report a net income of $1.9 billion, down from $3.3 billion a year ago, corresponding to adjusted earnings per share (EPS) of $1.77, about a third lower than $2.57 in the prior-year quarter, according to analyst estimates compiled by Visible Alpha. Revenue probably declined 19% to $9.1 billion. The company will report results after markets close on Wednesday.

Estimates of lower revenue and income underscore Qualcomm's ongoing battle against inflation and weaker demand for technology products.

A global chip shortage during the pandemic has given way to a drop-off in demand for tech products containing semiconductors, causing chipmaker inventories to balloon. Qualcomm's inventory rarely exceeded $2 billion before 2020, but inventories have exceeded $4 billion in each of the last four quarters. Analysts project inventory increased 22% in the most recent quarter to $5.5 billion.

CEO Cristiano Amon said earlier this year that reduced demand for handsets would likely lead to elevated inventory levels persisting "at least to the first half of calendar '23."

Weak demand has hit chipmakers' sales and an inventory glut has depressed prices. Qualcomm's shipments are expected to drop 15% to 181.8 million in the most recent quarter, while average sales price likely fell almost 7% to $32.30. Subsequently, handset revenue, the company's largest revenue stream, is likely to plunge by almost a quarter.

Qualcomm shares soared in January alongside other semiconductor stocks, buoyed by risk appetite and optimism that artificial intelligence applications would boost long-term chip demand. Qualcomm stock has fallen from its January highs and is up just 7% this year, compared with a 9% increase for the S&P 500 and a 22% rise for the S&P 500 Information Technology Sector.

Total year-to-date return of Qualcomm stock, the S&P 500, and the S&P 500 Information Technology Sector Index (as of May 1, 2023).
Qualcomm Key Stats
  Estimate for Q2 FY 2023 Actual for Q2 FY 2022 Actual for Q2 FY 2021
Adjusted Earnings Per Share ($) 1.77 2.57 1.53
Revenue ($B) 9.1 11.2 7.9
IoT Revenue ($B) 1.5 1.8 1.2

Source: Visible Alpha

The Key Metric: IoT Revenue

Qualcomm's IoT business involves producing semiconductors for consumer computing, voice and music applications, edge networking, and industrial use.

Qualcomm's IoT revenue climbed by at least 21% year-over-year from the final quarter of 2020 through the final quarter of 2022. It slowed to 7% growth in the most recent quarter. Now, analysts expect revenue in this business line to fall by 16% to $1.5 billion, the first YOY decline in three years.

Article Sources
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  1. CNBC. "Qualcomm revenue falls 12%, guidance implies more pain this quarter."

  2. Visible Alpha. "Financial Data."

  3. Qualcomm Inc. "Qualcomm Schedules Second Quarter Fiscal 2023 Earnings Release and Conference Call."

  4. Qualcomm Inc. "Annual report for the fiscal year ended September 25, 2022."

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