By
Godfrey Benjamin
October 31st, 2023
The company explained a 17-per cent drop in revenue by a tough macroeconomic environment and a “broad downturn” in the semiconductor sector.
Semiconductors and wireless telecommunications products manufacturer Qualcomm Incorporated (NASDAQ: QCOM) has reported its earning for the second quarter (Q2) of 2023. Qualcomm has beaten analysts’ revenue forecasts, with $9.27 billion versus Wall Street’s estimate of $9.1 billion. However, with a better-than-expected revenue, the company has seen a 17-per cent drop from last year’s mark in phone chip sales, which is its key business unit. Besides, it missed EPS estimates, delivering non-GAAP earnings of $2.15 per share, down from the last year’s $3.21 EPS.
Following the announcement, Qualcomm stock declined by 2.82% to close at $112.83 per share on Wednesday. In the pre-market, QCOM shares dropped by as much as 6.63% to $105.35. Year-to-date, Qualcomm stock is 2.63% up. Its market cap has totaled $129.46 billion.
Qualcomm Q2 2023: Highlights
For the second quarter of this year, Qualcomm reported $9.268 billion in revenue. The company operates in 3 segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). As much as $7.94 billion has been generated by QCT which focuses on chipsets, and $1.3 billion came from the licensing business. Handset revenue has increased by 6% to $6.1 billion, while automotive revenue of $447 million has grown by 20% year over year.
Further, Qualcomm has reported non-GAAP operating expenses of $2.2 billion.
During the second quarter of fiscal 2023, Qualcomm returned $1.7 billion to stockholders, including $834 million, or $0.75 per share, of cash dividends paid and $903 million through repurchases of 7 million shares of common stock.
Notably, the company explained a 17-per cent drop in revenue by a tough macroeconomic environment and a “broad downturn” in the semiconductor sector.
Qualcomm President and CEO Cristiano Amon commented:
“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 roadmap, best-in-class product portfolio, strong customer relationships and operational efficiencies. Our top priority remains to execute our diversification strategy and invest in areas that drive long-term value.”
According to Akash Palkhiwala, Qualcomm’s Chief Financial Officer and Executive Vice President, the fiscal 2023 year is a combination of an uncertain macroeconomic outlook, persistent inflation, and a slower recovery in China. And given the weaker handset forecast, Qualcomm expects further decline until demand normalizes and visibility improves.
What to Expect in Q3?
Giving a forecast for the third quarter of 2023, Qualcomm has provided the following estimates:
- revenue of $8.1 billion to $8.9 billion;
- non-GAAP EPS of $1.70 to $1.90;
- QTL revenue of $1.15 billion to $1.35 billion;
- QCT revenue of $6.9 billion to $7.5 billion.
In general, Qualcomm estimates a larger-than-normal sequential decline, with “roughly flat” Android handsets and automotive revenues and mid-single-digit growth in IoT.
Moreover, the company expects the trend of the third fiscal quarter to extend to the fourth quarter as a result of weaker global handset units, and channel inventory drawdown.