Qualcomm Inc. shares fell in the extended session Wednesday after the chip maker’s outlook indicated a big backup of inventory in its core business as its forecast fell way below what Wall Street expected.
Qualcomm
QCOM,
shares dropped as much as 7% after hours, following a 4.1% decline to close at $112.50 in the regular session. In late July, the San Diego-based chip maker cut its forecast because of weakness in the smartphone market that had yet to creep into the premium handset market.
“The rapid deterioration in demand and easing of supply constraints across the semiconductor industry have resulted in elevated channel inventory,” said Cristiano Amon, president and chief executive of Qualcomm, in a statement. “Due to these elevated levels, our largest customers are now drawing down on their inventory, negatively impacting the midpoint of our EPS guidance for the first quarter of fiscal 2023 by approximately ($0.80). This is the primary driver of the variance relative to our prior expectations.”
Qualcomm forecast first-quarter earnings of $3 to $3.30 a share on revenue of $9.2 billion to $10 billion, while the Street estimated $3.43 a share on revenue of $12.02 billion.
“While our financial outlook is being temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged,” Amon said.
While handset-chip sales surged 40% to $6.57 billion from a year ago, topping the Street’s expectation of $6.55 billion, the company’s forecast indicates a big glut in inventory in Qualcomm’s CDMA Technologies unit, the one that includes handset and RF chips as well as chips for autos and Internet of Things.
Qualcomm expects QCT sales of $7.7 billion to $8.3 billion, and sales from Qualcomm’s technology licensing, or QTL, segment of $1.45 billion to $1.65 billion. Analysts had forecast forecast $10.42 billion in QCT sales and QTL revenue of $1.71 billion.
Read about: Intel’s quarterly results, AMD’s quarterly results
Qualcomm reported fourth-quarter QCT revenue of $9.9 billion, a 28% gain from a year ago. Analysts had estimated $9.84 billion, based on the company’s forecast of $9.5 billion to $10.1 billion.
Fourth-quarter RF front-end sales fell 20% to $992 million, compared with a Wall Street estimate of $1.05 billion. Auto-chip sales zoomed up 58% to $427 million, and Internet of Things, or IoT, sales rose 24% to $1.92 billion. Meanwhile, the Street was expecting auto sales of $362.4 million, and IoT sales of $1.82 billion.
Revenue from the QTL segment fell 8% to $1.44 billion compared with Wall Street estimates of $1.58 billion, based on a company forecast of $1.45 billion to $1.65 billion.
The company reported fiscal fourth-quarter net income of $2.87 billion, or $2.54 a share, compared with $2.8 billion, or $2.45 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.13 a share, compared with $2.55 a share in the year-ago period. Total revenue for the third quarter rose to $11.4 billion from $9.34 billion in the year-ago period.
Analysts had estimated earnings of $3.13 a share on revenue of $11.32 billion, based on Qualcomm’s forecast of $3 to $3.30 a share on revenue of $11 billion to $11.8 billion.
Year to date, Qualcomm shares are down 38%, compared with a 41% decline for the PHLX Semiconductor Index
SOX,
a 21% decline by the S&P 500 index
SPX,
and a 33% drop by the tech-heavy Nasdaq Composite Index
COMP,
Shares of Advanced Micro Devices Inc.
AMD,
outperformed the broader market Wednesday after the chip maker said it would clear excess inventory by the end of the year, and forecast that data-center and embedded product sales would continue to rise.
