Qualcomm Sinks After Soft Guidance Despite Quarterly Beat
Fell after the company issued light current-quarter guidance and warned that broad input-cost pressure is squeezing the semiconductor industry. The chipmaker…
Qualcomm stock fell in extended trading on Wednesday after the chipmaker posted fiscal third-quarter results that matched analyst expectations but gave lighter guidance for the current quarter. The company pointed to an ongoing supply crunch for computer parts, especially memory, and said costs are rising across the semiconductor supply chain.
For the quarter, Qualcomm reported adjusted earnings of $2.21 a share on revenue of $9.95 billion. That compared with LSEG estimates of $2.23 a share on $9.67 billion in sales. The stock moved lower as investors focused less on the beat in revenue and more on what comes next.
Guidance lands below estimates
Qualcomm said it expects adjusted earnings per share of between $2.05 and $2.25 in the current quarter, with revenue between $9.7 billion and $10.5 billion. Analysts polled by LSEG were looking for $2.36 in adjusted earnings per share on $10.02 billion of sales.
The warning mattered. Qualcomm said the semiconductor industry is seeing a broad-based increase in input costs across wafer fabrication, assembly, test, advanced packaging, memory and other materials. The company added that revenues continue to be healthy, but the margin pressure is real.
CEO Cristiano Amon said Qualcomm is taking concrete steps to expand margins, including raising prices across the board starting on September 1 for the company’s chips. He also said the company is looking for ways to streamline its supply chain.
“Cost went up, prices are going to go up,” Amon said in an interview.
What the numbers say
Qualcomm’s handset business remains its biggest source of chip sales. In the quarter, handset chip sales came in at $5.1 billion, down 20% from a year earlier. The company said it is still trying to diversify beyond smartphones, with targets that include cars, smart glasses and robots.
That diversification push is central to the investment case around Qualcomm stock. Smartphone demand still drives a large part of the business, but the company is trying to reduce that dependence as it expands into other device categories. Qualcomm said it is targeting non-smartphone sales to be 60% of company revenues next year.
The result leaves investors with a mixed read. Qualcomm delivered earnings that held up. The guidance did not. And in a market that is already sensitive to margin pressure, that was enough to knock the shares lower after the bell.
The company is also preparing for a change in pricing strategy. Starting September 1, it plans to lift prices across its chip lineup, a move that will test how much customers can absorb while the supply chain remains under strain.
Qualcomm had entered the report with some support from Wall Street expectations. Before the release, the Zacks Consensus Estimate stood at $9.71 billion for sales and $2.22 per share for earnings, and the company had posted an average trailing four-quarter earnings surprise of 3.28%. Its last reported quarter produced an earnings surprise of 3.11%.
But the latest quarter put the focus back on costs, pricing and the demand mix. The next test comes when investors see whether Qualcomm’s price increases and diversification push can offset the pressure that management is already signaling.
