Qualcomm President and CEO Cristiano Amon speaks about Qualcomm’s technology for automakers at a press conference during CES 2022 in Las Vegas, Nevada, on January 4, 2022.
Steve Marcus | Reuters
Qualcomm reported third-quarter earnings after the bell on Wednesday, slightly beating Wall Street expectations, but guidance for the current quarter fell short of consensus expectations.
Qualcomm shares fell more than 4% in extended trading.
Here’s how Qualcomm fared against Refinitiv’s consensus expectations:
- EPS: $2.96, adjusted, vs. $2.87 expected, up 53% year-over-year.
- Revenue: $10.93 billion, adjusted, vs. $10.88 billion forecast, up 37% year-over-year.
Qualcomm said it expected fourth-quarter earnings of $3 to $3.30 per share on sales of $11 billion to $11.8 billion, below Wall Street’s fourth-quarter earnings expectations of $3.23 per share and $11.87 billion in sales.
Qualcomm CEO Cristiano Amon said in a statement that the company’s results were strong despite being in a “challenging macroeconomic environment.” Qualcomm’s sales rose 37% in the quarter.
Qualcomm’s biggest line of business is selling processors and modems for smartphones. The company’s mobile phone business grew 59% year-over-year in the quarter to $6.15 billion, despite signs that smartphone sales may already be slowing due to macroeconomic conditions such as inflation.
But Qualcomm’s forecast suggested the company’s cellphone sales growth would slow in its fiscal fourth quarter, reflecting the possibility that a decline in smartphone demand could hurt its core business both in terms of income and earnings. Qualcomm also expected operating expenses to rise 6% to 8% sequentially in the quarter.
Qualcomm said it is still on track for its mobile phone business to grow slightly below 50% this year thanks to more expensive chips and selling more chips to a wider market.
The phones are reported under a unit called QCT along with the other semiconductors Qualcomm sells, such as RF front-end, chips for cars and low-power chips for connected devices. This segment grew 45% annually to $9.38 billion. Mobile phones were the segment’s fastest-growing business despite Qualcomm’s recent efforts to diversify into other types of chips.
Qualcomm announced a partnership with Samsung until 2030 that includes patent licensing and the supply of Snapdragon processors for mobile phones. Samsung is the world’s leading smartphone maker by unit.
Automotive chips grew 38% annually to $350 million, an all-time high for Qualcomm, suggesting it’s still a small company compared to Qualcomm’s other lines. Qualcomm’s IoT business, which makes low-power chips for connected devices, grew 31% to $1.83 billion.
QTL, Qualcomm’s other major unit that consists of license fees related to 5G and other technologies the company manufactures, posted nearly $1.52 billion in sales, a 2% year-over-year increase. It hasn’t grown strongly in recent years, but it’s still an important source of profit for the chip maker.
Qualcomm’s gross margin was lower than expected during a period when chip costs have been rising due to shortages and problems with Chinese production. Qualcomm outsources its chip manufacturing to outside foundries that have been booked solid since the start of the pandemic. Qualcomm reported gross margin of 56% versus a consensus estimate of 57.8%.
Qualcomm said it spent $1.3 billion on shareholder returns in the quarter, including $842 million in dividends.