Qualcomm (QCOM) Q3 2022 results

Qualcomm President and CEO Cristiano Amon speaks about Qualcomm’s technology for automakers during 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 stock fell more than 4% in extended trading.

Here’s how Qualcomm fared against Refinitiv consensus expectations:

  • PES: $2.96, adjusted, vs. $2.87 expected, up 53% year-over-year.
  • Revenue: $10.93 billion adjusted, vs. $10.88 billion expected, up 37% year-over-year.

Qualcomm said it expects about $3 to $3.30 in earnings per share in the fourth quarter on sales of $11 billion to $11.8 billion, below Wall Street expectations. fourth-quarter earnings 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 a “challenging macroeconomic environment”. Qualcomm’s sales increased 37% in the quarter.

Qualcomm’s largest line of business is selling processors and modems for smartphones. The company’s handset business grew 59% year on year in the quarter to $6.15 billion, despite signs that smartphone sales may already be slowing due to macroeconomic conditions such as the ‘inflation.

But Qualcomm’s forecast suggests that the company’s handset sales growth will slow in its fiscal fourth quarter, reflecting the possibility that a drop in demand for smartphones could hit its core business both in terms of revenue and of profits. Qualcomm also expects operating expenses to grow between 6% and 8% sequentially in the quarter.

Qualcomm said it was still on course to grow its handset business by just under 50% this year thanks to more expensive chips and selling more chips to a broader market.

Handsets are reported under a unit called QCT along with other semiconductors sold by Qualcomm, such as RF front-end, chips for cars and low-power chips for connected devices. This segment grew by 45% on an annual basis to reach $9.38 billion. Handsets have been the segment’s fastest growing business despite recent efforts by Qualcomm to diversify into other chip types.

Qualcomm announced a partnership with Samsung until 2030 which includes licensing patents and providing Snapdragon processors for handsets. Samsung is the world’s largest smartphone maker on a unit basis.

Automotive chips rose 38% on a yearly basis to $350 million, an all-time high for Qualcomm, suggesting it’s still a small business compared to Qualcomm’s other lineups. Qualcomm’s IoT business, which makes low-power chips for connected devices, rose 31% to $1.83 billion.

QTL, Qualcomm’s other major unit that includes license fees for 5G and other technologies manufactured by the company, reported revenue of nearly $1.52 billion, an increase 2% annually. It hasn’t seen strong growth in recent years but remains a major source of profit for the chipmaker.

Qualcomm’s gross margin fell short of expectations during a period when chip costs rose due to shortages and problems with Chinese production. Qualcomm is outsourcing its chip manufacturing to outside foundries that have been well booked since the start of the pandemic. Qualcomm announced a gross margin of 56% against a consensus estimate of 57.8%.

Qualcomm said it spent $1.3 billion in shareholder returns during the quarter, including $842 million in dividends.

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