A Qualcomm sign is pictured at the Mobile World Congress (MWC) in Shanghai, China June 28, 2019. REUTERS/Aly Song GLOBAL BUSINESS WEEK AHEAD

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July 27 (Reuters) – Qualcomm Inc (QCOM.O) forecast fourth-quarter revenue below estimates on Wednesday, bracing for tough economic conditions and a slowdown in smartphone demand that could affect its core business chips for handsets.

Shares of the San Diego-based company fell 2.9% in extended trading, adding to the stock’s decline of about 18% this year amid a broader sell-off in growth stocks.

The chipmaker again beat expectations for adjusted revenue in the third quarter, driven by 59% growth in its handset chip business.

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“The weakness we are seeing in consumers has been offset by the company’s diversification strategy and focus on high-end, high-end handsets,” said Christiano Amon, chief executive of Qualcomm.

Qualcomm is looking to diversify into sectors such as automotive, but its handset chip business still accounts for more than half of total sales.

The company now expects smartphone sales to fall 5% this year, compared to its earlier outlook for flat growth, chief financial officer Akash Palkhiwala said.

Major chipmakers including Micron Technology (MU.O) and Texas Instruments (TXN.O) also warned of cooling demand for consumer electronics.

Smartphone sales are under pressure as runaway inflation, growing recession risks and China’s repeated COVID-19 lockdowns force consumers to limit spending. Global smartphone shipments will drop 3.5% this year, according to IDC data.

The Ukraine crisis and lockdowns in China have also deepened supply chain issues and hurt demand, forcing many phone makers to cut chip orders.

Qualcomm expects current-quarter revenue of $11 billion to $11.8 billion, versus analyst estimates of $11.87 billion, according to Refinitiv data.

He expects adjusted earnings per share to be between $3 and $3.30, versus estimates of $3.23.

Qualcomm said the midpoint of its fourth-quarter guidance included an estimated impact of a roughly 20-cent reduction in earnings per share due to macroeconomic headwinds and a weaker global handset forecast.

Adjusted revenue for the quarter ended June 26, when analysts expected strong demand from Apple (AAPL.O), was $10.93 billion, versus estimates of $10.88 billion of dollars.

Separately, Qualcomm announced that it has extended its patent license agreement with Samsung Electronics (005930.KS) until the end of 2030. It has also agreed to expand the use of Snapdragon platforms for future high-end products. Samsung Galaxy range, including Samsung Galaxy phones.

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Reporting by Chavi Mehta in Bengaluru and Jane Lanhee Lee in Oakland, California; Editing by Devika Syamnath

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