Qualcomm to cut costs through hiring freeze after poor earnings forecast for next fiscal quarter
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Update time : 2022-11-04 10:35:09
After the US stock market closed on Wednesday 2 November, US chip giant Qualcomm released its results for the fourth fiscal quarter of 2022, which ended on 25 September this year. Despite delivering results in line with expectations, its fiscal 2023 first-quarter earnings forecast was well below analysts' expectations, sending its after-hours share price down nearly 7%.
The results show that Qualcomm's fourth quarter adjusted earnings per share was $3.13, unchanged from market expectations; operating income was $11.39 billion, a 22% year-on-year growth rate, also largely in line with expectations. Qualcomm's main business is comprised of Qualcomm Semiconductor (QCT), which focuses on chip products, and Qualcomm Technology Licensing (QTL), which is responsible for licensing intellectual property. In the fourth fiscal quarter, Qualcomm's QCT business, which includes smartphone chips, RF front-end components, automotive chips and IoT devices, generated revenues totalling US$9.9 billion, up 28 per cent year-on-year and above Wall Street's expectations of US$9.87 billion. Specifically, revenue from handsets reached US$6.57 billion, up 40% year-on-year and slightly above market forecasts of US$6.59 billion; revenue from the RF front-end components business fell 20% year-on-year to US$992 million; revenue from automotive chips jumped 58% to US$427 million; and IoT devices grew 24% to US$1.915 billion. Notably, revenue growth in the mobile phone and IoT devices businesses was lower than the full fiscal year revenue growth rate, RF front-end components revenue increased by 4% year-on-year for the full year, while the automotive chip business grew at a higher rate than the 41% for the full year. Qualcomm's QTL division contributed US$1.44 billion in revenue for the reporting period, down 8 percent year-on-year and below market expectations of US$1.58 billion. The QCT business contributed 34 per cent of EBITDA in the fourth fiscal quarter, up two percentage points year-on-year, while the QTL business contributed 69 per cent, down three percentage points compared to the same period last year. Qualcomm expects revenues to be in the range of $9.2 billion to $10 billion in the first quarter of fiscal 2023, significantly below analysts' expectations of $12.03 billion. Revenue from the QCT business will be in the range of $7.7 billion to $8.3 billion, and revenue from the QTL business will be in the range of $1.45 billion to $1.65 billion. Earnings per share would be between $1.72 and $1.92 under GAAP (US GAAP) and $2.25 to $2.45 under Non-GAAP (non-GAAP). In a conference call following the earnings release, Qualcomm CEO Cristiano Amon said Qualcomm is responding to the economic slowdown by freezing hiring and further cutting operating expenses. In addition, Qualcomm updated its guidance on smartphone sales expectations for 2022, with previous estimates of a decline in sales of around 5 per cent from a year ago now changed to a decline of less than 15 per cent. Qualcomm said handset makers have been dealing with excess inventory before resuming chip orders, which could take up to two quarters to resolve. Major mobile phone component suppliers are pessimistic about smartphone market conditions. Murata expects the decline in smartphone sales this year to continue into 2023, with sales in China in particular set to fall sharply. Murata supplies electronic modules and components for Apple's iPhone, Samsung Electronics' Android devices and Chinese mobile phone makers. Murata estimates that the global mobile phone market sold 1.36 billion units in the last fiscal year, while the current fiscal year's sales figure is likely to be less than 1.2 billion units, with the biggest downside risk being a further decline in overseas sales by Chinese companies.
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