Last Updated: May 04, 2023, 15:05 IST
(Reuters) -Qualcomm Inc on Wednesday forecast third-quarter revenue and profit below Wall Street estimates, citing worries the smartphone industry would take longer to exhaust excess supply before fresh orders flow in.
Shares of the chip designer fell 4% in extended trading after it said its forecast also accounted for macroeconomic headwinds, weaker global sales of handsets and channel inventory drawdown.
“As we navigate this challenging environment, we remain focused on the critical factors we can control to emerge stronger from this downturn,” Qualcomm CEO Cristiano Amon said in a statement. “Our top priority remains to execute our diversification strategy and invest in areas that drive long-term value.”
The company said a larger-than-normal decline in its chip revenue forecast from the prior quarter was mainly due “to the timing of purchases by a modem-only handset customer.”
Qualcomm did not name the customer, but Kinngai Chan, analyst at Summit Redstone Partners, said it was Apple. Apple is the largest purchaser of its standalone modem chips, instead of Qualcomm’s main flagship chip which includes a modem and an application processor. Apple makes its own application processor.
Qualcomm forecast chips revenue of $6.9 billion to $7.5 billion.
The smartphones market was one of the first hit by declining demand after high inflation curbed consumer spending on discretionary goods like electronics, resulting in vendors slashing new chip orders.
Smartphone demand has remained weak despite promotions and price cuts. Global smartphone shipments fell 13% in the first quarter, according to research firm Canalys.
Easing COVID-19 curbs in China has not significantly boosted demand, with sliding first-quarter sales for Apple and its Android rivals in the world’s second largest economy.
Pervasive economic weakness has also forced device makers to limit chip orders. Rising competition especially from Taiwan’s MediaTek is a concern.
The company forecast revenue of $8.1 billion to $8.9 billion in the third quarter. Analysts polled by Refinitiv expected revenue of $9.14 billion.
It estimated adjusted earnings per share of $1.70 to $1.90, compared to analysts’ expectations of $2.16.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)