Qualcomm stock drops following earnings, outlook beat – MarketWatch

Qualcomm Inc. shares slipped in the extended session Wednesday as the chip maker’s quarterly results and outlook topped Wall Street estimates, but certain business segments fell short of expectations.

In its forecast for the second quarter, Qualcomm
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said it expects adjusted earnings of $2.80 to $3 a share on revenue of $10.2 billion to $11 billion, while analysts surveyed by FactSet estimated $2.51 a share on revenue of $9.66 billion.

Breaking that down, the company expects sales of CDMA technologies, or QCT, of $8.7 billion to $9.3 billion. QCT includes handset and RF chips as well as chips for autos and Internet of Things. Analysts expect QCT sales of $8.05 billion

The company also forecast sales of Qualcomm’s technology licensing, or QTL, of $1.45 billion to $1.65 billion. while analysts had estimated QTL sales of $1.58 billion.

“Demand remains strong across all of our technologies and continues to exceed supply,” said Cristiano Amon, Qualcomm’s chief executive, on a call with analysts. “Despite ongoing challenges across the global supply chain, our multi-sourcing and capacity-expansion initiatives will provide incremental improvements to our supply throughout the year.” Amon added that supply is expected to get better in the second half of the year.

Total revenue for the holiday quarter rose to $10.71 billion from $8.24 billion in the year-ago quarter. Analysts surveyed by FactSet had forecast revenue of $10.44 billion, based on Qualcomm’s revenue forecast of $10 billion to $10.8 billion.

Qualcomm reported revenue from its QTC segment of $8.85 billion, a 35% gain from a year ago, with strong sales for handset chips making up for lower-than-expected sales of other products. Analysts had estimated $8.69 billion, based on the company’s forecast of $8.4 billion to $8.9 billion.

Breaking that down, handset chip sales rose 42% to $5.98 billion from a year ago, while the Street expected $5.53 billion. Meanwhile, other segments fell short: RF front-end sales rose 7% to $1.13 billion versus an expected, $1.27 billion, auto chip sales rose 21% to $256 million versus the Street’s $275.9 million, and IoT sales rose 41% to $1.48 billion versus a $1.57 billion Street view.

On the call, Akash Palkhiwala, Qualcomm’s chief financial officer, said those non-handset businesses are expected to grow going forward, and credited handset strength to the holiday season.

“December being a strong quarter for the handset business, we definitely prioritize the handset business over some of the other new opportunities,” Palkhiwala said on the call. “We expect auto and IoT to see strong sequential growth in the second quarter and also strong year-over-year growth.”

“Today most of the business is handsets, but we’re going to have RF opportunities with 5G and automotive, with 5G and IoT, and then Wi-Fi RF as well,” Palkhiwala told analysts.

Revenue from the QTL segment rose 10% to $1.82 billion for the fourth quarter, while analysts had estimated $1.71 billion, based on a company forecast of $1.6 billion to $1.8 billion.

Meanwhile, Qualcomm reported first-quarter earnings of $3.4 billion, or $2.98 a share, compared with $2.46 billion, or $2.12 a share, in the year-ago period. The chip maker reported adjusted earnings, which exclude stock-based compensation expenses and other items, of $3.23 a share, compared with $2.17 a share in the year-ago period.

Analysts estimated earnings of $3.01 a share, based on Qualcomm’s forecast of $2.90 to $3.10 a share.

Shares, which had dropped as low as 8% after hours, pared some of those losses by the end of the conference call and were last down 2% in the extended session. In the regular session, shares rose 6.3% to close at $188.20.

Over the past 12 months, Qualcomm shares are up 14%, compared with an 18% gain for the PHLX Semiconductor Index
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a 20% rise by the S&P 500 index 
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  and a 6% gain by the tech-heavy Nasdaq Composite Index 
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