Qualcomm (QCOM) Q3 Earnings 2022

Qualcomm President and CEO Cristiano Amon talks about Qualcomm technologies for automakers at a press conference during CES 2022 in Las Vegas, Nevada on January 4, 2022.

Steve Markus | Reuters

Qualcomm informed profit in the third quarter after Wednesday’s bell, slightly beating Wall Street’s forecasts, but current quarter guidance fell short of consensus expectations.

Qualcomm shares fell more than 4% in extended trading.

Here’s how Qualcomm handled Refinitiv’s consensus expectations:

  • earnings per share: $2.96 adjusted for expected $2.87, up 53% year-over-year.
  • Income: $10.93 billion adjusted vs. $10.88 billion expected, up 37% year-over-year.

Qualcomm said it expects $3 to $3.30 in fourth-quarter earnings per share on sales of $11 billion to $11.8 billion, falling short of Wall Street’s fourth-quarter earnings expectations of $3.23 per share and $11.87 billion in sales.

Qualcomm CEO Cristiano Amon said in a statement that the company’s performance was strong despite being in a “challenging macro environment.” Qualcomm’s sales for the quarter were up 37%.

Qualcomm’s largest line of business is the sale of processors and modems for smartphones. The mobile phone company’s business grew 59% year-on-year during the quarter to $6.15 billion, despite signs that smartphone sales may already be slowing due to macro conditions such as inflation.

But Qualcomm’s forecast suggests that the company’s mobile phone sales growth will slow during the fiscal fourth quarter, reflecting that declining smartphone demand could hit its core business in terms of both revenue and profit. The company expects operating expenses to rise 6-8% sequentially during the quarter.

Qualcomm chief financial officer Akash Palhivala said the expected weakness in fourth-quarter smartphone chip sales will come from the mid-range and low-end, in contrast to chips for the most expensive phones.

Qualcomm said its mobile phone business will grow just below 50% this year, thanks to more expensive chips.

Smartphones belong to a division called QCT, along with other semiconductors that Qualcomm sells, such as RF interface, chips for cars, and low-power chips for connected devices. This segment grew by 45% year on year to $9.38 billion. Smartphones have been the fastest growing business in this segment, despite Qualcomm’s recent efforts to diversify into other types of chips.

Qualcomm announced partnership with Samsung until 2030 including patent licensing and supply of Snapdragon processors for phones. Samsung is the world’s leading smartphone manufacturer in terms of sales.

Automotive chips are up 38% year on year to $350 million, a record high for Qualcomm, suggesting it is still a small business compared to Qualcomm’s other businesses. Qualcomm’s IoT business, which makes low-power chips for connected devices, rose 31% to $1.83 billion.

QTL, Qualcomm’s other big division that consists of licensing fees related to 5G and other technologies the company produces, reported almost $1.52 billion in sales, up 2% year over year. It hasn’t grown much in recent years, but remains the main source of profit for the chipmaker.

The company’s gross margin fell short of expectations as chip costs rise due to shortages and problems with Chinese manufacturing. Qualcomm is outsourcing the production of its chips to foundries that have been busy since the start of the pandemic. Qualcomm reported a gross profit of 56% compared to the consensus forecast of 57.8%.

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