President and CEO of Qualcomm Cristiano Amon delivers a speech at the Web Summit at Parque das Nacoes in Lisbon, on November 12, 2024.
Patricia De Melo Moreira | AFP | Getty Images
Qualcomm reported fiscal first-quarter earnings on Wednesday that beat expectations, but the company’s forecast came up short because of the global memory shortage.
Shares of Qualcomm tumbled as much as 10% in extended trading.
Here’s how the chipmaker did versus LSEG consensus estimates:
- EPS: $3.50 adjusted vs. $3.41 expected
- Revenue: $12.25 billion vs. $12.21 billion expected
In the current quarter, Qualcomm said it expects adjusted earnings per share between $2.45 and $2.65 on revenue of $10.2 billion to $11 billion. Analysts polled by LSEG were expecting $11.11 billion in sales and earnings of $2.89 per share.
Qualcomm executives said in an interview that the shortfall in guidance was directly related to the global memory shortage. Big orders for data center memory are taking production capacity for memory for smartphones and other devices.
The company’s smartphone customers, who buy their own memory and pair it with Qualcomm’s processors and modems, are closely watching their purchases and inventories and adjusting them based on the availability of memory.
Qualcomm finance chief Akash Palkhiwala said the guidance gap versus consensus estimates was due to the memory issue.
“We’re starting to see that memory is going to define the size of the mobile market,” Qualcomm CEO Cristiano Amon said in an interview.
Amon added that handset demand remains high, and the smartphone market is going through an upgrade cycle, but he said Qualcomm anticipates issues with smartphone supply.
He said that the company doesn’t know if smartphone makers will raise prices, but Amon said he expects Qualcomm’s customers to focus on higher-tier devices, which will be more capable of absorbing memory price increases than budget handsets. Amon said on an earnings call that Qualcomm was most competitive in premium tier handsets.
“We see this as an industry issue affecting everything in consumer electronics,” Amon said.
Qualcomm one-day stock chart.
During the quarter, Qualcomm reported $7.82 billion in handset sales, a 3% rise on an annual basis. Qualcomm’s overall revenue grew 5% during the quarter.
Qualcomm’s smaller businesses grew more quickly during the quarter.
The company’s internet of things group, which includes both chips for industrial uses as well as the chip that powers the Meta Ray-Ban smart glasses, increased 9% during the quarter to $1.69 billion in sales. And Qualcomm’s growing automotive business, which provides chips for carmakers, including Toyota, rose 15% to $1.1 billion for the division.
Qualcomm said that it expected data center sales from its new AI chips and other data center products to start appearing in fiscal 2027.
“Everything is on track,” Amon said on an earnings call.
Net income in the period came in at $3 billion, or $2.78 per share, versus $2.18 billion, or $2.83 per diluted share in the year-ago period.
In addition to selling chips, Qualcomm also licenses its intellectual property for technologies such as 5G to other hardware companies. That’s reported as QTL revenues, which are significantly more profitable than hardware sales. Qualcomm reported $1.59 billion in QTL revenue during the quarter.
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