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 sank following the release.
Qualcomm shares fell in extended trading.
Here’s how the chipmaker did versus LSEG consensus estimates:
- EPS: $3.50, adjusted, versus $3.41 expected
- Revenue: $12.25 billion, versus $12.21 billion expected
In the current quarter, Qualcomm said it expected adjusted earnings per share between $2.45 and $2.65 on revenue between $10.2 billion and $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 that the guidance gap versus consensus estimates was driven by 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.
Qualcomm one-day stock chart.
He added 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.
“We see this as an industry issue affecting everything in consumer electronics,” Amon said.
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.
The company’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 and robotics business, which provides chips for carmakers, including Toyota, rose 15% to $1.1 billion for the division.
Net income during the quarter ending in December declined slightly to $3 billion, or $2.78 per diluted 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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