Qualcomm (QCOM) earnings report Q2 2023

Qualcomm reported second-quarter earnings on Wednesday that were in line with analysts’ expectations, but saw sales from handset chips, a core business for the company, fall 17% year over year.

Qualcomm shares fell more than 2% in extended trading.

Here’s how the chip maker did versus Refinitiv consensus estimates:

• EPS: $2.15 per share, adjusted, versus expectations of $2.15 per share
• Income: $9.27 billion, against expectations of $9.1 billion

In the quarter ended in March, Qualcomm said net income fell 42% to $1.70 billion, or $1.52 per share, from $2.93 billion, or $2.57 per share, a year ago.

Qualcomm said it expected about $8.5 billion in revenue in the current quarter, short of Wall Street’s expectations of $9.14 billion. Analysts were expecting earnings guidance for the current quarter of $2.16 per share, but Qualcomm said it expected it to be around $1.80.

Qualcomm CEO Cristiano Amon in a statement blamed the results on a challenging environment, and the company said it had seen no evidence that smartphone sales are recovering in China. The smartphone market is looking at a tough 2023, with shipments for the global market falling over 14% in the first quarter, according to IDC.

“The evolving macroeconomic backdrop has resulted in a further weakening of demand, particularly in handsets, of an order of magnitude greater than we previously predicted,” Qualcomm CEO Cristiano Amon said in a call with analysts.

Qualcomm’s chip segment, called QCT, sells smartphone processors, automotive chips and other parts for advanced electronics. It fell 17% to $7.94 billion in revenue during the quarter.

The biggest part of QCT’s sales comes from handset chips, which are the processors at the heart of most Android phones. Qualcomm reported $6.11 billion in phone sales, down 17 percent from last year.

Qualcomm said it expected a larger-than-normal third-quarter decline in QTL revenue, saying it was related to “the timing of the acquisition of a modem-only customer.” Qualcomm rarely discusses its business with Apple and did not name the company, but Apple buys modems from the company for its iPhones and other devices.

Qualcomm’s automotive business, which includes chips and software for cars, remains small, although it posted 20% growth during the quarter to $447 million in revenue. It has been reported as part of the QTL.

Qualcomm’s licensing segment, QTL, which sells access to technologies needed for mobile services, reported an 18% annual decline in revenue to $1.29 billion.

Qualcomm said it earned $900 million in share buybacks and paid $800 million in dividends during the quarter.