Add Qualcomm to the list of chipmakers who have issued disappointing quarterly results amid unstable macroeconomic trends and market demand dynamics.
In recent days, Intel, Samsung, and AMD all have discussed how macroeconomic weakness and fluctuating demand have affected performance and inspired soft outlooks for the short term. For Intel, it meant revenue declines across the board; for Samsung it caused problems for its memory and foundry units; for AMD, “mixed demand” left the company well short of the revenue figures it posted in early 2022.
In Qualcomm’s case, overall sluggish global trends meant weakness in its biggest product category–mobile handsets–during its fiscal second quarter. Overall revenue for the quarter was in line with expectations at $9.3 billion. However, mobile handset revenue for Qualcomm was down 17% year-over-year to $6.1 billion. IoT, which has been an important diversification growth story for Qualcomm in recent years, also was down during the most recent quarter, with revenue dropping 24% year-over-year to $1.4 billion. Only the company’s automotive segment delivered year-over-year revenue growth, with a 20% increase in revenue during fiscal Q2 to $447 million. Qualcomm also issued fiscal third quarter guidance for revenue to land between $8.1 billion and $8.9 billion, generally perceived as a very soft outlook.
“The evolving macroeconomic backdrop has resulted in further demand deterioration, particularly in handsets, at a magnitude greater than we previously forecasted,” said Qualcomm CEO Cristiano Amon, according to the Motley Fool earnings transcript. “As a result, we're operating under the assumption that inventory drawdown dynamics remain a significant factor for at least the next couple of quarters.”
China is proving an especially thorny market for Qualcomm, as Amon noted that expectations for a handset market rebound there do not appear to be coming to fruition just yet, influencing cautious planning for the short-term future.
But, as was the case with its sector peers, Qualcomm sees reason to be cautiously optimistic about the longer term. “While the challenges we are facing are impacting the semiconductor industry, we remain focused on managing what is within our control and will continue to execute on our diversification strategy and leading technology and product road map,” Amon said. “As market visibility remains limited, we're actively managing operating expenses and will continue to evaluate additional opportunities to drive greater operating efficiencies without losing sight of the automotive and IoT growth opportunities ahead.”
Amon said Qualcomm will reduce investment into its handset division this year in favor of feeding its automotive and IoT segments. He cited strong adoption of Qualcomm’s Snapdragon digital chassis as driving automotive growth, and suggested the IoT segment will rebound at some point.
“Within IoT, we continue to see the impact of similar factors as handsets,” Amon said. “Since it remains difficult to predict the timing of a sustained recovery, we are operating under the assumption that the inventory drawdown dynamics will remain a significant factor for at least the next couple of quarters. To effectively navigate this uncertain landscape, we are focused on driving operating efficiencies while maintaining our commitment to invest in diversification and long-term technology leadership. We believe we remain well-positioned to capture a rebound in demand once it occurs.”