Qualcomm on Thursday reported revenues from handset chips dropped in the December quarter, while automotive and IoT improved, much as Qualcomm had expected.
CEO Cristiano Amon described the fiscal first quarter that ended Dec. 25 as a “challenging environment” which included an 18% decline in handsets year-over-year for $5.7 billion in revenues.
Amon has made a big push for diversifying the chipmaker’s portfolio beyond handset chips to include automotive and other segments. Automotive grew in the quarter by 58%, although on a small base that reached $456 million. IoT grew 7% to $1.7 billion.
Overall revenues for the December quarter were $9.5 billion, a loss of 12% from the prior year, with net income down 39% to $2.3 billion. Earnings per share dropped 34% to $1.98. While the numbers for revenues were within the range Qualcomm expected, they fell slightly below Wall Street estimates of $9.57 billion, while earnings were well below the $2.35 per share estimate of Wall Street.
Second quarter revenues are expected to reached $8.7 billion to $9.5 billion with earnings in the range of $2.05 to $2.25. Amon said Qualcomm expects to reduce operating expenses in 2023 by 5% over 2022 levels.
The chip community has seen a drop in demand for smartphones and PCs. IDC reported Jan. 26 the largest ever decline of 18% in the fourth quarter. There was a steep 11% decline for the entire year 2022 as well.
In addition to a drop in demand, Qualcomm has seen an inventory correction noted by the entire technology sector.
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Amon laid out the diversification of Qualcomm products in a session with investors last year and bolstered his views with the Thursday earnings report. “The long-term trends driving demand for our differentiated technologies and solutions that enable digital transformation are intact,” he said. “We are confident in our ability to navigate in the near term and remain focused on executing our diversification strategy. We are focused on Qualcomm's long term success.“
Qualcomm shares dropped 2% Thursday afternoon to $135.85.