Qualcomm Net Profit Plummets 52%... Workforce Cuts Amid Worsening Performance

Q2 Earnings Announcement
Both Revenue and Net Profit Fall Short of Market Expectations

Qualcomm, a semiconductor chip design and supply company for smartphones, posted disappointing results again in the second quarter of this year. With the market slowdown expected to persist long-term, the company is initiating workforce restructuring to reduce costs. Following the poor performance and layoff news, Qualcomm's stock price plunged over 7% in after-hours trading.

On the 2nd (local time), Qualcomm announced its second-quarter (fiscal 2023 Q3) earnings, reporting a net profit of $1.803 billion (approximately 2.34 trillion KRW). This represents a 52% plunge compared to the same period last year ($3.73 billion). Earnings per share stood at $1.60.

During the same period, revenue was $8.451 billion, down 23% from $10.936 billion in the previous year’s quarter. Both earnings per share and revenue fell short of market expectations. According to financial data firm FactSet, the market consensus was earnings per share of $1.81 and revenue of $8.51 billion.

Qualcomm’s deteriorating performance stems from sluggish smartphone chip sales. The smartphone chip business segment, which accounts for more than half of Qualcomm’s total revenue, recorded sales of $5.26 billion during this period, a 26% decrease from the previous year and below market expectations. The company explained that the slow economic recovery and weakened demand in China, the largest smartphone market, dealt a direct blow to smartphone chip sales. According to research firm Canalys, smartphone shipments in China in Q2 this year are estimated to have declined by 5% year-over-year.

[Image source=Reuters Yonhap News]

Qualcomm’s smartphone chip sales are expected to show a high single-digit percentage decline for the entire year compared to the previous year. Qualcomm stated that it will likely take longer than expected to exhaust the excess supply in the smartphone market caused by the COVID-19 pandemic, and forecasted that third-quarter revenue and profits this year will also fall short of Wall Street estimates.

Qualcomm’s revenue guidance for Q3 this year remains between $8.1 billion and $8.9 billion, maintaining its previous target. The midpoint of this range ($8.5 billion) is below the market consensus of $8.7 billion. Earnings per share are projected to be between $1.70 and $1.90, aligning with the market estimate of $1.90.

Following the earnings announcement, Qualcomm stated that it is preparing workforce reductions to cut costs and respond to declining market demand. Cristiano Amon, Qualcomm’s CEO, said during the post-earnings conference call, "We are planning additional cost reductions, and most of that will be achieved through workforce reductions." However, he did not specify the scale of the layoffs. Qualcomm currently employs 51,000 people (as of the end of Q3 last year).

Qualcomm’s layoff efforts are expected to continue into next year. Akash Palkhiwala, Qualcomm’s CFO, said, "We will not change our management policy until we see signs of fundamental improvement," adding, "Cost-cutting measures will continue into the next fiscal year."

Qualcomm’s stock, listed on the U.S. Nasdaq market, closed down 2.13% in regular trading on the day due to earnings disappointment, and was down over 7% in after-hours trading as of 7:30 a.m. Korean time. Qualcomm’s stock price has risen only 17% this year (as of the close on the 2nd), underperforming the Nasdaq index, which gained 33.51% over the same period.

This content was produced with the assistance of AI translation services.