Published - August 3rd, 2023 @ 11:30 AM (GMT+2)

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Qualcomm's Q3 Earnings Report: A Mixed Bag

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Qualcomm reported third-quarter earnings that beat Wall Street expectations, but revenue and guidance for the fourth quarter fell short. The company's net income during the quarter fell to $1.8 billion, a staggering 52% drop from the previous year. Handset chip sales declined 25% year-over-year to $5.26 billion, reflecting the slumping smartphone industry. However, the automotive business was a bright spot, rising 13% to $434 million in revenue.

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Forecasting a Dull Fourth Quarter Amid Weak Smartphone Demand

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Qualcomm forecast fourth-quarter sales below market expectations, estimating revenue of $8.1 billion to $8.9 billion, while analysts expected $8.70 billion. The company also warned of likely restructuring charges for job cuts, mainly consisting of workforce reductions. The forecast takes into account macroeconomic headwinds, weaker global handset units, and the fact that phone makers are using existing inventory rather than placing fresh chip orders.

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Impact of Huawei and China's Slow Recovery

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The San Diego-based company expects no further sales to Chinese telecom giant Huawei due to the lack of a licence to sell 5G chips. A slower-than-expected economic recovery in China and a 5% decrease in smartphone shipments in the country during the June quarter also weighed on Qualcomm's orders.

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Diversification and Future Growth Opportunities

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Qualcomm is seeking to diversify beyond smartphone chips, with revenue from the automotive sector growing 13%.
CEO Cristiano Amon highlighted the company's artificial intelligence strategy, emphasising Qualcomm's ability to run AI models on phones, which could drive future growth. The company also paid $893 million in dividends and repurchased $400 million in stock during the quarter.

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Conclusion

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Qualcomm's Q3 report reveals a mixed picture with a significant drop in revenue and handset chip sales, but promising growth in the automotive sector. The company's future outlook is cautious, forecasting lower fourth-quarter sales and potential job cuts. However, diversification into AI and automotive chips offers a potential path for future growth.
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