Qualcomm reported fiscal third-quarter earnings on Wednesday that were in line with LSEG consensus estimates, but issued light guidance for the current quarter and announced across-the-board price increases for its chips starting September 1.
CEO Cristiano Amon confirmed the price hikes, stating: "Cost went up, prices are going to go up." The company attributed the move to a broad-based increase in input costs across wafer fabrication, assembly, test, advanced packaging, memory and other materials, noting it has "exhausted its ability to absorb higher costs from suppliers."
Qualcomm's handset chip sales in the fiscal third quarter, down 20% year-over-year
The company's net income fell 25% to $2 billion from $2.66 billion a year earlier. Qualcomm attributed the drop in handset revenue to "unprecedented increases in memory pricing and supply constraints." CFO Akash Palkhiwala noted that some OEMs are using prior-generation chips due to higher component costs.
For the current quarter, Qualcomm expects adjusted earnings per share of $2.05 to $2.25 on revenue between $9.7 billion and $10.5 billion, missing the LSEG consensus estimate of $2.36 in adjusted EPS on $10.02 billion of sales. The company also warned of an "acceleration" in the decline of revenue from Apple products, with modem share for the upcoming iPhone launch expected to be "materially lower."
Diversification and New Deals
Qualcomm is diversifying into automotive, data center, and IoT markets. Its automotive business posted $1.59 billion in sales, and the company targets $10 billion in automotive revenue by 2029. It announced a chip supply deal with BMW for digital cockpit chips, described by some sources as a decade-long agreement.
IoT revenue rose 9% annually to $1.83 billion. Qualcomm targets $5 billion in data center revenue next year and completed the acquisition of Modular. The company is also working on a more affordable version of its flagship Snapdragon 8 Elite Gen 5 and aims for non-smartphone sales to represent 60% of revenue next year.
Cost went up, prices are going to go up.
The price hikes, rumored to be in the "double digits" percentage, apply to all processors starting September 1. Meanwhile, Qualcomm's QTL revenue was $1.28 billion, slightly above the StreetAccount estimate of $1.26 billion.