San Diego-based tech giant, Qualcomm, has projected a challenging fourth quarter, with sales falling below market expectations.
In a candid statement, the company hinted at impending job cuts as global economic growth tapers and consumer demand for gadgets remains lackluster.
A significant blow was dealt with the revelation that Qualcomm expects no further sales to Chinese telecom titan Huawei.
Strikingly, the absence of a 5G chip license for Huawei stands as a pivotal roadblock.
This mirrors a broader slowdown in China’s economic rebound, which has curtailed orders to Qualcomm. Data from Canalys reveals a 5 percent dip in smartphone shipments in China’s second quarter.
Chief Financial Officer, Akash Palkhiwala, emphasized the sobering reality on a conference call, admitting, “We are not assuming any material revenue going forward.”
Forecasts place the fourth quarter’s estimated revenue between $8.1 billion and $8.9 billion, falling shy of Refinitiv’s projected $8.70 billion.
Qualcomm’s foresight reflects prevailing macroeconomic challenges, exacerbated by sluggish global handset sales.
Moreover, phone manufacturers are increasingly tapping into existing stockpiles, sidelining fresh chip orders.
Palkhiwala’s somber tone resonated further, as he disclosed an impending restructuring, predominantly centered on workforce reductions.
The company anticipates shouldering significant restructuring charges in tandem with these actions.
The impact on Qualcomm’s stock was evident, as shares dipped approximately 7 percent during extended trading.
This mirrors the broader trend, as the Philadelphia SE Semiconductor Index slipped 3.5 percent amidst a sweeping tech and chip stocks sell-off.
In contrast, rival MediaTek reported a nuanced perspective, with CEO Bob Bruggeworth highlighting substantial business gains, particularly from Apple. This came as a silver lining amid prevailing market pessimism.
Qualcomm’s diversification efforts were underlined by a beacon of hope within the automotive sector, which witnessed a 13 percent revenue growth.
This upswing is attributed to the growing integration of computer chips in vehicles, underscoring Qualcomm’s strategic resilience in adapting to industry shifts.
The road ahead for Qualcomm appears uncertain, with CEO Cristiano Amon echoing caution, pointing to a prolonged wait for a robust industry recovery.
