What happened 

Qualcomm (QCOM -0.48%) shareholders are having a bad morning after the semiconductor company reported its fourth-quarter results late yesterday. While the tech giant's earnings were on par with Wall Street's expectations and revenue even beat analysts' consensus estimate, worse-than-expected first-quarter guidance caused investors to panic. 

As a result, Qualcomm's shares tumbled 7.2% as of 10:45 a.m. ET. 

So what 

Let's start with the good news: Qualcomm's non-GAAP (adjusted) earnings per share for the fourth quarter were $3.13, matching analysts' average estimate, and up 23% from the year-ago quarter. 

A semiconductor on a logic board.

Image source: Getty Images.

The company's total revenue didn't disappoint either. Sales increased by 22% year over year to $11.4 billion, slightly outpacing Wall Street's consensus estimate of $11.37 billion. 

But investors quickly looked past these results and instead anticipated that there was pain on the horizon after Qualcomm issued a disappointing first-quarter outlook. Management said that revenue will be in the range between $9.2 billion to $10 billion, far below analysts' consensus estimate of $12 billion. 

Bottom-line guidance wasn't any better. Qualcomm's management said first-quarter adjusted earnings will be in the range between $2.25 to $2.45 -- missing Wall Street's expectation of $3.42 per share.  

Now what 

So why the gloomy outlook? Qualcomm's management said on its earnings call that the deceleration of demand for handsets that began in the third quarter has gotten worse. 

Qualcomm chief financial officer Akash Palkhiwala said on the call, "...The further deterioration of macroeconomic environment and sustained COVID restrictions in China have led to broad-based demand weakening across tiers and regions."  

The result is that some of Qualcomm's biggest customers now have elevated levels of inventory, and "they are now drawing down on their inventory, negatively impacting our near-term financial performance," Palkhiwala continued.  

The company said it has already implemented a hiring freeze and has other plans to cut spending. 

Management added that the company is still in a strong position to manage the near-term headwinds and that beyond 2023, it believes some of its strategic growth plans will increase in scale -- but investors are having a harder time visualizing that growth right now.