What happened
Shares of Qualcomm (QCOM +0.21%), a leading semiconductor designer and manufacturer, were falling today after the company reported its third-quarter financial results. While the company's revenue and earnings weren't all that bad for the quarter, Qualcomm issued weak guidance for the third quarter and said slowing smartphone demand was hurting its business.
The semiconductors stock was down by 6.5% as of 10:41 a.m. ET.
So what
Qualcomm reported non-GAAP (adjusted) earnings per share of $2.15, which was down 33% from the year-ago quarter but matched analysts' consensus estimate for the quarter. The company's top line fell by 11% to $9.3 billion but was still higher than Wall Street's average estimate of $9.1 billion for the quarter.
NASDAQ: QCOM
Key Data Points
But it's Qualcomm's third-quarter guidance that has investors worried today. Management said that its earnings will be in the range between $1.70 to $1.90 and that sales will be $8.5 billion at the midpoint of guidance. That outlook is significantly lower than the $2.16 earnings per share and $9.1 billion in sales that analysts were estimating for the third quarter.
Qualcomm's leadership said on the earnings call that a smartphone inventory drawdown, which the company expected to be over by June, will now continue for the next couple of quarters. CEO Cristiano Amon said: "The evolving macroeconomic backdrop has resulted in further demand deterioration, particularly in handsets, at a magnitude greater than we previously forecasted. As a result, we're operating under the assumption that inventory drawdown dynamics remain a significant factor for at least the next couple of quarters."
Now what
With Qualcomm's management expecting a continued slowdown in handset demand for at least the next couple of quarters, it's not all that surprising to see the company's share price retreating today.
Investors are doing some soul-searching right now when it comes to the tech stocks they own, amid a slowing economy. That doesn't mean Qualcomm can't still be a long-term winner, but it does mean that tech investors are far less patient right now as they assess what companies will weather a potential recession well.
