What happened

Shares of semiconductor maker Qualcomm (QCOM 9.74%) tumbled 9.9% through 11:55 a.m. ET on Thursday after reporting mixed earnings the previous evening.

Analysts had forecast that Qualcomm would do $8.5 billion in sales for its fiscal Q3 2023, but the company fell about $60 million short of that mark. On the plus side, Qualcomm beat analyst estimates for earnings. Instead of the $1.81 per share projected, the company turned in a non-GAAP profit of $1.87 per share.  

So what

But if Qualcomm "beat earnings" -- and did so on even less revenue than expected, isn't that a good thing? Shouldn't Qualcomm stock be going up today instead of down?

Not when you consider how objectively bad Qualcomm's news was, no.  

For one thing, Qualcomm didn't just miss sales expectations, but actually suffered a 23% sales decline in comparison to Q3 2022. And even if Qualcomm beat earnings expectations for non-GAAP profits, its GAAP results were worse -- only $1.60 per share, amounting to a 51% decline in profit year over year -- twice as bad as the revenue decline.

Now what

And things seem likely to get worse before they get better. Turning to guidance, Qualcomm told investors it will probably follow up Q3's earnings beat with an earnings miss in Q4. Management gave a non-GAAP range of $1.80 to $2 per share for Q4 earnings. At the midpoint of $1.90 per share, that falls short of analysts' expected $1.91 per share non-GAAP profit, and works out to as much as a 39% year-over-year decline in Q4 profit.  

Sales could underperform even more. Management forecasts anywhere from $8.1 billion to $8.9 billion this coming quarter -- so $8.5 billion at the midpoint. But Wall Street is looking for $8.7 billion in Q4.

Thus, it looks like Qualcomm is cruising toward a sales miss and an earnings miss next time around.

Granted, at less than 16 times expected 2023 (non-GAAP) earnings, and paying a 2.4% dividend yield, there's an argument to be made that Qualcomm stock is cheap, and should be bought on today's weakness. I'd be more convinced by that argument, though, if Qualcomm's earnings were growing rather than shrinking. As things stand, unfortunately, it's hard to get excited about Qualcomm's cheapness.

And investors are reflecting this lack of enthusiasm as they sell their Qualcomm shares.