The News: Qualcomm’s revenue for Q3 of fiscal year 2023 fell to $8.44 billion, down 23% from $10.9 billion YoY, as challenging macroeconomic issues continue around the globe, reducing the company’s component sales to mobile phone and IoT device manufacturers. Qualcomm, a maker of Snapdragon mobile processors, 5G equipment, RF systems, semiconductors, and Wi-Fi technology, announced its Q3 earnings figures on August 2 for the period ending June 25, 2023. Read the full Q3 earnings press release on the Qualcomm investor website.
Qualcomm Revenue in Q3 Dips to $8.44 Billion as Mobile, IoT Soften
Analyst Take: Qualcomm revenue for Q3 dipped again sequentially due to sales slowdowns in mobile handsets and in IoT products, but for the long haul, Qualcomm is still positioned well for growth in AI and automotive tech into the future.
The revenue decline for the quarter was expected as macroeconomic conditions around the world continue to be challenging, especially in markets served by Qualcomm. But we firmly believe it is only a matter of time before Qualcomm will again be cranking out increased sales as the global economy picks up following the lingering aftereffects of the Covid-19 pandemic.
Here are the Qualcomm Q3 2023 fiscal earnings figures by the numbers:
- Q3 2023 non-GAAP revenue of $8.44 billion, down 23% from $10.9 billion YoY. The revenue figure was below consensus estimates of $8.51 billion as expected by analysts from
Investing.com. - Q3 2023 non-GAAP net income of $2.1 billion, down 37% from $3.35 billion YoY.
- Q3 2023 non-GAAP operating income of $2.5 billion, down 37% from $4 billion YoY.
- Q3 2023 non-GAAP diluted earnings per share (EPS) of $1.87, down from $2.96 per share YoY, but beating the $1.81 per share price expected by analysts from Investing.com.
Overall, we believe that Qualcomm’s Q3 earnings are largely in line, top and bottom, as inventory and demand for mobile devices – and components like Snapdragon chips that are required to build them – remain soft. For Qualcomm and other tech vendors in this still challenging macroeconomic climate around the world, none of this is unexpected. Demand dictates sales and revenue, simply enough.
The difficulty is that since no one knows when the next turnaround in the mobile chips market will come, it leaves the future cloudy and uncertain.
That was the message from Qualcomm President and CEO Christian Amon when we spoke with him after the earnings call. Amon said he sees AI at the edge as a massive inflection driving growth today and that the booming edge AI market will certainly benefit Qualcomm by bringing in additional steady revenue in the future. He was also pleased to see Qualcomm’s automotive segment revenue growing and robust in Q3.
We agree with those sentiments and fully expect that when the mobile device and IoT markets recover in the future, Qualcomm’s continuing growth in edge AI and automotive will take the company to new heights in the marketplace. That is what we always expect from Qualcomm, even when it runs into an inevitable bump in the revenue road.
In its earnings call, Qualcomm shared that calendar year 2023 global handset unit sales are expected to be down to a high single-digit percentage YoY, which the company said reflects the macro environment and a slow recovery in China. On the positive side, however, Qualcomm said that the forecast also anticipates some growth in handset units going into the holiday season, which is notable.
Qualcomm said that its IoT channel inventory is higher than desired due to weaker demand due to macroeconomic conditions and that it is operating under the assumption that inventory drawdown dynamics will be a factor through the end of the calendar year.
It must be remembered that a broad range of other tech and consumer companies are continuing to experience mixed earnings in this unpredictable market in recent quarters, and this trend is not only affecting Qualcomm. These revenue results are absolutely based on lower consumer and business demand, not due to product or strategy failures by Qualcomm.
Qualcomm Revenue by Business Segment
Here is the breakdown for Qualcomm’s Q3 FY2023 earnings by business segment:
In the company’s Qualcomm CDMA Technologies (QCT) division, overall revenue fell to $7.17 billion in Q3, a 24% decrease from $9.37 billion YoY. This was due to continuing reduced global demand in the handset marketplace, which saw Qualcomm’s Q3 handset revenue fall to $5.25 billion, down 25% from $7.04 billion YoY for Qualcomm mobile chips and platforms.
Qualcomm’s automotive technology revenue, which is also in the QCT unit, rose 13% to $434 million, up from $385 million YoY. The QCT unit’s IoT revenue fell 24% to $1.48 billion from $1.94 billion YoY.
In its Qualcomm Technology Licensing (QTL) division, Qualcomm saw revenue fall 19% in Q3 to $1.23 billion, down from $1.5 billion YoY.
A key bright spot, however, is that Qualcomm’s automotive business continues to grow, this time by 13% in Q3, as this important segment experiences component sales gains with vehicle makers around the world. We believe that more of this growth can be expected in the future, which will be a significant boost for the company.
Generative AI and other AI revenue growth will also be a positive for Qualcomm’s future, we believe, as this fast-developing market and the rapid emergence of AI across the business marketplace bring new opportunities for the company and its products. We see Qualcomm looking at whole new areas of growth in these areas that we believe will be big for the company. As we have said before, as that growth happens, we believe we will see major impacts on Qualcomm’s revenue and market performance in the future.
Qualcomm Revenue Guidance for Q4 2023
Qualcomm also provided guidance for fiscal Q4 2023 revenue as part of its Q3 earnings report.
Total Q4 2023 revenue for Qualcomm is expected to be in the range of $8.1 billion to $8.9 billion, including estimated QCT revenue of $6.9 to $7.5 billion and QTL revenue of $1.15 billion to $1.35 billion, unchanged from previous estimates.
Also expected is a non-GAAP diluted EPS of $1.80 to $2.00, which is up from previous expectations of $1.70 to $1.90 per share.
What This All Means for Qualcomm
We believe that this is an exciting time for Qualcomm as its core products receive additional AI and generative AI capabilities to help serve customers at the edge and everywhere else. We see this as a huge opportunity for Qualcomm, and we like its prospects.
This growth will come through the strong leadership of Amon and the rest of his solid executive team in driving Qualcomm forward and achieving broader success as consumer and business markets begin to resume growth in demand and revenue.
Midway through 2023, we remain bullish on this technology leader and will continue to watch how the company makes its way through this rapidly changing technology market despite the economic headwinds that continue around the world.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed Qualcomm’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
