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Qualcomm Warns of Sales Hit from Cooling Phone Demand

Qualcomm Inc. warned of dampened sales in the coming quarters, bracing for a challenging economy and a slowdown in demand.

In line with this, the chipmaker expects smartphone sales to decline by 5.00% this year. The outlook came in lower than the previous forecast for flat growth. Consequently, this figure was worse than the IDC’s estimated 3.50% drop in smartphone shipments. Then, it forecasted current-quarter revenue between $11.00 billion and $11.80 billion. The midpoint of the range also came in lower than the anticipated $11.87 billion.

Qualcomm explained that the stringent Chinese COVID measures would cause customers to act with caution in managing their purchases. Additionally, the Ukraine war and China lockdowns have worsened supply-chain snags, pushing phone makers to reduce chip orders.

Accordingly, more than half of Qualcomm’s total sales come from the handset segment. This would make modem chips for Apple iPhones and some Samsung Galaxy S series models.

Nevertheless, company executives reiterated the firm’s focus on supplying chips to premium phones. The business also intends to diversify into other sectors that would cushion the hit from cooling smartphone demand.

Subsequently, Qualcomm delivered an upbeat revenue in the fiscal third quarter, driven by 59.00% growth in the handset chip business. As a result, the firm posted Q3 sales of $10.93 billion, beating the market consensus of $10.88 billion.

Qualcomm bolsters alliance with Samsung

Meanwhile, Qualcomm extended its patent license agreement with Samsung Electronics through the end of 2030. The expansion of the deal would help secure revenue stability for the firm’s licensing business. At the same time, the chip designer agreed to widen the use of its Snapdragon platforms for Samsung Galaxy products.

Qualcomm currently focuses on chips that power phones rather than modem chips used to connect to networks. This move came as its major customer Apple works on its own modem chips.

Nevertheless, shares of the San Diego-based company declined about 2.80% on Thursday’s pre-market trading. This deepened this year’s drop of about 18.00% amid a broader selloff in growth stocks.

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