Smartphone Sales Slump Hits Qualcomm Hard, Company to Cut Jobs

Smartphone sales are facing a major decline, and this has affected Qualcomm, which supplies components for these devices. In the third quarter of 2023 (Qualcomm's fiscal year is October-September), the company experienced a 25 percent drop in handset chip sales compared to the previous year, leading to a significant 52 percent decrease in net income year over year.

Their earnings per share were $1.87, and their revenue was $8.44 billion, but experts thought it would be a bit higher at $1.81 and $8.5 billion. Because of this, the company's stock dropped by 8.5%. Some big banks changed their opinions on the company's stock after the report: Deutsche Bank downgraded it from "buy" to "hold," while JPMorgan and UBS kept their ratings the same.

In response to the disappointing earnings, Qualcomm plans to reduce costs through layoffs. Earlier this year, 415 jobs were already cut at their San Diego headquarters, but recent filings reveal that more job cuts are on the horizon.

The company's securities filing stated, "Given the continued uncertainty in the economy and demand, we expect to take additional restructuring actions." The plans are likely to involve further workforce reductions, resulting in significant restructuring charges, which are expected to hit during the fourth quarter of fiscal 2023. Qualcomm aims to complete these additional actions by the first half of fiscal 2024. Currently, Qualcomm employs approximately 51,000 people.

Despite the challenges, Qualcomm's CEO, Cristiano Amon, remains optimistic about the future. He believes the company's AI work will help them leverage the upcoming on-device Gen AI opportunity. Qualcomm envisions allowing people to run AI-powered applications directly on their phones, hoping it will boost handset sales.

It's important to note that Qualcomm's struggles are reflective of the wider handset market. According to Counterpoint Research's recent market report, the entire industry experienced a 24 percent decline. However, some companies managed to fare better, with Google being the big winner for the quarter, showing a 48 percent increase. On the other hand, Apple's decline was comparatively less at only 6 percent. Notably, the companies that didn't use Qualcomm's SoCs performed better in this tough market environment.