10-QPeriod: Q1 FY2023

QUALCOMM INC/DE Quarterly Report for Q1 Ended Dec 25, 2022

Filed February 2, 2023For Securities:QCOM

Summary

Qualcomm Inc. reported total revenues of $9.46 billion for the first quarter of fiscal year 2023, a decrease of 12% year-over-year, primarily driven by a slowdown in demand for smartphones and other consumer devices. Net income also saw a significant decline of 34% to $2.24 billion compared to the prior year quarter. The company's semiconductor business (QCT) experienced an 11% revenue decline, largely due to lower handset revenues, although this was partially offset by growth in the Automotive and IoT segments. The Licensing business (QTL) also saw a 16% decrease in revenues. Management cited macroeconomic weakness and customers drawing down on elevated inventory levels as key factors impacting performance. Despite the revenue and profit decline, Qualcomm continues to invest heavily in research and development, with R&D expenses increasing significantly year-over-year, indicating a focus on future technologies. The company also maintained its shareholder return program, repurchasing shares and paying dividends, demonstrating a commitment to returning capital to investors.

Financial Highlights

48 data points
Beta

Revenue

$9.46B

57.3% Gross Margin

Net Income

$2.23B

23.6% Net Margin

EPS (Diluted)

$1.98

Total Assets

$50.01B

Cash & Equivalents

$5.07B

Free Cash Flow

$3.10B

Financial Statements
Beta
Revenue$9.46B
Cost of Revenue$4.04B
Gross Profit$5.42B
R&D Expenses$2.25B
SG&A Expenses$623.00M
Operating Expenses$7.00B
Operating Income$2.46B
Interest Expense$170.00M
Net Income$2.23B
EPS (Basic)$1.99
EPS (Diluted)$1.98
Shares Outstanding (Basic)1.12B
Shares Outstanding (Diluted)1.13B

Key Highlights

  • 1Total revenues declined 12% year-over-year to $9.46 billion in Q1 FY2023.
  • 2Net income decreased 34% year-over-year to $2.24 billion.
  • 3QCT (semiconductor) segment revenue decreased 11% primarily due to lower handset sales, though Automotive and IoT segments showed growth.
  • 4QTL (licensing) segment revenue decreased 16% year-over-year.
  • 5Research and development expenses increased significantly (24% of revenue) due to higher costs related to wireless and integrated circuit technologies, including share-based compensation.
  • 6The company repurchased $1.3 billion of common stock and paid $842 million in dividends during the quarter.
  • 7Management anticipates continued macroeconomic challenges and inventory drawdowns in the near term, impacting revenues and cash flows.

Frequently Asked Questions

The primary reasons for the decline are the weakening macroeconomic environment, which negatively impacts consumer demand for smartphones and other devices, and customers drawing down on their elevated inventory levels. These factors led to lower sales in both the semiconductor (QCT) and licensing (QTL) segments.

The company notes that its customers are drawing down on elevated inventory levels. Qualcomm itself expects to continue to see elevated inventory levels in the near term. This is a result of the rapid deceleration in consumer demand and the easing of supply constraints.

Qualcomm continues to invest heavily in research and development, particularly in areas like 5G, automotive, and IoT, indicating a strategic focus on diversification and future technology leadership. Management believes 5G combined with advanced processing and on-device intelligence will drive adoption beyond mobile handsets.

Qualcomm expects the current macroeconomic challenges and inventory drawdowns to continue, negatively impacting revenues, results of operations, and cash flows compared to the prior year. They also anticipate continued price increases from semiconductor wafer suppliers and intense competition, particularly in China.