Qualcomm to raise prices during memory crunch as chipmaker issues light earnings guidance

Qualcomm reported fiscal third-quarter earnings on Wednesday that met analyst estimates. The current-quarter guidance came in below expectations. The chipmaker blamed a broad surge in input costs, especially memory, and said it will raise prices across the board from Sept. 1.

"Cost went up, prices are going to go up," CEO Cristiano Amon said in an interview.

The company sees adjusted earnings per share of $2.05 to $2.25 for the fiscal fourth quarter on revenue of $9.7 billion to $10.5 billion. Analysts polled by LSEG had expected $2.36 per share on $10.02 billion in sales.

"The semiconductor industry is experiencing a broad-based increase in input costs, across wafer fabrication, assembly, test, advanced packaging, memory and other materials," Qualcomm said in its release. Management noted that "revenues continue to be healthy."

Handset chip sales, still the largest segment, came in at $5.1 billion, down 20% from a year ago. The company said the decline reflected a bottoming in China. Amon said low-end and mid-priced phones had become less competitive because of affordability. Even premium Android phones, where Qualcomm dominates, were seeing customers look for lower prices.

"Consumer preference within the premium category is changing towards a preference to the lower end of the premium, as well to last year's phone, because of the memory price increases," Amon said.

"There's also a change in gross margin because of the high supply cost that you're all hearing about," he added. "It's a temporary, short-term thing we are addressing with price increases."

Automotive was a bright spot. Qualcomm reported $1.59 billion in automotive sales, and reiterated its target of $10 billion in automotive revenue by 2029. The company announced a chip supply deal with BMW for digital cockpit chips on Wednesday.

Qualcomm is also targeting the AI data center market. Amon said the company remained on track to report $5 billion in data center revenue next year. On Wednesday, it completed the acquisition of Modular, a software company making AI programming tools, and said it would unveil its AI software platform at a conference in August.

Internet of things revenue, covering industrial chips and smart glasses, rose 9% annually to $1.83 billion.

Net income for the quarter was $2 billion, down 25% from $2.66 billion a year earlier.

Qualcomm's QTL licensing unit contributed $1.28 billion in revenue, slightly above the StreetAccount estimate of $1.26 billion.

Amon said Qualcomm is diversifying beyond smartphones, targeting cars, smart glasses, and robots, with a goal of non-smartphone sales reaching 60% of revenue next year.

The chipmaker earned an Alpha Score of 43 out of 100 from AlphaScala, labeled Mixed, reflecting the mixed signals from the guidance cut and the price increase response.