Today Qualcomm [NASDAQ:QCOM] announced their earnings today and they reported that they were able to deliver $2.23 Billion of profit on $4.94 Billion in revenue recording an EPS of $1.28. This represents an increase of revenue of 28 percent year over year and 6 percent over the previous quarter. In terms of profit, the company reported a 123% increase in profit over the same quarter a year ago and 59 percent over last quarter, fiscal Q1 2012. Their EPS of $1.28 was up 117 percent from the same quarter a year ago and 58 percent last quarter.
Qualcomm’s outlook for the 3Q 2012 actually shows that Qualcomm expects their revenue to be down next quarter compared to the current quarter at $4.45B – $4.85. In addition to that, they expect their EPS to be down significantly to $0.67 – $0.73 per share as compared to $1.28, almost halfed. This adjustment of their outlook may be a result of their supply shortages to customers and decline of shipments.
Based on these figures, Qualcomm had reported record EPS as well as record revenue in the company’s history. Although they had good earnings, there were concerns about Qualcomm’s fiscal 3Q 2012 due to supply shortages of 28nm chips and their lighter than expected outlook for 3Q 2012. Qualcomm expects to be supply constrained through the fiscal year, which is likely to be the same problem that companies like NVIDIA and AMD are experiencing on their 28nm processes as well.
In order to remedy this problem, some companies like Qualcomm have been exploring other fabs beyond TSMC and checking out their competition like Globalfoundries. Since TSMC has become the foundry of choice for so many companies and all of those companies are currently running on 28nm processes, these companies begin to fight for TSMC fab time and getting enough wafers produced. As Qualcomm mentioned in their earnings call, they have had to increase their operating expenditures by approximately 5% above what they had expected to due to having to increase the speed of their 28nm ramp through tape-outs and more rapid tape-outs. Some of these tape-outs may have actually been done at Globalfoundries when you consider that Qualcomm has been working on TSMC’s 28nm for quite a while and should have most of their tape-outs done. This explains their unexpected increase in Opex.
Currently, Qualcomm’s stock is down 3% in after hours trading (was down almost 7% before earnings call) on these adjusted earnings. Honestly, we are not in the least bit surprised by the issues presented by Qualcomm during their earnings report and earnings call. When you consider the fact that nearly every single company that is using 28nm that doesn’t own their own fab is having 28nm shortages (as most of them rely on TSMC). The interesting tidbit that makes us think that Qualcomm will be able to escape this rut in TSMC’s 28nm supply is the fact that they are likely going to expand their capacity at Globalfoundries and as they said, expect to resolve their shortages issues in the fourth calendar quarter of 2012 and fiscal first quarter of 2013.