“The evolving macroeconomic backdrop has resulted in further demand deterioration, particularly in handsets, at a magnitude greater than we previously forecasted,” Chief Executive

Cristiano Amon

said on an earnings call Wednesday.

The company reported sales of $9.28 billion in its fiscal second quarter, down 17% compared with a year before. Profits tumbled 42% to $1.7 billion in the period. Revenue came in ahead of Wall Street expectations, according to a survey of analysts by

FactSet,

but the profit figure fell short.

The company also gave a tepid outlook for its current quarter, projecting between $8.1 billion and $8.9 billion of revenue, short of analyst estimates of around $9.1 billion.

Qualcomm said weaker demand for handsets globally were weighing on the outlook, as well as problems in the wider economy and other issues. 

Mr. Amon also said that although the smartphone market in China is widely expected to rebound later this year, Qualcomm has seen no signs of that recovery. Qualcomm sells chips to leading Chinese handset makers.

Global handset shipments this year are likely to fall between 5% to 10%, Qualcomm signaled, worse than initially projected. “Until demand normalizes and visibility improves, we anticipate that customers will remain cautious with purchases,” Qualcomm Chief Financial Officer

Akash Palkhiwala

said on the call. 

The company is cutting operating expenses by 5% this fiscal year, Mr. Palkhiwala said, and could make more cuts as market conditions evolve. He also warned that some of the problems weighing on sales this quarter could last into the next one, too. The company’s shares fell more than 4% in after-hours trading.

The muted outlook also reflected a larger-than-expected decline in revenues due to the timing of purchases by a customer that only buys cellular modems from Qualcomm, the company said. Apple fits that description, though Qualcomm didn’t name the customer. The iPhone maker reports quarterly results Thursday. 

International Data Corp. last week said smartphone shipments in the first quarter fell year-over-year for the seventh straight period and were down about 14.6% globally. Demand should recover by the end of the year, IDC said.

Many chip makers have been hurt by a swing in the market that began last year as consumers held back on purchases of computers, smartphones and other electronics after buying them like hot cakes at the outset of the pandemic. Intel, the U.S.’s largest chip maker by revenue, last week reported its worst-ever loss in its fiscal first quarter, although it pointed to signs that its key PC market was recovering.

Qualcomm’s disappointing numbers came a day after

Advanced Micro Devices

spooked investors with its outlook, too, showing the turmoil in the chip sector is broad-based. AMD shares slumped more than 9% on Wednesday.

Write to Asa Fitch at [email protected]