Qualcomm provided a gloomy outlook for fiscal Q4, warning of an ongoing slump in smartphone sales due to slowing economic growth and likely job cuts, as it reported a hefty revenue and net income drop in its latest earnings.

The chip maker forecast revenue of between $8.1 billion and $8.9 billion in its next quarter, which it said reflects the “continued impact of macroeconomic headwinds, weaker global handset units and channel inventory drawdown”.

Providing more context in an earnings call, the company’s CFO Akash Palkhiwala suggested it would experience a significant downturn in China, with no sales expected to Huawei because it does not have a licence to sell 5G chips to the vendor.

He also said phone manufacturers are using existing inventory rather than making fresh chip orders.

In a separate securities filing, the company added that while it was updating plans, there would likely be workforce reductions, and “in connection with any such actions we would expect to incur significant additional restructuring charge”.

In fact, the company already recorded $285 million in restructuring charges in fiscal Q3 (period ending 25 June), mostly from severance payments, in what was also a difficult quarter.

It experienced a 23 per cent year-over-year drop in revenue to $8.4 billion and a 52 per cent decrease in net income to $1.8 billion, largely due to a continued slump in the smartphone sector.

QCT, Qualcomm’s largest division that sells processors for smartphones, cars, and other devices, reported $7.1 billion in revenue amounting to a decrease of 24 per cent. Handset revenue in QCT was down 25 per cent to $5.2 billion.

The company’s automotive chip business was a bright spot with revenue of $434 million for a 13 per cent increase, but IoT revenue declined 24 per cent to $14 billion.

QTL licencing revenue was down 19 per cent to $1.2 billion.

Qualcomm CEO Cristiano Amon stated on-device AI has the potential to drive an inflection point across all of the company’s products.

“Qualcomm remains best positioned to lead this transition given the unmatched accelerated computing performance with the power efficiency of our platforms,” he noted.