Shares of Spreadtrum Communications, Inc. (SPRD) plunged more than 12 percent in extended trade on Thursday after the Chinese fabless semiconductor company reported a profit for the second quarter that declined 36 percent from last year, reflecting lower margins amid higher costs and expenses.
However, both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also provided revenue outlook for the second quarter, in line with Street view.
"This quarter, we achieved a strong ramp of our 1GHz Android smartphone products, with customers launching handsets through both China Mobile and open market distribution channels," Chairman and CEO Leo Li said in a statement.
The Shanghai, China-based company reported net income of $20.95 million or $0.41 per ADS for the second quarter, lower than $32.49 million or $0.60 per ADS in the prior-year quarter.
Excluding share-based compensation expenses, adjusted net income for the quarter declined to $29.6 million or $0.58 per ADS from $35.5 million or $0.65 per ADS in the year-ago quarter.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share for the second quarter. Analysts' estimates typically exclude special items.
Total revenue for the quarter increased 8.1 percent to $173.13 million from $160.18 million in the same quarter last year, and topped eight Wall Street analysts' consensus estimate of $171.44 million by a whisker.
Sales volume of 2G/2.5G baseband and radio frequency bundle semiconductors realized in the quarter surged 52.1 percent year-over-year. Sales volume of 3G bundle semiconductors realized in the quarter grew 22.5 percent year-over-year.
The average selling price per unit of 2G/2.5G bundle semiconductors decreased 23.4 percent year-over-year, and average selling price per unit of 3G bundle semiconductors declined 21.0 percent from last year.
The company's operating margin for the quarter contracted 770 basis points to 13.5 percent from last year's 21.2 percent, as gross margin contracted 490 basis points and higher expenses, particularly research and development expenses.
Our operating expenses increased slightly this quarter as expected, with much of the increase in non-recurring cash bonus and share-based compensation recorded on the achievement of a final milestone in our WCDMA program related to the MobilePeak acquisition last year," CFO Shannon Gao noted.
Total operating expenses for the quarter were $40.75 million, up 22.5 percent from $33.28 million in the prior-year quarter.
Looking ahead to the third quarter, Spreadtrum said it expects revenues in a range of $178 million to $186 million, and sees operating margins to be similar to the second quarter. Street is currently looking for full-year 2012 revenues of $184.78 million.
"The demand for our smartphone products is very strong, and we now expect to ship more than 10 million smartphone chipsets in the third quarter," Li added.
The company also noted that it is continuing to invest in research and development in dual-core and quad-core smartphone platforms, as well as WCDMA, LTE and connectivity technologies, which will expand its addressable market in both China and overseas regions.
SPRD closed Thursday's regular trading session at $19.36, up $0.25 or 1.31% on a volume of 1.26 million shares. However, the stock plunged $2.36 or 12.19% in after-hours trading.
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