Rambus Inc. Shares Drop After Forecast Falls Short

Rambus Inc. shares experienced a significant drop in the extended session on Monday after the chip and sensor maker's forecast failed to meet Wall Street's expectations.

Disappointing Second-Quarter Results

Rambus reported second-quarter net income of $168.9 million, or $1.51 per share, primarily due to a substantial tax benefit of $155.3 million. Without factoring in this benefit, the company's net income was $13.6 million, or approximately 12 cents per share. This reflects a decline from the year-ago period, which saw net income of $35 million, or 31 cents per share.

Revenue for the quarter decreased to $119.8 million compared to $121.1 million in the same quarter last year. This decline in revenue contributed to the market's disappointment.

Forecasts Below Analyst Expectations

Analysts surveyed by FactSet had predicted earnings of 39 cents per share on revenue of $138 million for the second quarter. However, Rambus fell short of these estimates.

Moreover, for the third quarter, Rambus provided a forecast for licensing billings between $59 million and $65 million, below the average Street expectation of $65 million. The company's projection for product revenue was also below analysts' estimations, with a range of $47 million to $53 million versus an estimated $61.8 million. Additionally, contract and other revenue were projected to be between $17 million and $23 million, slightly below the Street consensus of $22.2 million.

Market Reaction

Following these disappointing results and forecasts, Rambus shares plummeted more than 8% in after-hours trading. This decline came after a minimal 0.1% increase during regular trading hours, closing at $62.61.

Rambus will have to navigate the challenges of meeting and exceeding expectations in the coming quarters to regain the market's confidence.