Gemalto's shares fell by as much as 23 percent on Wednesday after the Dutch digital security firm cut its 2017 profit forecast due to slow adoption of chip-enabled payment cards in the United States.
More than 1 billion euros was wiped off Gemalto's market value after the company said the slow take-up of cards embedded with so-called EMV chips to prevent counterfeit card fraud had caused an inventory build-up.
Payments network operators such as Visa and Mastercard have been pushing for the adoption of cards embedded with EMV, which stands for EuroPay, MasterCard and Visa, chips.
However, this drive has met with resistance from the banking industry due to the need for investment.
Gemalto expects annual profit from operations to be similar to 2016 levels, when it made an annual profit of 453 million euros ($489 million), down around 10 percent from its previous estimate. The company cut its annual profit forecast for 2017 to the 500-520 million euro range in October.
"This update primarily reflects a double-digit decline in our assumption for the payment cards total available market in the United States," Gemalto said in a statement.
Gemalto had until recently said it was not affected in the same way as its peers by the U.S. chip card inventory build-up, though that situation now appears to have reversed, Morgan Stanley's Andrew Humphrey said in a note to analysts.
The sector-wide impact of EMV weakness due to excess inventory levels was flagged by Gemalto's U.S. rival CPI Card earlier this month.
Gemalto also expects first-quarter revenue to fall 7 percent to 9 percent from a year earlier, at constant exchange rates.
Humphrey said this could mean a halving of the U.S. business in the short term.
Annual revenue at its payments business would be about 100 million euros lower than initially expected, Gemalto said, adding that it was reviewing its action plan and would provide further details in a trading update at the end of April.
(Reporting by Wout Vergauwen in Gdynia; editing by David Clarke and Alexander Smith)