Qualcomm Forecast Better Revenues As The Company Moves to AI Smartphones

Qualcomm - AI

Qualcomm announced its fiscal second-quarter earnings on Wednesday, surpassing Wall Street expectations and offering a robust forecast for the current quarter, leading to a 4% surge in shares during extended trading.

Here’s a breakdown of how the results compared to LSEG consensus estimates for the quarter ended March 24:

  • Adjusted earnings per share: $2.44 versus an expected $2.32
  • Adjusted revenue: $9.39 billion versus an expected $9.34 billion

During the quarter, net income amounted to $2.33 billion, or $2.06 per share, compared to $1.7 billion, or $1.52 per share, in the same period last year.

For the current quarter, Qualcomm anticipates sales between $8.8 billion and $9.6 billion, exceeding Wall Street’s projection of $9.05 billion. Analysts had been expecting earnings guidance of $2.17 per share, whereas the company’s forecast falls between $2.15 and $2.35.

Qualcomm – AI

On the earnings call, Qualcomm noted an anticipated decline in handset revenues during the current quarter, attributed to the typical seasonal pattern of fewer smartphone launches in the summer.

Qualcomm’s primary business revolves around handsets, where it supplies processors, modems, and other components for smartphones, particularly Android devices, but also includes some modem parts for iPhones.

Handset sales grew by 1% year-over-year to $6.18 billion, suggesting a potential recovery in the smartphone market following several years of post-Covid decline.

The company highlighted robust demand for “premium tier” smartphones requiring advanced chips, especially in China, where quarterly revenue from phone makers surged by 40% compared to the same period last year.

CEO Cristiano Amon emphasized the strength of the Android premium market in China, particularly among premium devices from manufacturers like Oppo, OnePlus, and Vivo.

Qualcomm refers to phones using its top-tier chips as “AI-powered smartphones,” citing features such as generative email completion and live translation.

Amon noted the positive consumer response to on-device AI and Gen AI features, highlighting Samsung’s Galaxy S24 Ultra as an example.

Qualcomm – AI

In terms of business segments, Qualcomm’s automotive division, which supplies chips to automakers, saw a 35% year-over-year increase to $603 million, with expectations of consecutive double-digit percentage growth in the current quarter.

However, revenue in the “Internet of Things” business declined by 11% year-over-year to $1.24 billion. The chip business (QCT), encompassing automotive, IoT, and other segments, reported a 1% year-over-year sales increase to $8.03 billion.

Qualcomm’s licensing business (QTL), which generates fees from companies integrating 5G or cellular technology into their products, saw a 2% increase to $1.32 billion from the same period last year.

During the quarter, Qualcomm disbursed $895 million in dividends, repurchased $731 million in shares, and raised its quarterly dividend to 85 cents from 80 cents previously.

Jason Nicks
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