Qualcomm Beats Earnings Estimates with Strong Smartphone Chip Sales, Signaling Market Recovery

Qualcomm's Fiscal First-Quarter Results

Qualcomm's fiscal first-quarter results outperformed analysts' expectations, driven by a 16% surge in handset chip sales compared to the previous year. The company's adjusted earnings per share stood at $2.75, surpassing the expected $2.37, while revenue reached $9.92 billion, higher than the anticipated $9.51 billion. Despite the positive performance, Qualcomm's shares dipped by over 2% in extended trading.

Anticipated Performance and Projections

For the current quarter, Qualcomm foresees adjusted earnings in the range of $1.73 to $1.93 per share, with expected revenue of $8.9 billion to $9.7 billion. These forecasts differ from the consensus expectations from LSEG, previously known as Refinitiv, which predicted earnings of $2.25 per share on $9.3 billion of revenue.

Net income for the quarter rose by 24% to $2.77 billion, equivalent to $2.48 per share, compared to the previous year's $2.24 billion, or $1.98 per share.

Influence in the Smartphone Market

Qualcomm, renowned for its production of smartphone chips, witnessed a notable increase in handset chip shipments, amounting to $6.69 billion during the December quarter, reflecting a 16% rise year over year. This surge signifies a positive momentum for the smartphone market, following two consecutive years of decline. Additionally, the company anticipates that global handset sales will remain stagnant year-over-year.

Business Diversification Efforts

Under the leadership of CEO Cristiano Amon, Qualcomm has been actively exploring opportunities to expand its chip technology into various sectors beyond smartphones, including PCs, automotive, and virtual reality headsets. Despite these diversification efforts, smartphone chips remain a significant aspect of Qualcomm's business, particularly as the global smartphone market has experienced a downturn in recent years.

Expanding Beyond Smartphones

Qualcomm's strategic efforts have led to endeavors in other sectors, such as its Internet of Things business, which includes chips used in Meta's virtual reality headsets. However, this segment experienced a 32% sales decline, amounting to $1.13 billion.

Automotive Pursuits

The company is heavily investing in selling chips to automakers and car suppliers, but such engagements involve a lengthy "qualification" cycle due to industry regulations. Despite this, Qualcomm's automotive business, part of QCT, saw a 31% increase in sales, reaching $589 million.

Business Segments Performance

QCT, the business segment encompassing chip sales for automotive, Internet of Things, and handsets, achieved $8.42 billion in revenue during the quarter, indicating a 7% increase compared to the previous year. Meanwhile, the company's licensing business, QTL, reported a 4% annual decline in revenue, amounting to $1.46 billion.

Key Corporate Developments

During an analyst call, Qualcomm's CEO, Cristiano Amon, revealed that Apple had agreed to extend its patent licensing agreement through March 2027. Additionally, the company allocated $800 million to share repurchases and $900 million on dividends during the quarter. This move demonstrates Qualcomm's commitment to delivering value to its shareholders.