CHIP designer Qualcomm on Wednesday (Nov 6) forecast sales and profit in the current quarter would exceed Wall Street estimates as the company benefits a wave of launches of flagship Chinese smartphones, and its shares rose 8.5 per cent in extended trading.
Qualcomm said it expects sales and adjusted profits for its fiscal first quarter, which will cover the holiday shopping season in US and European markets, with a midpoint of US$10.90 billion and US$2.95 per share. Wall Street expected US$10.59 billion and US$2.86 per share, according to data from LSEG.
For the fiscal fourth quarter ended Sep 29, Qualcomm said sales and adjusted profits were US$10.24 billion and US$2.69 per share, beating analyst expectations of US$9.91 billion and US$2.56 per share.
The San Diego, California-based company is the biggest supplier of smartphone chips and is benefiting from a recovery in the smartphone markets as consumers upgrade devices for artificial intelligence (AI) applications such as chatbots and image generators.
While Qualcomm’s current outlook topped Wall Street expectations, investors are still trying to gauge how quickly its revenue stream from Apple will fade. Apple is working on its own modem chips, and Qualcomm has warned investors that the iPhone maker will stop using its chips at some point. Some analysts believe Apple accounts for up to a quarter of Qualcomm’s revenue.
While Qualcomm has a deal to keep selling chips to Apple until at least 2026, Wall Street is watching to see whether Qualcomm’s efforts to break into laptops and AI in data centres will ramp up quickly enough to offset declines in Apple revenue.
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In an annual filing on Wednesday, Qualcomm said Apple has “utilised modem products of one of our competitors in some of its devices rather than our product” but did not name the competitor. Taiwan’s MediaTek and South Korea’s Samsung Electronics are Qualcomm’s biggest rivals in the modem market.
But launches of new flagship phones from Chinese Android brands such as Xiaomi, Oppo and Vivo helped lift Qualcomm’s forecast, said Kevin Cassidy, managing director at Rosenblatt Securities.
Qualcomm on Wednesday also said it had signed a new licensing agreement with Shenzhen Transsion Holdings, a Chinese firm that makes phones for developing markets.
The company also disclosed that it stopped shipping 4G smartphone products to Huawei Technologies on May 7. Before that, it derived about US$560 million in sales from the Chinese telecommunications giant.
Qualcomm is in a protracted legal dispute with Arm, whose technology Qualcomm uses in almost all its flagship products. Arm last month threatened to cancel a key license with Qualcomm, and the trial in a case brought by Arm in a license dispute is set to start in December.
In Qualcomm’s chip segment, the company forecast fiscal first-quarter sales with a midpoint of US$9.3 billion, compared with analyst estimates of US$9 billion, according to Visible Alpha data. Qualcomm predicted first-quarter sales with a midpoint of US$1.55 billion in its patent-licensing business, compared with estimates of US$1.51 billion.
For the just-ended fiscal fourth quarter, Qualcomm said chip and licensing revenues were US$8.68 billion and US$1.52 billion, respectively, compared with estimates of US$8.42 billion and US$1.45 billion, according to Visible Alpha data. REUTERS
