Qualcomm Surpasses Earnings Forecasts on Chinese Phone Demand; Shares Surge 8.5%

Chipmaker Qualcomm announced on November 6 that its fiscal Q1 earnings are expected to exceed Wall Street projections, thanks to growing demand from Chinese smartphone manufacturers like Xiaomi and Vivo. Qualcomm shares jumped 8.5% following the announcement, marking a promising holiday season outlook.

Qualcomm Beats Earnings Estimates, Forecasts Strong Q1 Driven by Growing Demand for AI-Ready Smartphones

As the firm benefits from a wave of flagship Chinese smartphone debuts, chip designer Qualcomm said on November 6 that sales and profit in the current quarter would surpass Wall Street projections. The company's shares increased 8.5% during extended trading, per Reuters.

Qualcomm said it anticipates a midpoint of $10.90 billion and $2.95 per share in sales and adjusted profits for its fiscal first quarter, spanning the holiday shopping season in the U.S. and European markets. Based on LSEG statistics, Wall Street anticipated $10.59 billion and $2.86 per share.

Qualcomm reported that its adjusted profits and sales for the fiscal fourth quarter ended September 29 were $10.24 billion and $2.69 per share, respectively, exceeding analyst estimates of $9.91 billion and $2.56 per share.

The largest provider of smartphone processors, the San Diego, California-based company, is reaping the benefits of a rebound in smartphone markets as users upgrade their devices for AI applications like image generators and chatbots.

Qualcomm Faces Apple Revenue Uncertainty, Eyes Growth in Laptops and AI to Offset Impact

Investors are still attempting to determine how rapidly Qualcomm's revenue stream from Apple will diminish, even if the company's current outlook exceeds Wall Street expectations. Qualcomm has cautioned investors that the iPhone manufacturer will eventually cease utilizing its modem chips, which Apple is developing independently. According to some analysts, much to 25% of Qualcomm's revenue comes from Apple.

Although Qualcomm and Apple agree to continue supplying processors until at least 2026, Wall Street is examining whether Qualcomm's attempts to penetrate the laptop market and data center artificial intelligence will pick up speed enough to counteract Apple's income reductions.

Qualcomm's annual filing on November 6 claimed that Apple had "utilized modem products of one of our competitors in some of its devices rather than our product." The company did not identify the rival, though. Qualcomm's two largest competitors in the modem market are MediaTek Inc. of Taiwan and Samsung Electronics of South Korea.

However, according to Kevin Cassidy, managing director at Rosenblatt Securities, Qualcomm's prediction was improved by introducing new flagship phones from Chinese Android companies, including Xiaomi, Oppo, and Vivo.

Qualcomm Secures Licensing Deal with Transsion, Ends Huawei Exports Amid Legal Dispute with Arm

On November 6, Qualcomm and Shenzhen Transsion Holdings Co Ltd, a Chinese company that manufactures phones for emerging markets, also announced a new licensing deal.

Additionally, the business revealed that on May 7, it ceased exporting 4G smartphone goods to Huawei Technologies Co. (HWT.UL). Before that, it received roughly $560 million in sales from the massive Chinese telecom company.

Qualcomm and Arm, whose technology Qualcomm utilizes in nearly all of its flagship products, are embroiled in a lengthy court battle. In a case involving a license disagreement, Arm threatened to revoke a significant license with Qualcomm last month, and the trial is scheduled to begin in December.

According to Visible Alpha statistics, Qualcomm predicted fiscal first-quarter revenues in the chip segment at a midpoint of $9.3 billion, whereas analysts had forecast $9.02 billion. In contrast to projections of $1.51 billion, Qualcomm's patent-licensing unit was expected to generate first-quarter sales with a midpoint of $1.55 billion.

According to Visible Alpha statistics, Qualcomm reported chip and licensing revenues of $8.68 billion and $1.52 billion, respectively, for the just-concluded fiscal fourth quarter versus projections of $8.42 billion and $1.45 billion.