Qualcomm gives strong forecast, signaling chip slump recovery

Cristiano Amon, president and CEO of Qualcomm Incorporated, speaks during an interview with CNBC on the floor of the New York Stock Exchange (NYSE) in New York, April 28, 2022.

Brendan McDermid | Reuters

Qualcomm reported fiscal fourth-quarter earnings on Wednesday that beat expectations for sales and earnings, despite big year-over-year declines, and gave a strong forecast for the current quarter.

Qualcomm stock rose over 3% in extended trading.

Here’s how the chipmaker did for the quarter ended Sept. 24 per LSEG (formerly Refinitiv) consensus expectations:

  • EPS: $2.02, adjusted, vs. $1.91 expected
  • Revenue: $8.67 billion, adjusted, vs. $8.51 billion expected

Qualcomm said it expected adjusted earnings of between $2.25 and $2.45 per share on between $9.1 billion and $9.9 billion of sales in the current quarter, versus LSEG consensus expectations of $2.23 per share of earnings on $9.2 billion of sales.

At the midpoint of Qualcomm’s guidance, adjusted revenue will grow slightly during the current quarter compared to last year.

Net income during the quarter was $1.49 billion or $1.32 per share, a 48% decrease from last year’s $2.87 billion or $2.54 per share.

Revenue during the quarter declined 24% year over year from $11.39 billion last year. Overall adjusted revenue for Qualcomm’s fiscal year fell 19% from last year to $35.83 billion.

Qualcomm’s fortunes are tied to the smartphone industry, which has been in a slump for nearly two years after the Covid pandemic created a boom in sales. The company makes the processors at the heart of most high-end Android devices and many lower-end phones as well.

“We are seeing early signs of stabilization in demand for global 3G, 4G, 5G handsets,” Qualcomm CFO Akash Palkhiwala said on a call with analysts. He said that Qualcomm expects total shipments using its handset chips to decline “mid to high single digit percentage” in 2023 versus last year, which is better than the company had previously expected.

Handset chip sales declined 27% to $5.46 billion, above StreetAccount expectations of $5.34 billion, from the year-earlier period. Those sales are reported as part of QCT, Qualcomm’s biggest division that sells processors, which declined 26% to $7.37 billion in sales.

The company’s automotive business was a bright spot for QCT, increasing 15% year over year to $535 million in sales, beating Wall Street expectations. It’s still a small business but continues to grow as Qualcomm convinces more automakers and parts manufacturers to use its chips in cars.

Qualcomm’s “Internet of Things” business, which also includes the chips Meta uses in its Quest headsets, fell 31% year over year to $1.38 billion in revenue.

The company’s profitable licensing business, QTL, reported $1.26 billion in sales, a 12% decrease from last year, in line with StreetAccount expectations.

Qualcomm is eager for investors to see it as an artificial intelligence company, given that it ships chips with AI features to millions of smartphones, and could benefit from Wall Street’s recent obsession with semiconductor stocks for machine learning.

In October, Qualcomm announced new Android and Windows PC chips with improved AI portions called NPUs that could generate AI images significantly faster than last year’s processors. In a statement, Qualcomm CEO Cristiano Amon drew investor attention to the company’s road map for “generative AI and mobile computing performance.”

Earlier this year, Qualcomm said it would continue to supply Apple with 5G modems for handsets through 2026. Previously, analysts had suggested that Apple could use different modems as soon as this year. Palkhiwala, the CFO, said that the new deal was similar to its previous agreement with Apple.

“We are proud of our ongoing relationship with Apple,” Amon said.

Qualcomm said it spent $400 million on share repurchases and $893 million on dividends during the quarter.

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