Qualcomm Inc. has recently unveiled its fiscal third-quarter earnings, showcasing a robust performance that surpassed Wall Street’s expectations, particularly in the sales department. The company’s primary revenue driver—processors and modems for smartphones—reported a notable 12% increase year-over-year, reflecting a positive trend in the smartphone market.
In its latest earnings report, Qualcomm revealed that its adjusted earnings per share reached $2.33, exceeding the anticipated $2.25. Additionally, the company reported revenues of $9.39 billion, which also surpassed the expected $9.22 billion. Qualcomm’s net income for the quarter stood at $2.13 billion, translating to $1.88 per share, compared to $1.8 billion, or $1.60 per share, in the same period last year.
Despite the strong performance, Qualcomm’s stock experienced a slight dip of 1% in after-hours trading, following an initial surge of 7% earlier in the day. The company’s guidance for the upcoming quarter suggests sales will range between $9.5 billion and $10.3 billion, while Wall Street had forecasted $9.71 billion. Furthermore, analysts were expecting an earnings guidance of $2.45, but Qualcomm projected between $2.38 and $2.58.
Qualcomm’s handsets business, which focuses on processors and modems for smartphones, is crucial to its overall performance. The summer months typically see a slowdown in smartphone sales, as new models are generally launched in the fall. However, Qualcomm reported that handset sales climbed to $5.9 billion, aligning with analyst estimates and indicating a recovery from the significant slump in smartphone sales experienced over the past two years.
The company is also leveraging its advanced Snapdragon chips, promoting them as essential for the new wave of “AI smartphones.” Recent models from Samsung, for instance, are capable of performing generative AI tasks, such as image creation. Qualcomm’s CEO, Cristiano Amon, highlighted this trend during the earnings call, stating, “AI has expanded the size of the premium tier. So even in a market which it’s kind of flattish to low single digits in growth, the premium tier is actually growing faster and we’ve seen that.” This indicates a shift in consumer preference towards higher-end devices that incorporate advanced technology.
In addition to its smartphone business, Qualcomm is focusing on its automotive sector, which, although currently a smaller segment, presents significant growth potential. The company reported an impressive 87% increase in automotive revenues year-over-year, reaching $811 million, far exceeding analyst expectations of $641.7 million. Qualcomm sees the integration of more software and semiconductors into vehicles as a key opportunity for diversification and expansion.
Moreover, Qualcomm’s Internet of Things (IoT) division, which includes chips for lower-cost devices and Meta’s Quest headsets, continues to contribute to the company’s overall growth. As the demand for connected devices rises, Qualcomm is well-positioned to capitalize on this trend.
As Qualcomm navigates through a competitive landscape, its ability to innovate and adapt to emerging technologies, such as artificial intelligence and automotive applications, will be crucial in maintaining its market leadership. Investors and analysts alike will be closely monitoring the company’s performance in the coming quarters, especially as it positions itself for future growth in the rapidly evolving tech industry.
