Chip designer Qualcomm reported stronger-than-expected forecasts for the current quarter, driven by a surge in Chinese smartphone launches and bolstered by a new $15 billion stock buyback program. Following the announcement, Qualcomm shares jumped 5.5% in extended trading, marking a positive response to its fiscal outlook.
Qualcomm, headquartered in San Diego, California, is the largest supplier of smartphone chips and is experiencing a boost as consumers increasingly upgrade their devices for artificial intelligence (AI) capabilities, including applications like chatbots and image generators. This quarter’s forecast reflects the company’s benefits from this AI-driven market shift, with its recent results exceeding Wall Street expectations.
In its recent fiscal year, Qualcomm derived 46% of its revenue from Chinese clients, highlighting the significance of this market. However, in light of potential tariff concerns following Donald Trump’s re-election and his plans for sweeping tariffs on imports, Qualcomm executives clarified on a post-earnings call that rising sales in China were not motivated by tariff fears. Trump’s policy proposals include tariffs of 10% to 20% on imports and up to 60% on Chinese goods, aimed at bolstering U.S. manufacturing. Angelo Zino, CFRA Research’s senior equity analyst, noted that while such policies pose risks to the semiconductor industry, their implementation remains uncertain.
For its fiscal first quarter, Qualcomm anticipates sales of approximately $10.90 billion and adjusted earnings of $2.95 per share, surpassing Wall Street’s expectations of $10.59 billion and $2.86 per share, according to data from LSEG. In its fiscal fourth quarter, Qualcomm reported sales of $10.24 billion and adjusted earnings of $2.69 per share, also beating analyst projections.
While Qualcomm’s projections impressed investors, the market remains cautious about the future of its revenue from Apple, which is developing its own modem chips and is expected to eventually discontinue Qualcomm’s chips. Although Qualcomm secured a deal to continue supplying Apple until at least 2026, investors are watching closely to see if Qualcomm’s expansion into laptops and AI data centers will offset this anticipated decline in Apple-related revenue.
Aiding Qualcomm’s forecast are new releases from Chinese brands like Xiaomi, Oppo, and Vivo, according to Kevin Cassidy of Rosenblatt Securities. Additionally, Qualcomm recently signed a licensing agreement with Shenzhen Transsion Holdings, a company that manufactures phones for developing markets.
Qualcomm is also entangled in a legal dispute with Arm, whose technology is integral to Qualcomm’s flagship products. Arm recently threatened to revoke a key license, with a trial set for December. Despite these legal challenges, Qualcomm expects first-quarter chip sales of $9.3 billion and patent-licensing revenue of $1.55 billion, both surpassing analyst estimates.
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