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Qualcomm Has $9.9B Quarter

CHIPS: Guidance For Q2 Ranges From $8.9B to $9.7B

SAN DIEGO – Chipmaker and wireless technology powerhouse Qualcomm (Nasdaq: QCOM) forecasted revenue between $8.9 billion and $9.7 billion in the quarter set to end in March, and earnings per share of $2.20 to $2.40, excluding items. The business released its forecast for the current quarter (the second quarter in Qualcomm’s calendar) during an earnings announcement late last month (Jan. 31).

The company reported earnings of $2.75 per share, excluding items, for the quarter ending Dec. 24. The results beat Qualcomm’s forecast of $2.25 to $2.45 per share.

Net income for the December quarter was $2.77 billion when calculating using GAAP, or generally accepted accounting principles. Revenue was $9.94 billion, slightly above the high end of Qualcomm’s guidance and up 5% from the same quarter of 2023.

In March 2023, Qualcomm reported net income of $1.7 billion on revenue of $9.28 billion.

Handset Demand

Qualcomm is working to diversify into markets as varied as automobiles and personal computers. However, smartphone handsets still dominate Qualcomm’s business; the number of handsets sold is a key metric for Qualcomm.
In an earnings conference call, CFO and COO Akash Palkhiwala spoke of a “recent stabilization of demand” for handsets.

Akash Palkhiwala
CFO and COO
Qualcomm

Following a mid-single-digit percentage decline in handsets shipped globally from 2022 to 2023, handset units shipped are expected to be flat to slightly higher year-over-year during 2024. Advanced fifth-generation (5G) handset units — which are the top-tier products — are expected to grow in the high single-digit to low double-digit range.

Apple Remains on Board

In the earnings call, Qualcomm CEO Cristiano Amon noted that Apple (Nasdaq: AAPL) extended its global patent license agreement with Qualcomm until March 2027. The news followed a September announcement that Qualcomm had reached a deal to supply Apple with Snapdragon 5G modems for smartphone launches in 2024, 2025 and 2026. According to published reports, Apple has been trying to make its own modem to replace Qualcomm’s.

Cristiano Amon
CEO
Qualcomm

In the Jan. 31 call, Qualcomm also announced it extended an agreement with Samsung, beginning this year, relating to Snapdragon platforms for flagship Galaxy smartphone launches. Qualcomm did not give the length of the agreement, saying only it was for multiple years.

In the December quarter, revenue from automotive chips grew 31% year-over-year from $456 million to $598 million, a record. The revenue number was up 12% sequentially due to increased content in new vehicle launches with the Snapdragon Digital Chassis platform.

Qualcomm reported $8.13 billion in cash and cash equivalents at the end of the December quarter, down from $8.45 billion at the end of the September quarter.
Shares of Qualcomm closed Wednesday (Feb. 7) at $145.89. Over the last 52 weeks they have traded in a range of $101.47 to $157.98. Shares reached their 52-week high on Jan. 25.

PCs and Patents

One highlight of the months to come will be the rollout of personal computers using Qualcomm Snapdragon chips. That will happen in the middle of the year.
Patrick Moorhead of Moor Insights & Strategy said in an interview with Yahoo Finance that Qualcomm’s entry to the PC space could “get interesting.” In one scenario, he said, Qualcomm could get a 10% share of the notebook market within two years.

Michael Walkey, an analyst from Canaccord Genuity, said in a Jan. 31 research note that Qualcomm is “well positioned to benefit from on-device generative AI over the next several years for smartphones.”

Samsung’s Galaxy S24 is an example of a smartphone with generative AI. Features include “real-time language conversion enabling people to connect despite language barriers.”

“Over the next several years, we anticipate on-device GenAI to become pervasive across smartphones,” Walkey wrote. “As devices proliferate with these capabilities, we anticipate the app community will drive more and more innovation to drive a new upgrade cycle and stronger global device sales.”
Separately, Qualcomm received the second place spot on the list of 2023 U.S. Patent Assignees compiled by IFI Claims Patent Services, trailing only Samsung and beating tech giants such as IBM (NYSE: IBM). Qualcomm was awarded 3,854 patents in 2023, a number that adds up to more than 10 patents per day.
“We have invested over $90 billion in research and development since our founding — nearly 20% of annual revenue since 2006,” wrote John Smee, Ph.D., senior vice president of engineering with Qualcomm Technologies in a Feb. 2 blog post.

“Qualcomm’s success in 5G is not a coincidence,” Smee wrote. “Rather, it is the result of continuous investments and focused innovation that is made years ahead of the industry. In 2023 alone, we averaged more than 10 patents granted per day. Approximately 75% of these patents are focused on 5G, 5G-Advanced and 6G technologies, further solidifying our position as a leader in connectivity.”

During the December quarter, Qualcomm reported spending $2.1 billion in research and development, down from $2.25 billion in the same quarter one year ago.

Qualcomm
FOUNDED: 1985
CEO: Cristiano Amon
HEADQUARTERS: Sorrento Mesa, San Diego
BUSINESS: Fabless semiconductor maker, specialist in developing and commercializing foundational technologies for the wireless industry
REVENEUE: $38.5 billion in fiscal 2023
STOCK: QCOM (Nasdaq)
WEBSITE: qualcomm.com
CONTACT: 858-587-1121
NOTABLE: An early Qualcomm product was in-cab communications for big rig truckers.

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