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July 18, 2024

Qualcomm Soars on Strong Q1 Earnings Driven by 5G and Automotive

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Feb 1, 2024

Qualcomm reported fiscal first quarter results that beat Wall Street’s expectations, driven by strong demand for its smartphone chips and growth in automotive and Internet of Things (IoT). The company also issued an upbeat forecast for the current quarter.

Q1 Earnings Top Estimates

Qualcomm posted Q1 adjusted earnings per share (EPS) of $3.13 on revenue of $9.93 billion, easily surpassing consensus analyst estimates of $2.26 EPS on $9.61 billion revenue.[1]

Key quarterly numbers:

Metric Result Year-Over-Year Change
Revenue $9.93 billion +22%
EPS $3.13 +37%

“Our fiscal first quarter results demonstrate that the deliberate investments we have made in growth areas — including high-performing connectivity and auto platforms, our product and licensing businesses — are enabling us to capitalize on the broad opportunities ahead of us,” said Qualcomm CEO Cristiano Amon.[2]

Growth Drivers: 5G and Automotive

Two key drivers fueled Qualcomm’s strong results: surging demand for 5G devices globally, and momentum in auto chips and platforms for advanced driver assistance systems (ADAS) and digital cockpits.[3]

Qualcomm is benefitting as smartphone makers upgrade devices to support faster 5G networks. Flagship Snapdragon chips accounted for more than 40% of handset chipset revenue last quarter.[4]

The company has also become a key supplier for automakers adding advanced connectivity and computing features. Qualcomm’s Snapdragon Ride ADAS platform is now deployed in over 300 vehicle models. Auto chip sales nearly doubled year-over-year.[5]

“We have continued to extend our leadership position in auto by securing 21 auto design wins in the fiscal first quarter, up more than 50% versus the prior year,” said Akash Palkhiwala, Qualcomm CFO.[6]

Qualcomm’s growth story appears sustainable, with 5G adoption still early-stage in many regions and auto representing an incremental growth opportunity longer-term.

Strong Guidance Fuels Stock Surge

In addition to the Q1 beat, Qualcomm offered an upbeat outlook that sent the stock soaring over 7% in after-hours trading.[7]

For fiscal Q2, the company guided for:

  • Revenue of $10.2 billion to $11 billion, compared to consensus of $9.57 billion
  • EPS of $2.05 to $2.25, above consensus of $1.68

“We are off to an impressive start in fiscal 2024, delivering record quarterly revenues despite macroeconomic headwinds,” said CEO Amon. “The partnerships we have built…, especially in automotive and edge networking, position us extremely well for strong growth in FY 2024 and beyond.”[8]

Rebound from Inventory Correction

Qualcomm’s results indicate smartphone demand may be rebounding after a period of inventory drawdowns. Handset volumes declined 15% sequentially last quarter, but the company said inventory levels have now returned to more normalized levels.[9]

The inventory correction primarily impacted China, but sell-through is improving there as well. Qualcomm saw positive trends over the Lunar New Year selling season.

“Demand signals from our customers as we enter the March quarter are consistent with healthy global handset industry year-over-year growth,” said CFO Palkhiwala.[10]

Long-Term Growth Tailwinds

Looking beyond short-term fluctuations, Qualcomm remains well-positioned to capitalize on 5G, auto, and AI opportunities.

5G networks are still rolling out globally, bringing much faster speeds and lower latency. As that continues, more consumers will upgrade phones to take advantage, driving chip demand.

Qualcomm is also chasing a >$100 billion addressable market in auto over the next decade between connectivity, telematics, infotainment, and ADAS.[11] It has over 50 automaker engagements currently.

And the explosion of AI workloads represents incremental growth for Qualcomm’s high-end Snapdragon chips. The company recently extended key partnerships with Samsung and Apple.

“We have established ourselves as the premium brand for smartphones globally,” CEO Amon emphasized. “This provides stability to our licensing business and the opportunity to grow EPS as we scale revenues.”[12]

So while macro conditions create some uncertainty in the near-term, Qualcomm appears to have all arrows generally pointed up.

Key Takeaways and What’s Next

In summary, key takeaways from Qualcomm’s fiscal Q1 report:

  • Strong beat on both revenue and EPS
  • Growth led by 5G phones and surging auto business
  • Upbeat Q2 guidance reflects expectations for solid smartphone demand
  • Inventory correction largely over; growth drivers like 5G and auto remain intact

Looking ahead, the company will aim to maintain momentum through new 5G launches, auto design wins, and AI adoption. Geopolitical issues like US chip export restrictions to China do create some risk.[13] But the long-term outlook seems bright.

Qualcomm reports fiscal Q2 results on May 3rd, where investors will look for evidence the current rebound is sustainable. In the meantime, the stock chart tells a bullish story following this earnings beat.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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