Qualcomm Rises the Most in Two Years After Giving Rosy Forecast
(Bloomberg) -- Qualcomm Inc. shares soared as much as 10% after the world’s biggest seller of smartphone processors gave an upbeat forecast, suggesting that demand for handsets is increasing after a two-year slump.
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Revenue in the three-month period ended in June will be $8.8 billion to $9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be $2.15 to $2.35 a share. Analysts had projected sales of $9.08 billion and profit of $2.16 a share.
The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover in 2024. The San Diego-based company also reported better-than-predicted results in the second quarter — buoyed by headway in China, where it sells technology to local phone manufacturers.
The shares rose as high as $181.25, the biggest intraday gain since April 2022. They had been up 13% this year through Wednesday’s close.
Chief Executive Officer Cristiano Amon has been trying to decrease reliance on phone chips by pushing into personal computers, vehicles and other markets. But Qualcomm remains heavily dependent on demand for handsets, particularly in China.
In the second quarter, which ended March 24, profit was $2.44 a share, excluding some items. Revenue rose 1% to $9.39 billion. Analysts had estimated profit of $2.32 and sales of $9.32 billion.
Revenue from the smartphone segment gained 1% last quarter, a slowdown from the 16% increase in the previous three months. But China was a bright spot, Qualcomm said. Sales to phone makers in that country, the biggest market for the devices, surged 40% in the first half of the fiscal year, “reflecting our strong competitive positioning and recovery of demand.”
In that market, Qualcomm’s Amon said that his local customers, including Xiaomi, Honor, OnePlus Technology, Oppo and Vivo, are fueling demand. They’re not losing smartphone market share to a resurgent Huawei Technology Co. in China, he added. Amon said that Huawei’s reentry into the market has helped stoke interest in the Android operating system, which is often paired with Qualcomm chips.
“We have not seen signs of weakness in the Android premium market in China,” he said.
Huawei has been blacklisted by the US government, and Amon pointed out that Qualcomm only sells less-advanced 4G phone parts to the company — in line with US trade restrictions. His company expects that business to wind down to nothing next year.
Apple Inc., which reports earnings tomorrow, and Samsung Electronics Co., a maker of Android-based phones, are major phone customers of Qualcomm. But Apple’s iPhone relies on Qualcomm for connectivity chips, rather than the main processor.
Qualcomm’s Internet of Things group, which creates electronics for web-connected appliances, has suffered from a glut of inventory. Revenue at that unit was down 11% last quarter. Qualcomm’s automotive sales rose 35%.
An additional portion of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks. Phone manufacturers pay these fees whether they use Qualcomm-branded chips or not.
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