On July 31, 2024, Qualcomm (QCOM.O), a leading chipmaker based in San Diego, announced a promising revenue forecast for the fourth quarter, exceeding Wall Street’s expectations. The company is leveraging strong demand for high-end Android devices and the increasing integration of AI technology in smartphones. Despite an initial rise of over 5% in Qualcomm’s stock price during after-hours trading, shares later fell by more than 1% due to concerns over potential revenue impacts from new trade restrictions.
Impact of Trade Restrictions on Qualcomm’s Revenue
Qualcomm’s Chief Financial Officer, Akash Palkhiwala, indicated that the revocation of an export license for Huawei Technologies, a major Chinese telecom firm, will affect the company’s revenue in both the current quarter and the first quarter of fiscal 2025. However, specific financial impacts were not detailed. Qualcomm continues to pursue licensing negotiations with Huawei, according to Alex Rogers, President of Qualcomm’s Licensing Segment.
Earlier in May, Qualcomm had already forecasted no chip revenue from Huawei beyond 2024 but remains committed to licensing discussions with the company. These trade restrictions, coupled with escalating U.S.-China trade tensions, are impacting Qualcomm’s access to one of the largest semiconductor markets globally.
Strong Demand for AI-Enhanced Smartphones
Despite the trade challenges, Qualcomm’s optimistic revenue outlook is supported by a resurgence in smartphone demand, particularly for devices with advanced AI features. The company projects fourth-quarter revenue with a midpoint of $9.9 billion, surpassing the analysts’ average estimate of $9.71 billion. Increased semiconductor usage in AI-capable smartphones has bolstered Qualcomm’s sales.
For its core chip business, Qualcomm forecasts fourth-quarter sales ranging around $8.4 billion, exceeding Visible Alpha’s estimate of $8.33 billion. Additionally, Qualcomm expects adjusted earnings per share to reach a midpoint of $2.55, higher than the projected $2.45.
Growth in Mobile Handset and Automotive Sectors
Qualcomm reported a 12% increase in mobile handset revenue for the third quarter, totaling $5.9 billion. The automotive sector saw a remarkable 87% revenue growth, reaching $811 million. However, revenue from Internet-of-Things (IoT) chips declined by 8% to $1.36 billion. Qualcomm’s strategic move into the automotive market aims to diversify its business and reduce dependence on the smartphone sector.
ARM-Based PCs and Future Prospects
Analysts highlight that Qualcomm’s strong outlook for handsets is driven by the premium smartphone market and the growth of ARM-based PCs. These PCs are gaining momentum, posing a challenge to Intel and AMD’s dominance in the industry.
As Qualcomm navigates trade restrictions and capitalizes on the growing demand for AI-enhanced devices, its diversified approach positions the company for continued growth and resilience in the semiconductor market.
