Qualcomm Delivers Flat Earnings in Q1 but Predicts Solid Growth in Q2

Mobile chipset giant Qualcomm announced that it earned a net income of $2.3 billion on revenues of $9.4 billion in the quarter ending March 24. Those figures represent gains of 37 percent and 1 percent, respectively, year-over-year (YOY).

Qualcomm beat expectations and delivered a positive forecast for future earnings, sending its stock price up 10 percent. (This announcement arrived Wednesday, but I somehow missed it at the time.)

“We are pleased to report strong quarterly results, with EPS [earnings per share] exceeding the high end of our guidance,” Qualcomm president and CEO Cristiano Amon said. “We are excited about our continued growth and diversification, including achieving our third consecutive quarter of record Automotive revenues, upcoming launches with our Snapdragon X platforms, and enabling leading on-device AI capabilities across multiple product categories.”

There are two halves to Qualcomm’s business, QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing), and the former is divided into three revenue streams: Handsets, Automotive, and IoT. As you might expect, Handsets is by far the biggest part of the business, and this segment delivered $6.2 billion in revenue in the quarter, up 1 percent (basically flat), accounting for about 65 percent of Qualcomm’s total revenue.

As for the rest of the business, Automotive revenues grew 35 percent to $603 million, and IoT revenues fell 11 percent to $1.2 billion. QTL, the licensing side of the business, delivered about $1.36 billion in revenues.

The lack of growth in the Handset segment is, of course, concerning, since Qualcomm is the world’s biggest maker of microprocessors and other chipsets for smartphones and other mobile devices. But the firm said that revenue in the current quarter, which ends in June, will be better than previous predictions, another sign that the smartphone market is finally making a comeback. (IDC reported last month that smartphone sales grew 7.8 percent in Q1.)

And while smartphone makers like Apple and Samsung struggle when China-based hardware makers surge in their own country, Qualcomm benefits because most of those companies use its chipsets. And Qualcomm’s chip sales in the world’s biggest market are up 40 percent over the past two sequential quarters “reflecting [its] strong competitive positioning and recovery of demand.”

“AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models,” Mr. Amon said during a post-earnings conference call. “Users want to buy a more capable phone that can run AI.”