Qualcomm forecast beats estimates as AI revives smartphone market

A woman walks past a counter displaying mobile phones at the Qualcomm booth during the 2021 China International Fair for Trade in Services (CIFTIS) in Beijing, China September 4, 2021. REUTERS/Florence Lo/File Photo

By Stephen Nellis and Arsheeya Bajwa

(Reuters) – Qualcomm on Wednesday forecast fiscal third-quarter sales and adjusted profit above Wall Street expectations, driven by a faster-than-expected recovery in smartphone markets thanks to artificial-intelligence features.

Qualcomm forecast third-quarter sales and adjusted profit with midpoints of $9.2 billion and $2.25 per share, beating analyst estimates of $9.05 billion and $2.17 per share, according to LSEG data.

Shares were up 3% after the results in volatile after-hours trading.

San Diego, California-based Qualcomm is the world’s biggest supplier of chips for smartphones and counts both Apple and Samsung as customers. The company’s sales declined sharply last year following a boom during the pandemic. The drop was felt especially in the Android phone market where Qualcomm draws most of its business.

The company faces competitive pressure from China’s Huawei Technologies Co, which last year introduced a domestically made smartphone chip, and Taiwanese rival MediaTek, which last week said it expects rising sales this year as it gains market share among the premium-priced Android handsets.

For the fiscal second quarter ended March 24, Qualcomm’s sales and adjusted profit were $9.39 billion and $2.44 per share, respectively, above analyst expectations of $9.34 billion and $2.32, according to LSEG data.

Qualcomm is hoping to benefit from consumer demand to upgrade devices to run AI chatbots directly on the device rather than going over to a data center.

In a challenge to Apple, Qualcomm plans to release a chip designed to power laptops starting this summer, though that small amount of early sales is unlikely to play a major role in the company’s third-quarter forecast, analysts said.

In Qualcomm’s chip segment, the company forecast fiscal third-quarter sales with a midpoint of $7.8 billion, compared with analyst estimates of $7.74 billion, according to LSEG data.

Qualcomm predicted third-quarter patent-licensing sales with a midpoint of $1.3 billion, compared with estimates of $1.29 billion.

For the just-ended fiscal second quarter, Qualcomm said chip and licensing revenues were $8.03 billion and $1.32 billion, respectively, compared with analyst estimates of $7.95 billion and $1.32 billion, according to LSEG.

Within Qualcomm’s chip business, the company said that mobile handsets generated $6.18 billion in sales in the second quarter, compared with estimates of $6.23 billion, according to data from Visible Alpha. Automotive and Internet-of-Things chip revenues in the second quarter were $603 million and $1.24 billion, respectively, compared with analyst estimates of $578.9 million and $1.22 billion.

(Reporting by Stephen Nellis in San Francisco and Arsheeya Bajwa in Bengaluru; Additional reporting by Noel Randewich in Oakland, California; Editing by Matthew Lewis)