Qualcomm Forecasts Beat Estimates, Shares Rise 8.5%

By Stephen Nellis and Arsheeya Bajwa

(Reuters) – Chip designer Qualcomm forecast on Wednesday that current-quarter revenue and profit would beat Wall Street estimates, as the company benefited from a wave of Chinese flagship smartphone launches, sending its shares up 8.5% in extended trading. rose.

Qualcomm said it expects revenue and adjusted earnings to average $10.90 billion and $2.95 per share for its first fiscal quarter, which will cover the holiday shopping season in the U.S. and European markets. According to LSEG, Wall Street expected $10.59 billion and $2.86 per share.

For its fiscal fourth quarter ended Sept. 29, Qualcomm said revenue and adjusted earnings were $10.24 billion and $2.69 per share, beating analyst expectations of $9.91 billion -dollars and $2.56 per share.

The San Diego, California-based company is the largest supplier of smartphone chips and is benefiting from a recovery in smartphone markets as consumers upgrade their devices for artificial intelligence applications such as chatbots and image generators.

While Qualcomm's current outlook beat Wall Street's expectations, investors are still trying to gauge how quickly Apple's revenue stream will disappear. Apple is working on its own modem chips and Qualcomm has warned investors that the iPhone maker will eventually stop using its chips. Some analysts estimate that Apple accounts for up to a quarter of Qualcomm's revenue.

While Qualcomm has an agreement that will see it sell chips to Apple through at least 2026, Wall Street is watching to see whether Qualcomm's efforts to break into laptops and artificial intelligence in data centers will advance quickly enough to offset declines in Apple sales.

In an annual filing Wednesday, Qualcomm said Apple has “used modem products from one of our competitors instead of our product in some of its devices,” but did not name the competitor. MediaTek Inc of Taiwan and Samsung Electronics of South Korea are Qualcomm's biggest competitors in the modem market.

But the launch of new flagship phones from Chinese Android brands such as Xiaomi, Oppo and Vivo helped raise Qualcomm's forecast, said Kevin Cassidy, managing director at Rosenblatt Securities.

Qualcomm also said Wednesday that it had signed a new licensing agreement with Shenzhen Transsion Holdings Co Ltd, a Chinese company that makes phones for developing markets.

The company also announced that it stopped shipping 4G smartphone products to Huawei Technologies Co on May 7. It previously generated around $560 million in revenue from the Chinese telecom giant.

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