After Wednesday's trading hours Eastern Time, Qualcomm, the world's largest smartphone chip supplier, released a comprehensive better than expected second quarter performance report, indicating that demand for smartphones is recovering after two years of sluggishness.
Driven by positive financial reports, Qualcomm's stock price surged 4.11% in post market trading, and the stock has risen by about 17% so far this year.
Specific data
The financial report shows that Qualcomm's adjusted revenue for the quarter was $9.39 billion, slightly higher than the estimated $9.32 billion; Adjusted earnings per share were $2.44, an increase of 13.5% from $2.15 in the same period last year and exceeding the expected $2.32.
It is understood that Qualcomm's main business is divided into two categories: semiconductor business (QCT), which focuses on chip products, and technology licensing business (QTL), which is responsible for intellectual property authorization. Among them, the QCT department is its main source of revenue, consisting of three major sectors: mobile terminal chips, which account for the highest proportion of revenue, newly emerging and fastest-growing automotive chips, and Internet of Things (IoT) chips.
Specifically, the revenue of QCT business for the quarter increased by 1% year-on-year to $8.03 billion, slightly higher than the market's expected $8 billion.
Among them, revenue from mobile phone chips increased by 1% year-on-year to $6.18 billion, lower than the 16% increase in the previous quarter. But Qualcomm stated that China is a bright spot. As the largest market for mobile phones, China's mobile phone sales surged by 40% in the first half of the fiscal year, "reflecting our strong competitiveness and the recovery of demand."
Cristiano Amon, CEO of Qualcomm, has been striving to reduce reliance on mobile phone chips by entering the personal computer, automotive, and other markets. However, Qualcomm still heavily relies on the demand for mobile phones, especially in the Chinese market. He stated that in the Chinese market, "major customers" including Xiaomi, Honor, OnePlus Technology, Oppo, and Vivo are driving demand for Qualcomm's mobile phone chips.
"We haven't seen any signs of weakness in the high-end Chinese Android market," he said.
In addition, the revenue of automotive chips increased by 35% year-on-year to 603 million US dollars, reaching a new high for three consecutive quarters and breaking the $600 million mark; The revenue of IoT chips decreased by 11% year-on-year to $1.24 billion.
Finally, QTL's revenue increased by 2% year-on-year to $1.32 billion, higher than the expected $1.31 billion, reversing the decline of 4% year-on-year in the fourth quarter of last year to $1.46 billion. The pre tax profit margin of this business segment is as high as 71%, mainly due to technology licensing fees integrated with Qualcomm's 5G or cellular technology
Performance Guidelines
Qualcomm expects its revenue for the third quarter to be between $8.8 billion and $9.6 billion, with the midpoint of the range higher than Wall Street's expected $9.08 billion; The adjusted earnings per share will be between $2.15 and $2.35, which is also higher than the market forecast of $2.16.
This outlook indicates that the smartphone market has begun to rebound, in line with Qualcomm's forecast that demand will gradually recover in 2024. Some analysts believe that Qualcomm's release of such guidance may be due to the company's heavy investment in the end-to-end AI field.
Amon stated that automotive chip sales have reached new highs for three consecutive quarters, and the company is also about to launch the Snapdragon Snapdragon X platform, achieving leading end-to-end AI functionality in multiple product categories.
He also stated that smartphones that require the most advanced chips, such as "high-end" or "artificial intelligence driven" smartphones, have a strong demand for high-end products. Some leading OEM manufacturers have launched their first generation flagship Android smartphones equipped with end-to-end AI functionality, including Chinese manufacturers.
"Customers hope to enable artificial intelligence on their terminal devices, and we will benefit," said Amon.