Key Points
- Qualcomm projects fourth-quarter revenue exceeding Wall Street estimates.
- Shares initially rose but fell 1.4% due to the Huawei export license revocation.
- Increased demand for smartphone AI capabilities boosts Qualcomm’s orders.
- Qualcomm continues negotiations with Huawei despite export restrictions.
Chipmaker Qualcomm (QCOM.O) has forecast fourth-quarter revenue exceeding Wall Street estimates, driven by robust demand for high-end Android devices and the increasing need for AI-upgraded smartphone chips. Following the announcement, Qualcomm’s shares initially rose over 5% in extended trading. Still, they declined by 1.4% after the company revealed a revenue hit due to the U.S. revoking one of its export licenses for the sanctioned Chinese telecom firm Huawei (HWT.UL).
The tightening of export restrictions on high-end chip technology to China and the escalating trade tensions between the U.S. and China pose significant challenges for chipmakers. These restrictions are particularly impactful as China represents one of the largest semiconductor markets.
“This change will impact our revenues in both the current quarter and the first quarter of fiscal 2025,” stated CFO Akash Palkhiwala during a post-earnings call, without providing specific details on the financial impact. President of Qualcomm’s licensing segment, Alex Rogers, mentioned that negotiations with Huawei would continue despite the restrictions.
Earlier in May, Qualcomm had indicated it did not expect any chip revenue from Huawei beyond 2024 but was pursuing licensing negotiations with the Chinese firm. The recent warning regarding trade curbs somewhat overshadowed Qualcomm’s optimistic revenue forecast. Adding AI capabilities to smartphones has rejuvenated demand, boosting orders for Qualcomm after a prolonged industry slump.
Qualcomm is poised to benefit from increased sales of Apple (AAPL.O) iPhones in China, where Apple has reduced iPhone prices to better compete against Huawei. “While the smartphone market end-demand has remained somewhat muted, Qualcomm is benefiting from the stronger share position in the premium-tier segment where end-market demand has been more resilient,” commented Kinngai Chan, an analyst at Summit Insights.
Analysts anticipate Apple will return to revenue growth when it reports its fiscal third-quarter results. Qualcomm has projected fourth-quarter revenue with a midpoint of $9.9 billion, surpassing analysts’ average estimate of $9.71 billion, according to LSEG data. The rise in AI features has also led smartphone manufacturers to integrate more of Qualcomm’s chips to support advanced processing requirements.
According to Visible Alpha, Qualcomm forecasted fiscal fourth-quarter sales slightly above the analyst estimates of $8.33 billion for its core business of selling chips to customers. Chan noted that Qualcomm’s outlook is driven by Apple and ARM-based PCs, with the premium-tier smartphone market showing more resilience than the mainstream segment.
Qualcomm is also likely to benefit from the recovering personal computer market. Its ARM-based processors in Microsoft’s (MSFT.O) latest AI PCs present a significant challenge to Intel’s (INTC.O) and AMD’s (AMD.O) dominance.
