Qualcomm recently reported its fiscal second-quarter earnings, exceeding Wall Street expectations and providing a strong forecast for the current quarter. The company’s earnings per share were $2.44, higher than the expected $2.32, and revenue came in at $9.39 billion, surpassing the expected $9.34 billion. Net income for the quarter was $2.33 billion, or $2.06 per share, compared to $1.7 billion, or $1.52 per share, in the same period last year. Qualcomm expects sales between $8.8 billion and $9.6 billion in the current quarter, higher than Wall Street’s estimate of $9.05 billion. The company projected earnings per share of between $2.15 and $2.35, slightly below analysts’ expectation of $2.17 per share.
The handset business is Qualcomm’s primary revenue generator, selling processors, modems, and other parts for smartphones. Despite an anticipated decline in overall handset revenues during the current quarter due to fewer summer smartphone launches, Qualcomm reported a 1% increase in sales in this segment, reaching $6.18 billion. This suggests a potential recovery in the smartphone market following a period of post-Covid sluggishness. The company highlighted strong demand for premium-tier smartphones, particularly in China, with quarterly revenue from Chinese phone makers rising by 40% year over year.
Qualcomm’s high-end chips are utilized in AI-powered smartphones that offer advanced features such as generative email completion, live translation, and virtual assistants. Notable devices, including Samsung’s Galaxy S24 Ultra, leverage Qualcomm’s specialized “NPU” AI section. The company aims to optimize performance per watt as its primary AI benchmark, targeting the integration of on-device AI and Gen AI in premium devices. The automotive business, which sells chips to automakers, experienced a 35% year-over-year growth, reaching $603 million. The Internet of Things business, which offers lower-cost chips and chips for virtual reality, saw an 11% decline in revenue to $1.24 billion.
Qualcomm’s QCT division, encompassing the chip business lines, recorded a 1% increase in sales to $8.03 billion. The licensing business, QTL, responsible for collecting fees from companies integrating 5G or cellular technology, saw a 2% growth to $1.32 billion from the previous year. The company allocated $895 million for dividends and repurchased $731 million in shares during the quarter. In a move to return value to shareholders, Qualcomm raised its quarterly dividend from 80 cents to 85 cents per share. Moving forward, Qualcomm anticipates consecutive double-digit percentage growth in its automotive business in the current quarter, along with ongoing demand for premium-tier smartphones in markets like China.
Overall, Qualcomm’s strong performance in the second quarter reflects its success in the handset and automotive businesses, fueled by demand for premium-tier smartphones and high-end chips. The company’s focus on AI-powered devices and optimized performance per watt positions it well in the evolving smartphone market. With a positive outlook for the current quarter and increased shareholder value through dividends and share repurchases, Qualcomm remains a key player in the semiconductor industry.
