Qualcomm’s fortunes appear to be turning around

Last Wednesday, Qualcomm Incorporated (NASDAQ: QCOM ) reported its fiscal third quarter earnings, beating Wall Street estimates while also issuing strong guidance for the current quarter. However, while both the top and bottom lines slightly beat estimates, it wasn’t enough to get the market excited.

Third Quarter Fiscal Highlights

For the quarter ended June 23, Qualcomm reported adjusted revenue of $9.39 billion, beating LSEG’s estimate of $9.22 billion. Revenues grew by 11% year-on-year.

The chip business, or more specifically, three hardware lines reported together, as QCT reported sales were up 12 percent from last year as they generated $8.1 billion in revenue.

Its handset business grew 12 percent year-on-year to $5.9 billion, suggesting a recovery after a deep two-year decline in smartphone sales. When it comes to the smartphone market, the summer months are usually a slower part of the annual cycle.

The Internet of Things business that includes the sale of chips for lower-cost devices and Quest headsets from Meta Platforms (NASDAQ: META ) revenue contracted 8% year over year to $1.4 billion, but still beat StreetAccount estimate of $641.7 million. In 2022, Meta and Qualcomm partnered to deliver multi-generational metaverse experiences. While Qualcomm’s deal with Meta is a multi-year strategic collaboration, two years later, the metaverse has yet to come to life. While Meta and Mark Zuckerberg aren’t giving up on the metaverse, they’ve talked more about generative AI.

Licensing revenue from collecting fees from companies that integrate 5G or other cellular technologies into their products rose 3 percent to $1.3 billion.

Auto revenue rose 87% from last year to $811 million, beating StreetAccount’s consensus estimate of $641.7 million. Although automotive chips remains a small part of Qualcomm’s total revenue stream, it is seen as one of the biggest opportunities for future growth and diversification.

Earnings rose 18% from last year as net income totaled $2.13 billion, or $1.88 per share. Adjusted earnings rose 25% from last year to $2.33 per share.

Current quarter guidance points to an improvement on the horizon

Qualcomm guided for sales in the range of $9.5 billion to $10.3 billion, forecasting earnings per share of $2.38 to $2.58. Looking at the middle numbers, this guidance indicates a 14% improvement in revenue over the previous quarter, along with a 26% improvement for the bottom line. However, CEO Cristiano Amon hinted that the smartphone market’s recovery will not be quick, pointing to single-digit to single-digit growth.

The story continues

Qualcomm’s fortunes seem to be turning around.

While the downturn in the smartphone market has dragged down Qualcomm’s financials over the past three years, its latest results suggest that growth appears to be back on track. Additionally, the growth of the AI ​​smartphone market should support the company in sustaining its new growth drive.

DISCLAIMER: This content is for informational purposes only. It is not intended as investment advice.

This article is from an unpaid external contributor. It does not represent Benzinga reporting and has not been edited for content or accuracy.

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