Qualcomm’s Profit Forecast Tops Estimates Amid AI Focus, Shares Fluctuate

Qualcomm Stock

On Wednesday, Qualcomm (NASDAQ:QCOM) projected fiscal second-quarter profit slightly exceeding Wall Street estimates, with sales aligning with market expectations. However, investor concerns regarding the chip maker’s Android sales in China led to fluctuations in after-hours trading.

The sales outlook reflects growing interest in new Qualcomm chips featuring capabilities to support chatbots, image generators, and other artificial intelligence (AI) features directly on devices rather than relying on cloud computing data centers. While Qualcomm’s executives expressed optimism about the new chips, they acknowledged a flat sales expectation for the current fiscal second quarter in China, hinting at potential market share losses to competitors.

The company’s forecast for the current fiscal second quarter, ending in March, predicted sales and adjusted profit with a midpoint of $9.30 billion and $2.30 per share. This outlook surpassed analyst estimates of $9.30 billion and $2.25 per share, according to data from LSEG.

Qualcomm also announced a chip supply deal with Samsung (005930.KS) for its top-end Galaxy S24 model, though it doesn’t cover all of Samsung’s newest models. Some of Samsung’s phones will feature their chips, marking a departure from the exclusive use of Qualcomm chips in the previous generation.

Qualcomm faces challenges on various fronts, including Huawei’s limited use of Qualcomm for 4G phones due to U.S. export restrictions and the growing competition from Taiwan’s MediaTek (2454.TW) in mid and premium-tier Android phones.

Analyst Kinngai Chan from Summit Insights expressed concern about Qualcomm losing market share in the Chinese Android market, particularly when compared to MediaTek’s results and outlook.

In its patent business, Qualcomm shared that Apple (NASDAQ:AAPL) extended a licensing deal through March 2027. Qualcomm had previously signed a deal with Apple in September to supply chips through 2026, and this extension alleviates concerns about a potential gap in their partnership.

For the fiscal first quarter ending on Dec. 24, Qualcomm reported sales and adjusted profit of $9.94 billion and $2.75 per share, exceeding estimates of $9.52 billion and $2.37 per share. The company’s chip segment forecast for the fiscal second quarter sales, with a midpoint of $7.9 billion, was above analyst estimates of $7.86 billion. In the patent-licensing business, Qualcomm projected second-quarter sales with a midpoint of $1.3 billion, in line with estimates of $1.3 billion.

Qualcomm is diversifying into new markets, such as personal computers, with collaborations with Dell Technologies (NYSE:DELL) and Lenovo Group (0992.HK) for laptops featuring chips claimed to be faster than Apple’s in-house processors.

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