Qualcomm (QCOM) revealed its second-quarter earnings on Wednesday, exceeding analysts’ predictions for both revenue and earnings per share (EPS), although it provided cautious guidance for the third quarter. The company forecasts third-quarter revenue to be between $9.2 billion and $10 billion, which is below the $10.23 billion anticipated by Wall Street.
In a potentially encouraging sign, Qualcomm indicated that the Chinese smartphone market may have hit bottom this quarter. Additionally, Qualcomm plans to supply custom silicon to an undisclosed hyperscaler later this year. Following the earnings announcement, Qualcomm’s stock surged over 10% in premarket trading on Thursday.
For the second quarter, Qualcomm reported an EPS of $2.65 on revenues of $10.59 billion, surpassing the expected EPS of $2.55 and revenue of $10.56 billion according to Bloomberg’s consensus estimates. In the same quarter last year, it posted an EPS of $2.85 on $10.83 billion in revenue.
The company’s Qualcomm CDMA Technologies (QCT) segment generated revenues of $9.07 billion, slightly below the projected $9.13 billion. Conversely, its licensing business exceeded expectations, bringing in $1.38 billion against the forecast of $1.32 billion.
Global smartphone shipments fell by 4.1% in the first quarter, totalling 289.7 million units, marking the end of a ten-quarter growth streak that began in mid-2023. Market research from the International Data Corporation warned that this decline could be a “mild precursor” to further declines throughout the year. Analysts at Bernstein Research, led by Stacy Rasgon, suggest that the overall smartphone market could experience double-digit declines in unit sales this year.
Qualcomm’s revenue is predominantly derived from its handset business, but the company is actively working to diversify into other sectors, such as data centre chips, while also making strides in automotive and robotics technologies. However, these diversification efforts may not fully compensate for the anticipated drop in smartphone sales.
Looking ahead, there’s potential for Qualcomm to unveil positive developments at the Computex conference in June, where CEO Cristiano Amon is expected to discuss the company’s strategy for data centre growth under the keynote titled “AI Together.” This presentation could provide more clarity on Qualcomm’s future plans and market positioning.
Overall, as Qualcomm navigates a challenging smartphone market, its emphasis on diversification and technological advancements may become crucial for its future growth and stability.
