Qualcomm earnings report fiscal Q2 2024

Qualcomm reported fiscal second-quarter earnings on Wednesday that surpassed Wall Street expectations, and provided a strong guide for the current quarter.

Shares rose about 4% in extended trading.

Here’s how it did versus LSEG consensus estimates for the quarter ended March 24:

• Earnings per share: $2.44 adjusted vs. $2.32 expected
• Revenue: $9.39 billion adjusted vs. $9.34 billion expected

Net income during the quarter was $2.33 billion, or $2.06 per share, versus $1.7 billion, or $1.52 per share, in the year-earlier period.

Qualcomm said it expected between $8.8 billion and $9.6 billion in sales in the current quarter, higher than Wall Street expectations of $9.05 billion. Analysts were looking for earnings guidance of $2.17 per share, versus the company’s forecast of between $2.15 and $2.35.

The company said on the earnings call that it expected overall handset revenues to decline during the current quarter by “mid-single digit percent” because of a lack of summer smartphone launches, which is a typical seasonal pattern.

Qualcomm’s most important business is its handsets business. It sells processors, modems and other parts for smartphones — primarily Android devices, but also some modem parts in iPhones.

Handset sales rose 1% year over year to $6.18 billion, signaling that the smartphone market may be recovering after a few years of post-Covid slumping. Qualcomm called out strong demand for “premium tier” smartphones that require the most advanced chips, especially in China. It said quarterly revenue from Chinese phone makers jumped 40% from the year-earlier period.

“We have not seen signs of weakness in the Android premium market in China,” Qualcomm CEO Cristiano Amon said on an earnings call with analysts. “A lot of the strength is really coming from premium devices on Oppo, OnePlus, Vivo.”

Qualcomm calls the phones that use its best chips “AI-powered smartphones,” citing features such as generative email completion, live translation, and virtual assistants that use the chips specialized “NPU” AI section. One such phone is Samsung’s Galaxy S24 Ultra, which launched earlier this year.

“We are seeing the very first instances of on-device AI and Gen AI being launched in premium devices and that is resonating well with the consumer,” Amon said, adding that the company is targeting performance per watt as its primary artificial intelligence benchmark.

The company’s automotive business, which sells chips to automakers, also showed signs of growth, rising 35% year over year to $603 million. Qualcomm said it expected consecutive double digit percentage growth in the division in the current quarter. Revenue in the “Internet of Things” business — lower-cost chips and chips for virtual reality — declined 11% year over year to $1.24 billion.

Those three business lines are reported together as QCT, the company’s chip business, which saw a 1% year-over-year sales increase to $8.03 billion.

The company’s licensing business, QTL, in which it collects fees from companies that want to integrate 5G or cellular technology into their products, increased 2% to $1.32 billion from the year-earlier period.

Qualcomm said it paid $895 million in dividends and repurchased $731 million in shares during the quarter, and raised its quarterly dividend to 85 cents from 80 cents previously.