Qualcomm Exceeds Expectations With Strong Performance In China, Leading To Share Price Surge

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As the smartphone market in China rebounds from a recent downturn and a renewed contract with tech giant Apple enhances its prospects, Qualcomm anticipates first-quarter revenues between US$9.1 billion and US$9.9 billion. 

Qualcomm has unveiled a promising outlook for its first-quarter sales and profits, surpassing Wall Street expectations. The optimistic forecast comes as the smartphone market, particularly in China, shows signs of recovery from a recent slump, aided by a renewed contract with tech giant Apple.

Based in San Diego, California,  the company anticipates first-quarter revenue to range between US$9.1 billion and US$9.9 billion. The midpoint of this projection, exceeding analysts’ predictions at US$9.2 billion, signifies a robust performance. The company forecasts adjusted profits for the current quarter to be between US$2.25 and US$2.45 per share, surpassing expectations of US$2.23 per share, according to LSEG data. Following this announcement,  the company’s shares surged by 3.4%.

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For the recently concluded fiscal fourth quarter,  the company reported sales of US$8.67 billion and adjusted profits of US$2.02 per share, exceeding analysts’ estimates. This positive performance underscores Qualcomm’s resilience in the market. While facing competition from Huawei Technologies, which has resumed producing its smartphone chips, the company expressed confidence that Huawei’s re-entry into the market will not adversely affect its relationship with Chinese smartphone companies. The company anticipates a 35% quarter-over-quarter increase in sales to Chinese smartphone customers.

The company’s primary customer, Samsung Electronics, is expected to return to using some of its in-house chips after exclusively utilising Qualcomm chips in its recent devices. Nevertheless,  the company remains optimistic about retaining a “majority share” of the chips in Samsung’s upcoming S24 line of phones. The recovery in global smartphone shipments, driven by strong demand in emerging markets and a resilient premium phone segment, has contributed to the company’s positive outlook. Analysts reported only a 0.1% decline in global smartphone shipments for the quarter ending in September.

Logan Purk, an analyst at Edward Jones, commented, “For Qualcomm, it is a recovery in Android demand mostly driven by significant growth in demand from Chinese OEMs. This recovery would eventually happen but appears to have materialised sooner than expected, driving solid results and improved guidance for the next quarter.” The strategic moves, such as the renewed supply agreement with Apple extending to 2026 and plans to re-enter the laptop market with Microsoft’s support, bode well for its prospects.

In the chip business segment, the company reported fourth-quarter revenue from smartphone handsets of US$5.46 billion, surpassing expectations. Automotive chip sales also exceeded estimates, totalling US$535 million for the quarter and contributing to a 24% growth in The automotive chip business for fiscal 2023, reaching US$1.9 billion. Overall performance showcases its resilience and adaptability in a dynamic market landscape.

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