Qualcomm Inc on Wednesday predicted the current quarterly sales and adjusted profits above Wall Street estimates, with executives saying they see challenges in supply cuts as smartphone buyers move up to 5G and former Huawei Technologies Co Ltd customers move to Qualcomm-chip phones.
Qualcomm shares increased by 5.4% to $ 144 in expanded trading.
Qualcomm is the world’s largest provider of smartphone chips, offering the essentials of 5G connectivity. The San Diego, California-based company has settled a long-running legal battle with regulators and re-acquired iPhone maker Apple Inc as a customer.
That helped its share rise to 83% last year, beating the Nasdaq Composite Index’s 64% gain, as investors bet Qualcomm will be a major winner in global transformation towards 5G communications networks.
“Obviously Qualcomm is benefiting from its 5G win over Apple12’s Apple12 and other OEMs in Asia,” said Kinngai Chan, an analyst at Summit Insights Group. Respect, Huawei’s brand brand, also contributed to this, he added.
Qualcomm forecasts adjusted profits by $ 1.65 per share per capita revenue to mid-$ 7.5 billion in its third quarter quarter ending in June, compared to analysts’ expectations of $ 1.52 per share at $ 7.11 billion, according to Refinitiv data.
In the second quarter of March 28, Qualcomm adjusted $ 1.90 per share to $ 7.93 billion in sales, compared to analysts’ $ 1.67 per share of $ 7.62 billion, Refinitiv data showed. Wall Street estimates were just slightly above Qualcomm’s $ 1.65 direct point per share for $ 7.6 billion.
Qualcomm manufactures chips but relies on partners to build them, such as Taiwan Semiconductor Manufacturing Co Ltd, Samsung Electronics Co Ltd and Semiconductor Manufacturing International Corp. of China.
Qualcomm executives said the company was investing with its manufacturing partners to gain strength, “which is one of the key areas for rising costs between the second and third quarters,” Qualcomm chief financial officer Akash Palkhiwala told Reuters.
“Purchases remain strong within the chip industry but leading chip manufacturers such as Qualcomm (and Apple) have managed to move smoothly as popular customers” of chip contract manufacturers, notes Angelo Zino, chief financial analyst at CFRA Research.
Qualcomm has been aiming to secure a chip market share after U.S. sanctions For Huawei Technologies Co Ltd last year it all but cut off the Chinese company’s assets, making it impossible to continue making smartphones. Qualcomm executives said they expect a large portion of Huawei’s previous market to pass to other Android phone makers using Qualcomm chips.
Analysts believe the U.S. ban Huawei has benefited Qualcomm customers including iPhone maker Apple and other Asian phone makers.
Qualcomm sees Huawei’s void as “a great opportunity to gain market share, not just a short-term 2022 budget, but also a much longer period of time,” Palkhiwala added.
Those benefits depend on Qualcomm’s ability to secure enough chips during global delivery. Cristiano Amon, who will take over as chief executive in the coming months, told Reuters that Qualcomm could get its most profitable chips, the flagship Snapdragon 800 series of smartphone processors, from both Samsung and TSMC.
“We expect the procurement to improve significantly as we approach the end of the calendar year,” Amon said in an interview.
In the third quarter, Qualcomm chip’s forecast and licensed revenue averaged between $ 6.05 billion and $ 1.45 billion, respectively, compared to analysts’ estimates of $ 5.64 billion and $ 1.36 billion, according to FactSet data.
In the second quarter of the financial year, chip sales and licensing were $ 6.28 billion and $ 1.61 billion respectively, compared to FactSet expectations of $ 6.26 billion and $ 1.35 billion.
Qualcomm said sales of handset chips were $ 4.07 billion, an increase of 53% from a year earlier, compared to a 79% profit in the first quarter. Sales of radio chips, which Qualcomm said would boost revenue growth, increased by 39% to $ 903 million, compared to the annual increase of 157%.