An Analysis of Qualcomm’s Fourth Quarter Earnings

An Analysis of Qualcomm’s Fourth Quarter Earnings

Qualcomm, a leading chipmaker, recently reported its fourth-quarter earnings, surpassing expectations for sales and earnings despite significant year-over-year declines. This article examines Qualcomm’s performance, forecasts, and key business divisions.

Qualcomm exceeded market expectations, with adjusted earnings per share (EPS) of $2.02 compared to an expected $1.91 per share. Additionally, the company’s adjusted revenue reached $8.67 billion, surpassing the estimated $8.51 billion. As a result, Qualcomm’s stock experienced a 3% increase in extended trading.

Qualcomm provided a positive outlook for the current quarter, expecting adjusted earnings between $2.25 and $2.45 per share on sales ranging from $9.1 billion to $9.9 billion. These projections are higher than LSEG consensus expectations of $2.23 per share of earnings on $9.2 billion of sales. Notably, Qualcomm’s mid-range forecast indicates slight revenue growth compared to the previous year.

The fourth quarter saw a significant decrease in net income, dropping by 48% to $1.49 billion or $1.32 per share compared to the previous year’s $2.87 billion or $2.54 per share. Revenue also declined by 24%, amounting to $11.39 billion. Overall, adjusted revenue for Qualcomm’s fiscal year dropped by 19% to $35.83 billion.

Qualcomm’s fortunes are closely linked to the smartphone industry, which has experienced a slump due to the repercussions of the Covid-19 pandemic. As a major chip supplier for high-end Android devices and lower-end phones, Qualcomm faced a 27% decline in handset chip sales, reaching $5.46 billion. However, this surpassed expectations of $5.34 billion. The company’s largest division, QCT, witnessed a 26% decline in sales, generating $7.37 billion. Despite these challenges, Qualcomm’s automotive business stood out, reporting a 15% increase year-over-year to $535 million in sales for the quarter.

Qualcomm’s “Internet of Things” (IoT) business, which includes the chips used in Meta’s Quest headsets, experienced a significant decline of 31% in revenue, amounting to $1.38 billion. On the other hand, the company’s licensing business, QTL, reported $1.26 billion in sales, marking a 12% decrease from the previous year. This performance aligns with the expectations set by Street Account.

In an effort to position itself as an artificial intelligence (AI) company, Qualcomm highlighted its chips’ AI capabilities featured in millions of smartphones. The company aims to leverage Wall Street’s current interest in semiconductor stocks for machine learning. Qualcomm recently unveiled new Android and Windows PC chips with improved AI parts called NPUs, which can significantly enhance AI image processing speed compared to previous processors. CEO Cristiano Amon emphasized the company’s roadmap for “generative AI and mobile computing performance.”

During the quarter, Qualcomm allocated $400 million towards share repurchases and $0.9 billion for dividends. These investments demonstrate the company’s commitment to returning value to its shareholders.

Qualcomm’s fourth-quarter earnings showcased resilience and exceeded market expectations. Despite challenges in the smartphone industry and declines in net income and revenue, the company’s strong forecast for the current quarter instills confidence in its future performance. With a focus on artificial intelligence and investments to drive innovation, Qualcomm remains a key player in the semiconductor industry.

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