(Bloomberg) — Qualcomm Inc. shares rose as much as 10% after the world’s biggest seller of smartphone processors gave an upbeat forecast, suggesting demand for the devices is rising after a two-year slump.
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Revenue for the three-month period ending in June will be $8.8 billion to $9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be $2.15 to $2.35 per share. Analysts were projecting sales of $9.08 billion and earnings of $2.16 per share.
The outlook signals that the smartphone market has begun to recover, in line with Qualcomm’s forecast that demand would gradually recover in 2024. The San Diego-based company also reported better-than-expected second-quarter results – driven by progress in China, where it sells technology to local phone makers.
Shares rose as high as $181.25, the biggest intraday gain since April 2022. They were up 13% this year through Wednesday’s close.
CEO Cristiano Amon has tried to reduce dependence on phone chips by investing in personal computers, vehicles and other markets. But Qualcomm remains heavily dependent on demand for cell phones, especially in China.
In the second quarter, ended March 24, earnings were $2.44 per share, excluding certain items. Revenue increased 1% to $9.39 billion. Analysts estimated profit of US$2.32 and sales of US$9.32 billion.
Smartphone segment revenue rose 1% last quarter, a slowdown from the 16% increase in the previous three months. But China was a bright spot, Qualcomm said. Sales to phone manufacturers in that country, the largest market for the devices, increased 40% in the first half of the fiscal year, “reflecting our strong competitive positioning and the recovery in demand”.
In this market, Qualcomm’s Amon said its local customers, including Xiaomi, Honor, OnePlus Technology, Oppo and Vivo, are fueling demand. They are not losing smartphone market share to the resurgent Huawei Technology Co. in China, he added. Amon said Huawei’s re-entry into the market has helped spark interest in the Android operating system, which is often paired with Qualcomm chips.
“We have seen no signs of weakness in the premium Android market in China,” he said.
Huawei has been blacklisted by the US government, and Amon highlighted that Qualcomm only sells less advanced 4G phone parts to the company – in line with US trade restrictions. His company expects the business to come to nothing next year.
Apple Inc., which reports results tomorrow, and Samsung Electronics Co., a maker of Android-based phones, are Qualcomm’s top phone customers. But Apple’s iPhone relies on Qualcomm for connectivity chips, not the main processor.
Qualcomm’s Internet of Things group, which creates electronics for Internet-connected devices, has suffered from excess inventory. This unit’s revenue fell 11% in the last quarter. Qualcomm’s automotive sales increased 35%.
An additional portion of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks. Phone makers pay these fees whether they use Qualcomm-branded chips or not.
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