In its latest fiscal year 2024 report, Qualcomm, the American multinational corporation best known for making smartphone chips, announced its Q1 financial earnings. According to the reports, Qualcomm gained $6.6 billion in sales of handset chips, a 16% bump from the same time last year ($5.7 billion). For the current quarter, the company expects adjusted earnings of between $1.73 and $1.93 per share on revenue of $8.9 billion to $9.7 billion.
Moreover, the company revealed their adjusted $9.92 billion in total revenue, a 5% uptick compared to the $9.4 billion reported during the first quarter of 2023. In addition, Qualcomm’s net income rose 24% during the quarter to $2.77 billion, or $2.48 per share, from $2.24 billion, or $1.98 per share.
Cristiano Amon, president and CEO of Qualcomm, was evidently delighted with the report: “We are extremely pleased to report strong quarterly results, with revenues and EPS exceeding the high end of our guidance. We see the Android market stabilising after we’ve been through 2023. That was a year of correction.”
Also Read: Apple Q4 2023 Earnings: Services Revenue Hits New Crazy High
How Did Qualcomm Recover From A Declining 2023 Q4?
After the smartphone market experienced two years of decline, Canalys research highlighted that the global smartphone market experienced an 8% year-on-year growth in Q4 2023, indicating signs of stabilisation and recovery.
Toby Zhu, a Senior Analyst at Canalys, stated: “Smartphone vendors witnessed a significant profitability improvement despite the market declining in 2023. Components and chipset prices were relatively low over the past year, allowing vendors to increase profit margins and develop competitive products.” Another senior analyst, Sanyam Chaurasia, commented: “In 2024, emerging markets will remain a strategic battleground for most smartphone vendors seeking growth.”
Since Qualcomm is one of the leading designers and manufactures chipsets for smartphones, automotive, VR headsets, and other devices, their revenue grew, especially with the announcement of their partnership with Samsung’s latest S24 series.
Qualcomm Announced Chip-Supply Deal with Samsung
As mentioned above, besides releasing its Q1 report, Qualcomm revealed that it has reached a chip supply deal with Samsung to supply chips globally for its Galaxy S24 model. For context, Samsung’s high-end Galaxy phones launching will use Qualcomm processors, and the company expects that business to continue for several years under a new deal, foreclosing the possibility that the second-largest smartphone maker would eschew Qualcomm for its own chips.
However, there is a drawback as the deal does not cover all of Samsung’s newest models, some of which will use Samsung’s own chips, a reversal from the previous generation of phones where the South Korean electronics giant used Qualcomm chips exclusively.
Nevertheless, Amon is thankful for the partnership between his company and Samsung. “I think you should look at the launch of the Galaxy S24 as a good proxy and how they should think about the agreement between us and Samsung. We are proud to partner with Samsung and Google to provide leading XR experiences to Galaxy users by utilising Snapdragon XR2+ Gen 2 and aiming to have the leadership position and the mobile performance on CPU.”
What Challenges Are Qualcomm Facing?
As stated above, Qualcomm’s deal with Samsung includes the phone manufacturers not exclusively using their products in all their newest models, which would allow competitors such as Taiwan’s MediaTek to challenge their stronghold on Android phones.
According to Kinngai Chan, an analyst at Summit Insight: “A simple comparison against MediaTek results and outlook clearly confirmed our concern that Qualcomm is losing market share in the Chinese Android market”, referencing its 12% stock decline in September last year and its 15% reduction of workload in China.
Besides MediaTek challenging Qualcomm’s stronghold in mid- and premium-tier Android phones, the U.S. export restrictions have forced Huawei to use its chips only for 4G phones, further highlighting their vulnerable position in China.
Thus, with these ongoing concerns, Amon is heavily focusing on its Snapdragon XR2+ Gen 2 to power Samsung’s long-awaited mixed-reality headset, possibly called Samsung Glasses, and the Meta Quest 3. “We’re tracking the launch of products with the Snapdragon X Elite chipset tied with the next version of Microsoft Windows. They have a lot of Windows AI capabilities.”
Will Qualcomm Be a Top AI Stock in 2024?
With Samsung’s S24 already reaching 1.21 million units, the highest figure in the S series to date, Qualcomm will receive its first mobile chip sales in 2024.
For Qualcomm, this implies another year of high-end chip income from 5G network chipsets as CFO Akash Palkhiwala has said that this proliferation of new semiconductor technologies and Qualcomm’s work at the base software layer to unlock the power of AI on mobile devices could lead to about a 10% per year increase in average selling price (ASP) for its chips.
Furthermore, with the smartphone market gradually recovering and stabilising, Qualcomm is anticipating a new upcycle for its smartphone-centric business. This next growth cycle could go a long way toward diversifying Qualcomm’s business, with its QTC and QTL sales seeing a reasonable gain, while its IoT saw a 32% dip in sales, with $1.1 billion in earnings this quarter.
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