The recovery of the smartphone market is favorable: Qualcomm's profit last quarter increased by over 30%, and this quarter's guidance exceeded expectations, rising by as much as 10% in after-hours trading | Earnings report insights

Smartphone chip giant Qualcomm has received positive news that investors have been hoping for regarding a rebound in the mobile market. In the last fiscal quarter, Qualcomm's sales revenue and profit accelerated growth, and the guidance for the current fiscal quarter has significantly surpassed Wall Street expectations, potentially maintaining double-digit growth momentum. At the same time, Qualcomm announced a new stock repurchase plan for the first time in three years, with a scale exceeding $10 billion. The company's stock price surged in after-hours trading.

On November 6th, Wednesday, Eastern Time, Qualcomm announced its financial data for the fourth fiscal quarter of 2024 (referred to as the third quarter) ending September 29, 2024, while also providing performance guidance for the first fiscal quarter of 2025 (referred to as the fourth quarter) ending December 2024. The third fiscal quarter of 2024 is referred to as the second quarter.

1) Key Financial Data

Revenue: In the third quarter, the adjusted operating revenue under non-GAAP was $10.244 billion, a year-on-year increase of 19%, compared to analyst expectations of $9.91 billion, with a year-on-year growth of 11% in the second quarter.

EPS: The adjusted earnings per share (EPS) for the third quarter was $2.69, a year-on-year increase of 33%, compared to analyst expectations of $2.57, with a year-on-year growth of 25% in the second quarter.

EBT: The pre-tax profit for the third quarter was $3.491 billion, a year-on-year increase of 33%, with a year-on-year growth of 25% in the second quarter.

2) Segment Revenue

QCT: In the third quarter, the semiconductor business (QCT), primarily including mobile, automotive, and Internet of Things (IoT) chip products, generated revenue of $8.678 billion, a year-on-year increase of 18%, with a year-on-year growth of 11% in the second quarter.

QTL: In the third quarter, the technology licensing business (QTL), responsible for intellectual property licensing, generated revenue of $1.521 billion, a year-on-year increase of 21%, with a year-on-year growth of 3% in the second quarter.

3) Performance Guidance

Revenue: The revenue for the fourth quarter is expected to be between $10.5 billion and $11.3 billion, with analyst expectations of $10.54 billion.

EPS: The adjusted EPS for the fourth quarter is expected to be between $2.85 and $3.05, with analyst expectations of $2.81.

4) Shareholder Returns

Repurchase: Based on the stock repurchase plan announced in October 2021, the board of directors approved a new authorization for stock repurchase of $15 billion, with no expiration date for the new stock repurchase authorization. As of the end of the 2024 fiscal year, there is still $1 billion of unused repurchase authorization from the previous plan.

After the financial report was released on Wednesday after U.S. stock market hours, Qualcomm's stock price, which had risen nearly 4.3%, quickly expanded its gains, with after-hours gains reaching as high as 10%.

Third Quarter Revenue Growth of 19%: Mobile Chip Revenue Up 12%, Automotive Chip Revenue Up 68%

The financial report shows that Qualcomm's revenue and EPS earnings accelerated growth in the third quarter compared to the second quarter, with growth rates exceeding analysts' expectations. In the third quarter, Qualcomm's revenue grew by 19% year-on-year, and EPS grew by 33%, while analysts expected growth of 14.4% and 27.2%, respectively.

Qualcomm's core business saw widespread growth exceeding expectations in the third quarter. Among them, the largest revenue source, the mobile chip business, generated $6.1 billion in revenue for the quarter, a year-on-year increase of 12%, compared to analysts' expectations of $6 billion.

For the entire fiscal year 2024, Qualcomm's revenue is projected to be $33.19 billion, an increase of 9% from the previous fiscal year, driven by sales of mobile phones, especially in China, the world's largest smartphone market. Qualcomm stated that as of September 29, 2024, sales of Android phones in the Chinese market grew by 40%.

Qualcomm occupies a majority of the high-end Android system smartphone chip market and also provides chips for various low-end Android devices. In September last year, Qualcomm announced an extension of its contract to supply chips to Apple, meaning it will continue to provide 5G chips for iPhones launched in 2024, 2025, and 2026.

Among other QCT businesses, automotive chips saw the most significant growth in the third quarter, with revenue increasing by 68% year-on-year to $899 million, far exceeding analysts' expectations of $816 million. Qualcomm stated that the company's collaboration projects with automakers are worth billions of dollars and emphasized that this marks the fifth consecutive quarter of growth in the automotive business.

In the third quarter, Qualcomm's IoT chip revenue was $1.68 billion, a growth of 22%, also higher than analysts' expectations of $1.55 billion. Revenue from this business comes from industrial chips, Meta's mixed reality headset Quest, and smart glasses co-launched by Meta and Ray-Ban.

Revenue Guidance Up to 14% Growth, EPS Guidance Up to 11% Growth

In terms of performance guidance, Qualcomm expects the growth rate in the fourth quarter to slow compared to the third quarter, but it will still be significantly stronger than Wall Street's expectations.

Based on the guidance range, Qualcomm expects fourth-quarter revenue to grow by 5.8% to 13.9% year-on-year, while analysts expect it to be close to the lower end of the guidance range. This means Qualcomm anticipates that fourth-quarter revenue may still maintain double-digit growth, while analysts expect growth to slow significantly compared to the third quarter, with a growth rate only one-third of that in the third quarter.

According to the guidance range, Qualcomm expects fourth-quarter EPS to grow by 3.6% to 10.9% year-on-year, while analysts expect EPS for the quarter to grow by only 2.2%.

Last month, Qualcomm released the most powerful AI mobile chip Snapdragon 8 Elite, claiming it to be "the most powerful and fastest mobile system-on-chip (SoC) ever." The Oryon CPU and Adreno GPU equipped with this chip have performance up to three times that of the previous generation, with the Oryon CPU reaching up to 4.32GHz and the Adreno GPU's efficiency improved by 40%.

The "brain" of the Snapdragon 8 Elite—the Hexagon neural processing unit (NPU)—has performance 12 times that of the previous generation, enhancing the NPU's AI efficiency by 40% and supporting multimodal generative AI and longer token inputs Qualcomm introduced in its earnings report that the Snapdragon 8 Elite has demonstrated strong design appeal, with Chinese manufacturers Xiaomi, Honor, Oppo, and Vivo successfully launching smartphones equipped with this chip. It looks forward to more products using this chip from companies like Samsung and ASUS