Qualcomm's 2024 Q1 Earnings Report: Revenue Growth Continues, Profits Exceed Expectations

On Wednesday, May 1st, after the U.S. stock market closed, Qualcomm released its Q2 fiscal 2024 earnings report (for convenience, referred to as Q1), covering the period ending March 24, 2024. In Q1, Qualcomm achieved revenue of $9.39 billion, up 1% year-over-year, slightly exceeding market expectations of $9.32 billion. $Qualcomm(QCOM.US) $NASDAQ Composite Index(.IXIC.US) $Dow Jones Industrial Average(.DJI.US) $S&P 500(.SPX.US) $Hang Seng Index(00HSI.HK) $NVIDIA(NVDA.US) $AMD(AMD.US) $Microsoft(MSFT.US) $Amazon(AMZN.US) $Alphabet(GOOGL.US)

1. Summary of Personal Views

1. In recent earnings, Qualcomm has achieved year-over-year growth for two consecutive quarters, with significant improvements in profitability. The current recovery in performance is quite impressive.

2. The prevailing view is that the recovery trend in the smartphone industry is becoming increasingly evident. The potential opportunities brought by AI technology to the smartphone market are also attracting significant attention, becoming a focal point for the industry. It remains to be seen whether Qualcomm can seize this opportunity.

3. From a stock price perspective, Qualcomm has recently shown a strong upward trend, outperforming the broader market and approaching historical highs. Caution is advised when considering buying.

Overall, Qualcomm has achieved year-over-year growth for two consecutive quarters, with significant improvements in profitability and strong performance recovery. As the smartphone industry's recovery trend becomes more evident, the potential opportunities brought by AI technology to the market are attracting significant attention, making Qualcomm's ability to seize this opportunity a key industry focus. Meanwhile, from a stock price perspective, Qualcomm has recently shown a strong upward trend, outperforming the broader market and approaching historical highs. Investors should exercise caution when considering buying.

2. Financial Analysis: Revenue Growth Continues, Profitability Exceeds Expectations

In terms of revenue, Qualcomm achieved $9.39 billion in Q1, up 1% year-over-year, slightly exceeding market expectations of $9.32 billion. This marks two consecutive quarters of year-over-year growth, primarily driven by demand for smartphone chips and growth in automotive chips.

In terms of profitability, Qualcomm reported net income of $2.326 billion in Q1, up 36.5% year-over-year. Adjusted earnings per share were $2.44, above market expectations of $2.32 and up 13.5% year-over-year. Compared to revenue, profitability growth is more substantial, mainly due to improved gross margins and operational optimizations.

3. Operational Analysis: Smartphone Business Recovery, AI Transformation Tracking, and Optimistic Guidance

1. Core Business Performance

As a global leader in semiconductors and wireless communication technologies, Qualcomm's business is divided into two main segments: chip manufacturing (QCT) and patent licensing (QTL). QCT covers smartphones, automotive, IoT, and other areas, serving as Qualcomm's primary revenue source.

Within QCT, smartphone chips have been the main growth driver. With continuous innovation in the smartphone market, Qualcomm's chips are highly regarded for their performance and stability. In Q1, smartphone chip revenue grew 1% year-over-year to $6.18 billion, indicating a gradual recovery after two years of decline, though the pace may be slower than expected.

Beyond smartphones, Qualcomm's automotive business has shown strong growth. With the rise of autonomous driving and electric vehicles, demand for automotive chips has surged. In Q1, automotive chip revenue grew 35% year-over-year to $603 million, setting a new high for three consecutive quarters, reflecting Qualcomm's successful investments in this space.

However, IoT revenue declined 11% year-over-year to $1.24 billion in Q1. While the decline has narrowed compared to Q4, it highlights the volatility and challenges in the IoT market, which relies on low-cost chips and requires ongoing innovation.

2. Can AI Become a Key Growth Engine?

As Qualcomm's previous guidance suggested, this quarter's performance was outstanding, exceeding the upper end of expectations and demonstrating strong execution and market adaptability. This success is largely attributed to the steady recovery of the smartphone market. While some institutions question the strength of this recovery, overall, third-party data supports the market's upward trend.

Meanwhile, the smartphone market is undergoing an AI-driven transformation. AI is rapidly penetrating every aspect of the market, from software to hardware, reshaping functionality and user experience. This presents significant innovation opportunities for chip companies like Qualcomm, which is actively positioning itself in the AI chip space to gain a competitive edge.

Notably, Qualcomm may follow the successful examples of NVIDIA and AMD in AI chips. These companies have set industry benchmarks, and Qualcomm, as a leader, is unlikely to miss this opportunity.

3. Optimistic Guidance

Over the past three quarters, Qualcomm's guidance has been consistently optimistic. For Q2, the company forecasts revenue between $8.8 billion and $9.6 billion, with the midpoint exceeding Wall Street's $9.08 billion expectation, suggesting accelerated year-over-year growth of nearly 9%. For earnings, Qualcomm expects EPS between $2.15 and $2.35, also above the $2.16 consensus.

These positive figures, combined with the better-than-expected Q1 results, have bolstered confidence in Qualcomm's future performance, driving after-hours stock gains.

Qualcomm's guidance reflects optimism about 2024 revenue growth, underpinned by strong competitiveness and profitability. This outlook stems from the company's market insights and ongoing innovation.

This article is a personal earnings analysis based on my own research and insights. Feedback is welcome. Note that this does not constitute investment advice; readers should conduct their own due diligence.