Qualcomm Beats Estimates as AI Drives Chip Sales in China
Qualcomm forecasts quarterly sales and adjusted profit above expectations, driven by AI-enabled smartphones in China. Sales to Chinese smartphone makers have grown 40% in the first half of the fiscal year. Qualcomm faces competition from Huawei but benefits from the overall trend towards more capable devices.
The company attributes this success to the increasing demand for Android smartphones with artificial intelligence (AI) features in the Chinese market.
After experiencing a slump in smartphone sales last year, Qualcomm has seen a resurgence in the Chinese Android market. Consumers in China are now gravitating towards purchasing higher-priced devices that can accommodate AI chatbots, leading to a 40% growth in sales to Chinese smartphone makers in the first half of the fiscal year.
Chief Executive Cristiano Amon highlighted the role of AI in driving the demand for Qualcomm's chips, stating, "AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models. Users want to buy a more capable phone that can run AI."
While Qualcomm faces competition from Huawei Technologies, which introduced its own chip for flagship 5G smartphones, analysts believe that the overall trend towards more capable devices is benefiting Qualcomm. The recovery and shift towards premium phones in the Chinese market are contributing to Qualcomm's revenue growth.
For the third quarter, Qualcomm forecasts sales and adjusted profit with midpoints of $9.2 billion and $2.25 per share, respectively, surpassing analyst estimates. The company's strong position in the smartphone chip market, with Apple and Samsung as customers, further bolsters its outlook.
However, the recovery in China's smartphone market may not extend to Apple's iPhone. Analysts expect Apple to report its deepest quarterly revenue decline in over a year due to competition from Huawei and other companies selling cheaper smartphones in China.
While Qualcomm remains optimistic about the recovery among Android handset customers, wireless connectivity chipmaker Qorvo has forecasted weak demand from the flagship smartphone market. This divergence in forecasts reflects Qorvo's heavier reliance on Apple sales compared to Qualcomm.
Qualcomm's fiscal second-quarter results exceeded analyst expectations, with sales and adjusted profit reaching $9.39 billion and $2.44 per share, respectively. The company aims to capitalise on consumer demand for devices capable of running AI chatbots directly on the device, rather than relying on data centers.
In a move to challenge Apple, Qualcomm plans to release a chip designed for powering laptops starting this summer. However, analysts believe that the initial sales of this chip are unlikely to significantly impact the company's third-quarter forecast.
In terms of Qualcomm's chip segment, the company forecasts fiscal third-quarter sales with a midpoint of $7.8 billion, slightly higher than analyst estimates. Additionally, Qualcomm predicts third-quarter patent-licensing sales with a midpoint of $1.3 billion.
Qualcomm forecasts quarterly sales and adjusted profit above expectations, driven by AI-enabled smartphones in China.
Sales to Chinese smartphone makers have grown 40% in the first half of the fiscal year.
Qualcomm faces competition from Huawei but benefits from the overall trend towards more capable devices.
Source: REUTERS