Qualcomm's third-quarter performance exceeded expectations across the board, with total revenue growing by 19% year-on-year, mobile chip revenue up by 12%, and auto chip revenue soaring by 68%, far exceeding expectations; The fourth-quarter revenue guidance is up to 14%, and EPS guidance is up to 11%, while analysts predict revenue growth of less than 6% and EPS growth of over 2%. Qualcomm announced a new $15 billion share buyback plan for the first time in three years.
Leader in smart phone chips $Qualcomm (QCOM.US)$ Investors are optimistic about the rebound in the smart phone market. In the last fiscal quarter, Qualcomm's sales revenue and profits accelerated, surpassing Wall Street expectations this quarter, possibly maintaining double-digit growth momentum. At the same time, Qualcomm announced a new share buyback plan for the first time in three years, exceeding $10 billion. The company's stock price surged after hours.
On Wednesday, November 6th, post-market trading in the U.S., Qualcomm announced the financial data for the fourth quarter of the 2024 fiscal year (referred to as the third quarter), ending on September 29, 2024, and provided performance guidance for the first quarter of the 2025 fiscal year, ending in December 2024. The 2024 fiscal year third quarter is referred to as the second quarter.
1) Main financial data
Revenue: In the third quarter on a non-GAAP basis, adjusted revenue was $10.244 billion, up 19% year-on-year, analysts expected $9.91 billion, up 11% from the second quarter.
EPS: Adjusted earnings per share (EPS) in the third quarter were $2.69, up 33% year-on-year, analysts expected $2.57, up 25% from the second quarter.
EBT: Third-quarter pretax profit was $3.491 billion, a 33% year-on-year increase, and a 25% year-on-year increase compared to the second quarter.
2) Segment Business Revenue
QCT: The third-quarter revenue of the semiconductor business (QCT) focusing on mobile phones, autos, and IoT chips was $8.678 billion, an 18% year-on-year increase, and an 11% year-on-year increase compared to the second quarter.
QTL: The third-quarter revenue of the technology licensing business (QTL) responsible for intellectual property licensing was $1.521 billion, a 21% year-on-year increase, and a 3% year-on-year increase compared to the second quarter.
3) Performance guidance
Revenue: Fourth-quarter revenue is expected to be $10.5 billion to $11.3 billion, with analysts expecting $10.54 billion.
EPS: Adjusted EPS for the fourth quarter is $2.85 to $3.05, with analysts expecting $2.81.
4) Shareholder Returns
Share buyback: On the basis of the share buyback plan announced in October 2021, the board of directors approved a new authorization of 15 billion US dollars for share repurchases, with no expiration date for the new share buyback authorization. As of the end of the 2024 fiscal year, there was still 1 billion US dollars of unused repurchase authorization from the previous buyback plan.
After the post-market release of the earnings report on Wednesday, Qualcomm's stock price rose nearly 4.3% and the increase rapidly expanded, reaching over 10% at one point before narrowing down to 5%.
Revenue in the third quarter increased by 19%, with mobile chip revenue up 12% and automotive chip revenue up 68%.
The financial report shows that Qualcomm's revenue and EPS earnings in the third quarter accelerated compared to the second quarter, exceeding analysts' expectations. In the third quarter, Qualcomm's revenue increased by 19% year-on-year, and EPS increased by 33% year-on-year, surpassing analysts' expectations of 14.4% and 27.2% growth respectively.
Qualcomm's core business in the third quarter exceeded expectations across the board. The largest revenue source, the mobile chip business, generated quarterly revenue of 6.1 billion US dollars, up 12% year-on-year, surpassing analysts' expectation of 6 billion US dollars.
Throughout the entire 2024 fiscal year, Qualcomm's revenue was 33.19 billion US dollars, a 9% growth from the previous fiscal year, driven by sales in the smartphone market, especially in China, the world's largest market. Qualcomm stated that Android smartphone sales in the Chinese market grew by 40% by the end of the 2024 fiscal year on September 29.
Qualcomm dominates the 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 the contract to supply chips to Apple, indicating the continued provision of 5G chips for iPhones to be launched in 2024, 2025, and 2026.
In other QCT businesses, automotive chip growth was the strongest in the third quarter, with revenue increasing by 68% year-on-year to 0.899 billion US dollars, far exceeding analysts' expectations of 0.816 billion US dollars. Qualcomm stated that the current collaboration projects with auto manufacturers 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 internet of things chip revenue reached 1.68 billion USD, a 22% increase, exceeding analysts' expectations of 1.55 billion USD. The business revenue comes from industrial chips, Meta's mixed reality headsets Quest, and smart glasses co-branded by Meta and Ray-Ban.
The revenue guidance is a maximum increase of 14%, while the EPS guidance is a maximum increase of 11%.
In terms of performance guidance, Qualcomm expects a slower growth rate in the fourth quarter compared to the third quarter, but still significantly stronger than Wall Street's expectations.
Based on the guidance range, Qualcomm is expected to see a year-on-year revenue growth of 5.8% to 13.9% in the fourth quarter, with analysts' expectations closer to the lower end of the guidance range. In other words, Qualcomm expects fourth-quarter revenue to potentially maintain double-digit growth, while analysts anticipate a much slower growth compared to the third quarter, with growth rate only one-third of the third quarter.
According to the guidance range, Qualcomm expects fourth-quarter EPS to increase by 3.6% to 10.9% year-on-year, while analysts predict a seasonal EPS growth of 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.' This chip is equipped with Oryon CPU and Adreno GPU, both performance of which is three times higher than the previous generation, with Oryon CPU reaching up to 4.32GHz and Adreno GPU efficiency increased by 40%.
The 'brain' of Snapdragon 8 Elite - Hexagon Neural Processor (NPU) performance is 12 times that of the previous generation, improving NPU AI efficiency by 40%, supporting multi-modal generative AI and longer token inputs.
During Qualcomm's latest earnings call, it was mentioned that Snapdragon 8 Elite has shown strong design appeal, with Chinese manufacturers Xiaomi, Honor, Oppo, and Vivo already successfully launching phones equipped with this chip, and there is anticipation for more companies like Samsung and Asus to introduce products using this chip.
Editor/Lambor
