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# Qualcomm Reports Strong Earnings and Gives Positive Forecast

## Introduction

Qualcomm Incorporated, led by President and CEO Cristiano Amon, has reported its fiscal fourth-quarter earnings, surpassing sales and earnings expectations. Despite experiencing significant year-over-year declines, the company remains optimistic about the current quarter.

## Financial Performance

Qualcomm’s fiscal fourth-quarter earnings beat expectations, with adjusted earnings per share (EPS) of $2.02, compared to the expected $1.91. The company also reported adjusted revenue of $8.67 billion, exceeding the anticipated $8.51 billion. This positive performance has led to a 3% increase in Qualcomm’s stock during extended trading.

Looking ahead, Qualcomm has provided a strong forecast for the current quarter, projecting adjusted earnings per share between $2.25 and $2.45, and sales between $9.1 billion and $9.9 billion. These figures surpass the LSEG consensus expectations of $2.23 per share in earnings and $9.2 billion in sales.

## Growth Outlook

Despite the challenges faced by the smartphone industry due to the Covid-19 pandemic, Qualcomm expects a slight growth in adjusted revenue for the current quarter compared to last year. The company’s fortunes are closely tied to the smartphone industry, as it produces processors for high-end Android devices and lower-end phones.

Qualcomm’s finance chief, Akash Palkhiwala, stated that there are early signs of stabilization in demand for global 3G, 4G, and 5G handsets. He expects a decline in total shipments using Qualcomm’s handset chips by a “mid- to high-single-digit percentage” in 2023, which is better than previously anticipated.

## Business Segments

The handset chip sales of Qualcomm declined by 27% to $5.46 billion, while the QCT division, responsible for selling processors, witnessed a 26% decline to $7.37 billion in sales. However, Qualcomm’s automotive business experienced a 15% year-over-year increase, generating $535 million in sales. The company’s “Internet of Things” business, including chips used in Meta’s Quest headsets, saw a 31% decline in revenue to $1.38 billion.

Qualcomm’s licensing business, QTL, reported $1.26 billion in sales, in line with expectations. The company continues to explore opportunities in artificial intelligence (AI), shipping chips with AI features to numerous smartphones. Qualcomm’s emphasis on its AI capabilities aligns with the current market interest in semiconductor stocks for machine learning.

## Key Partnerships and Investment

Qualcomm announced that it will continue to supply Apple with 5G modems for handsets until 2026. This agreement highlights the strong ongoing relationship between Qualcomm and Apple, dispelling previous speculation that Apple would switch to different modems.

During the fiscal fourth quarter, Qualcomm allocated $400 million for share repurchases and $893 million for dividends.

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