Qualcomm (QCOM, Financial), the world's largest smartphone processor vendor, reported better-than-expected fourth-quarter results and provided an optimistic sales outlook, signaling a recovery in the mobile device sector. Following the announcement, the stock surged in after-hours trading.
The company revealed in a statement that revenue for the quarter ending in December is projected to reach between $10.5 billion to $11.3 billion, surpassing analysts' average forecast of $10.5 billion. Excluding certain items, earnings per share (EPS) could reach up to $3.05, exceeding Wall Street's predictions.
Investors are keenly observing signs of a smartphone market rebound, particularly in China. Qualcomm holds an advantage in the Chinese market as most popular smartphones, especially high-end models, utilize its chips. The guidance provided indicates a demand recovery, with a reported 40% growth in Android phone sales in China during the fiscal year ending September 29.
Qualcomm's stock closed at $172.99, jumping over 10% in after-hours trading. Year-to-date, the stock has gained approximately 20%. While CEO Cristiano Amon is pushing for deeper penetration into automotive and computing markets, over 60% of the company's revenue still comes from smartphone-related chips, making its financial performance a key indicator for the smartphone industry.
During the fourth quarter, EPS stood at $2.69, excluding certain items, with revenue growing 19% to $10.2 billion, outpacing analysts' expectations of $2.56 EPS and $9.91 billion in revenue. Sales related to smartphones increased by 12% to $6.1 billion, slightly above the $6 billion analyst estimate. Automotive chip revenue rose 68% to $899 million, exceeding the $816 million forecast. Revenue from connected device chips reached $1.68 billion, surpassing the $1.55 billion expectation.
Apple (AAPL), one of Qualcomm's largest customers, uses Qualcomm's modem chips in its iPhones but is working on developing its own to replace them. Although Qualcomm has collaborated with Apple longer than expected, it has repeatedly cautioned investors that this revenue will eventually diminish.
Moreover, another significant profit driver for Qualcomm is the licensing of fundamental technologies that support all modern mobile networks. Mobile manufacturers must pay Qualcomm these fees, regardless of whether they use its chips.
The company also announced a $15 billion stock buyback program to replace the $10 billion plan announced in October 2021. Qualcomm stated that the current buyback plan still has $1 billion authorized.
