(Bloomberg) — Qualcomm Inc., the world’s largest seller of smartphone processors, gave an upbeat forecast for sales and earnings in the current period, suggesting demand for handsets is picking up after a two-year slump.
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Revenue for the three-month period ending in June will be $8.8 billion to $9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be $2.15 to $2.35 per share. Analysts had expected sales of $9.08 billion and earnings of $2.16 per share.
The outlook signals that the smartphone market has started to bounce back, and follows Qualcomm’s forecast that demand would gradually recover in 2024. The San Diego-based company also reported better-than-expected second-quarter results – supported by progress in China, where it sells technology to local phone manufacturers.
Shares rose about 3% in extended trading after the announcement. They had previously closed at $164.11 in New York trade, a gain of 13% this year.
CEO Cristiano Amon has tried to reduce reliance on phone chips by pushing into personal computers, vehicles and other markets. But Qualcomm remains heavily dependent on demand for handsets, particularly in China.
In the second quarter, which ended March 24, earnings were $2.44 per share, excluding some items. Revenue increased 1% to DKK 9.39 billion. Analysts had estimated a profit of $2.32 and sales of $9.32 billion.
Revenue from the smartphone segment rose 1% last quarter, a slowdown from the 16% increase in the previous three months. But China was a bright spot, Qualcomm said. Sales to phone makers in that country, the biggest market for the devices, rose 40% in the first half of the fiscal year, “reflecting our strong competitive position and recovery in demand.”
In that market, Qualcomm’s Amon said his local customers, including Xiaomi, Honor, OnePlus Technology, Oppo and Vivo, are driving demand. They are not losing smartphone market share to a resurgent Huawei Technology Co. in China, he added. Amon said Huawei’s re-entry into the market has helped fuel interest in the Android operating system, which is often paired with Qualcomm chips.
“We have seen no signs of weakness in the Android premium market in China,” he said.
Huawei has been blacklisted by the US government, and Amon pointed out that Qualcomm only sells less advanced 4G phone parts to the company – in compliance with US trade restrictions. His company expects the business to break even next year.
Apple Inc., which reports earnings tomorrow, and Samsung Electronics Co., a maker of Android-based phones, are Qualcomm’s big phone customers. But Apple’s iPhone relies on Qualcomm for connectivity chips, rather than the main processor.
Qualcomm’s Internet of Things group, which creates electronics for web-connected devices, has been suffering from an inventory glut. Revenue in this unit fell by 11% last quarter. Qualcomm’s car sales rose 35 per cent.
A further portion of Qualcomm’s profits comes from licensing the basic technology that underpins all modern mobile networks. Phone manufacturers pay these fees regardless of whether they use Qualcomm-branded chips or not.
(Updates with CEO comments on the Chinese market in the eighth episode.)
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