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Qualcomm shares rise as revenue pops 63% driven by chip sales

Qualcomm CEO Cristiano Amon.

Carlo Allegri | Reuters

Qualcomm shares rose over 3% in extended trading on Wednesday after the chipmaker reported third fiscal-quarter earnings that exceeded analyst estimates and offered a strong forecast for the current quarter.

Here’s how the company did versus Refinitiv consensus estimates:

  • EPS: $1.92 per share, adjusted, vs $1.68 per share as expected by analysts
  • Revenue: $8.00 billion, adjusted, vs. $7.58 billion as expected by analysts

Qualcomm revenue was up 63% from the same period last year, and earnings per share more than doubled annually in the quarter that ended on June 27. However, that is being compared to a quarter where Qualcomm saw less demand for its chips and technology amid the Covid-19 pandemic.

Qualcomm guided investors to a midpoint of $8.8 billion in sales in the current quarter and EPS around $2.25 per share.

Much of the growth was driven by chip sales. Qualcomm’s QCT semiconductor business reported $6.47 billion in revenue, a 70% increase annually. Handset chip sales made up the bulk of that business, but was the slowest growing component. The fastest growing component was RF front-end, a kind of chip that is essential for 5G, and which was up 114% annually to $957 million in sales.

Increasing the size of Qualcomm’s RF front-end business has been a priority for new Qualcomm CEO Cristiano Amon, who officially took over on July 1. It also gives the company an important component to sell to handset makers who may want to develop their own 5G modems.

Qualcomm’s IoT business, a part of QCT, which consists of low-powered chips to make other devices smart, grew 83% to nearly $1.4 billion.

Qualcomm stands to benefit from smartphone demand rising around the world as economies re-open. It also is one of the main suppliers of parts and intellectual property for 5G handsets and networks, which are currently being built around the world.

Qualcomm now expects the number of smartphones shipped by its customers to grow “high single digits” in 2021, after decreasing 11% last year during the pandemic.

Qualcomm expects between 450 million and 550 million 5G smartphones to be shipped this year.

The company’s profitable Qualcomm Technology Licensing segment, which includes revenue from to 5G patents and other handset technologies, rose 43% to $1.49 billion. QTL is a higher-margin business than Qualcomm’s chip sales.

Industry-watchers are paying attention to how Qualcomm navigates the global chip shortage. The company doesn’t manufacture its own chips. It has relationships with most of the major foundries around the world, including Taiwan’s TSMC and Samsung. Intel said earlier this week that Qualcomm will be a customer for its new foundry, too.

In a statement, Qualcomm said it is on track to improve chip supply by the end of 2021 and that it is working on getting more factory capacity for both its high-end processors and chips that use older manufacturing processes, often called “mature nodes.”

In the quarter ending in June, Qualcomm paid $767 million in dividends and repurchased $630 million of its stock.

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