Qualcomm delivered record revenue in its fiscal 2024 first quarter earnings report, beating Wall Street estimates thanks largely to strong demand for its smartphone chips and technology used in 5G networks.
Qualcomm Beats Expectations As Smartphone Sales Bounce Back
As per Qualcomm’s Q1 2024 earnings press release, the company reported revenue of $11.4 billion, up 21% year-over-year and exceeding analysts’ expectations of $10.59 billion. Earnings per share came in at $3.15, also topping estimates of $2.36 per share.
Qualcomm CEO Cristiano Amon attributed the earnings beat to a recovery in global smartphone sales. Smartphone OEM partners are replenishing inventory as inflation fears ease and demand bounces back post-pandemic.
“The smartphone recovery has been happening a little faster than we thought,” Amon noted in the earnings call. However, he warned that handset makers are still working through excess inventory buildup from 2023 and supply chain bottlenecks have yet to fully clear, meaning the recovery may be uneven in coming quarters.
Outlook Remains Positive As 5G Rollout Continues
Qualcomm expects growth to continue through 2024, projecting Q2 revenue could reach $12 billion, a 7% year-over-year increase. This is despite some analysts forecasting smartphone shipments to decline slightly in Q2 due to tough comparisons from last year.
A key source of Qualcomm’s growth is demand for its Snapdragon chipsets and other components vital to building out 5G networks globally. This explains why Qualcomm’s QCT semiconductor division saw revenue jump 28% in Q1.
“We continue to execute well on multiple exciting growth opportunities ??? including the ongoing 5G upgrade cycle, RF front-end leadership, automotive and the connected intelligent edge,” Amon said in the earnings release.
Qualcomm now owns a staggering 80% market share of the 5G modem chip market. As networks expand, demand for Qualcomm’s technology should continue rising through 2025 and beyond.
QTI Licensing Revenue Grows Despite Apple Dispute
Qualcomm’s QTL licensing division, which collects royalty revenue on its vast patent portfolio spanning 3G/4G/5G and other wireless technologies, saw revenues grow 3% year-over-year to $1.8 billion.
This growth came despite an ongoing legal dispute with Apple, which has stopped paying licensing fees to Qualcomm since 2017. Qualcomm has also had to offer discounts to Chinese OEMs to abide by antitrust settlements reached with China’s regulators.
Offsetting those headwinds is the continued rollout of 5G, which enables Qualcomm to charge higher per-device licensing fees. Average selling prices grew sequentially in Q1, contributing to the licensing division’s profitability.
| Key Financial Metrics | Q1 2024 | Change YOY |
|---|---|---|
| Revenue | $11.4 billion | +21% |
| EPS (GAAP) | $3.15 | +45% |
| QCT Revenue | $8.7 billion | +28% |
| QTL Revenue | $1.8 billion | +3% |
Qualcomm Stock Pops On Earnings Beat
Qualcomm shares jumped over 8% the day after earnings were announced, reflecting investors’ optimism over the company’s growth trajectory. The stock is now up nearly 7% over the past month.
Longer term, analysts see room for more upside given Qualcomm’s dominance in multiple secular growth markets like 5G and automotive.
Mizuho analyst Vijay Rakesh set a price target of $200 per share on Qualcomm after earnings. Considering the stock trades around $170 currently, this implies 17% more upside for shareholders.
Rakesh believes Qualcomm deserves a higher earnings multiple given it is both the leader in smartphone/tablet processors and a top play on next-gen technologies like AI, IoT and driverless vehicles.
Key Takeaways: Dominant Position In Multiple Growth Markets
In summary, Qualcomm continues to fire on all cylinders thanks to:
- Strong demand for smartphone chipsets as the handset market recovers
- Secular tailwinds from the multi-year 5G network build-out
- Growth from RF front-end chips and WiFi connectivity chips
- Upside potential in auto and industrial IoT sectors
Despite some lingering legal overhangs, Qualcomm looks poised to continue outpacing earnings expectations through 2024. Its dominant position supplying critical components for 5G networks gives Qualcomm a wide moat versus competitors in several adjacent high-growth technology markets.
While smartphone shipment growth may cool after the initial 5G upgrade cycle, Qualcomm is poised to maintain a leading industry position for years to come. With best-in-class technology and intellectual property across connectivity and computing, Qualcomm still has room to run both financially and in the stock market in 2024.
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