(Bloomberg) — Qualcomm, the world's largest seller of smartphone processors, expects a modest rebound for the industry in 2024, with phone shipments strengthening but the market for internet-connected devices still sluggish.
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Phone shipments, which declined in 2023, will be “flat to slightly up” in 2024, the company said Wednesday on a conference call after its fiscal first-quarter earnings report. Although phone makers have mostly dealt with excess inventory, That oversupply remains a problem in Qualcomm's second-biggest business — providing chips for connected devices.
CEO Cristiano Amon said the company is working to “position ourselves for growth, while dealing with an industry-wide inventory drawdown.”
Qualcomm said sales will range between $8.9 billion and $9.7 billion in the fiscal second quarter. This is in line with analysts' average estimate of $9.36 billion. Excluding certain items, earnings will be $2.20 to $2.40 per share in the current quarter, versus an average forecast of $2.26.
Investors have been looking for signs that consumers are updating their smartphones at a faster pace. On this front, Qualcomm had good news: revenue from phones rose 16% in the last quarter, compared to a decline of 27% in the previous three months.
Qualcomm also said Wednesday that Apple has extended its patent licensing agreement by two years. It now runs until March 2027. The chipmaker also signed a new agreement with Samsung Electronics Co., with the South Korean company agreeing to build future devices on Qualcomm processors.
Apple is the world's largest smartphone maker – having overtaken Samsung last year – and will provide more information on the state of the industry on Thursday. That's when the company is scheduled to announce its quarterly results.
While Amon is trying to reduce its dependence on the phone market – through forays into automotive and personal computer chips – Qualcomm's profits are still heavily influenced by demand for phones, especially in China.
After the initial rise in extended trading, Qualcomm shares fell less than 1%. The stock price had previously closed at $148.51 during regular trading in New York.
In the fiscal first quarter, which ended December 24, profit was $2.75 per share, excluding certain items. Revenue rose 5% to $9.9 billion. Analysts estimated profit at $2.36 and sales at $9.54 billion.
Internet-connected device chips remained a weak point. Revenue from this business decreased by 32%. Qualcomm's auto sales rose 31%.
The San Diego-based company's flagship product is the processor that powers many of the world's most popular phones, including many Samsung Galaxy phones. It also sells modem chips that connect Apple's iPhone to high-speed data networks.
An additional portion of Qualcomm's profits comes from licensing the underlying technology that underpins all modern mobile networks — fees that phone manufacturers pay whether they use Qualcomm-branded chips or not.
(Updates the agreement with Samsung in the sixth paragraph.)
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