(Bloomberg) — Qualcomm Inc., the world’s largest seller of smartphone processors, gave optimistic sales and profit forecasts for the current period, suggesting that demand for phones is growing after a two-year slump.
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Revenue for the three months ended in June will be between $8.8 billion and $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 forecast revenue of $9.08 billion and earnings of $2.16 per share.
The outlook indicates that the smartphone market has started to rebound, consistent with 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 previously closed at $164.11 in New York, a gain of 13% this year.
CEO Cristiano Amon has tried to reduce reliance on phone chips by expanding into personal computers, vehicles and other markets. But Qualcomm remains heavily dependent on demand for phones, particularly in China.
In the second quarter, ended March 24, earnings were $2.44 per share, excluding certain items. Revenue rose 1% to $9.39 billion. Analysts had forecast earnings of $2.32 and revenue of $9.32 billion.
Revenue in the smartphone segment rose 1% last quarter, a slowdown from the 16% rise in the previous three months. But China is a bright spot, Qualcomm said. Sales to phone makers in that country, the largest market for such devices, jumped 40% in the first half of the fiscal year, “reflecting our strong competitive positioning and recovery in demand.”
In this market, Qualcomm’s Amon said its local customers, including Xiaomi, Honor, OnePlus Technology, Oppo and Vivo, were fueling demand. They won’t lose smartphone market share to a resurgent Huawei Technology Co. in China, he added. Amon said Huawei’s return to the market has helped spark interest in the Android operating system, which is often bundled with Qualcomm chips.
“We have not seen any signs of weakness in the premium Android 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 line with US trade restrictions. His company expects that business to be reduced to zero next year.
Apple Inc., which reports earnings tomorrow, and Samsung Electronics Co., a maker of Android-based phones, are Qualcomm’s biggest 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 suffered from excess inventory. Revenue from this unit fell 11% last quarter. Qualcomm’s automotive sales increased 35%.
An additional portion of Qualcomm’s profits comes from licensing the fundamental technology that underpins all modern mobile networks. Phone makers pay these fees whether or not they use Qualcomm-branded chips.
(Updates with CEO comments on the Chinese market in eighth paragraph.)
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