By Stephen Nellis and Arsheeya Bajwa
(Reuters) – Chip designer Qualcomm predicted on Wednesday that current quarter sales and profit would surpass Wall Street estimates as the company benefits from a wave of Chinese flagship smartphone launches.
The company’s shares rose 5.5% in extended trading. They were up 12% right after it reported results, after the company also announced a new $15 billion share buyback.
The San Diego, California-based company is the largest supplier of smartphone chips and is benefiting from a recovery in smartphone markets as consumers upgrade devices for artificial intelligence applications such as chatbots and image generators.
Qualcomm generated 46% of its revenue in the most recent fiscal year from customers headquartered in China.
The company denied a question on a post-earnings call about whether the increase in Chinese sales was driven by concerns about possible tariffs that could be imposed by Donald Trump, who was re-elected as US president on Tuesday.
Qualcomm executives said they did not believe the prospect of tariffs on Chinese goods played a role in the rising sales.
Trump has launched second-term plans for blanket tariffs of 10% to 20% on virtually all imports, as well as tariffs on
60% or more on goods from China, in an effort to boost U.S. manufacturing.
“Trump’s policies pose a risk to the broader semiconductor industry, but it remains to be seen whether he will allow a Chinese takeover of Taiwan and whether aggressive tariffs will be imposed,” said Angelo Zino, vice president and senior equity analyst at CFRA Research.
Qualcomm said it expects revenue and adjusted earnings for its first fiscal quarter — which will cover the holiday shopping season in the U.S. and European markets — at a midpoint of $10.90 billion and $2.95 per share. Wall Street expected $10.59 billion and $2.86 per share, according to LSEG data.
For the fiscal fourth quarter ended September 29, Qualcomm said revenue and adjusted earnings were $10.24 billion and $2.69 per share, beating analyst expectations of $9.91 billion and $2.56 per share.
Although Qualcomm’s current prospects exceed Wall Street expectations, investors are still trying to gauge how quickly Apple’s revenue stream will disappear. Apple is working on its own modem chips, and Qualcomm has warned investors that the iPhone maker will stop using its chips at some point.
While Qualcomm has a deal to continue selling chips to Apple through at least 2026, Wall Street is watching to see whether Qualcomm’s efforts to break into laptops and artificial intelligence in data centers will accelerate quickly enough to offset the decline in Apple revenues to compensate.
But the launch of new flagship phones from Chinese Android brands such as Xiaomi, Oppo and Vivo helped boost Qualcomm’s forecast, said Kevin Cassidy, managing director at Rosenblatt Securities.
Qualcomm also said Wednesday it has signed a new licensing agreement with Shenzhen Transsion Holdings Co Ltd, a Chinese company that makes phones for emerging markets.
Qualcomm has been embroiled in a long-running legal dispute with Arm, whose technology Qualcomm uses in almost all of its flagship products. Arm threatened to revoke a key license from Qualcomm last month, and trial in a case Arm filed in a licensing dispute is set to begin in December.
In Qualcomm’s chip segment, the company expects fiscal first-quarter revenue of $9.3 billion, compared to analyst estimates of $9.02 billion, according to data from Visible Alpha. Qualcomm forecast first-quarter revenue of $1.55 billion in its patent licensing business, compared with estimates of $1.51 billion.
(Reporting by Stephen Nellis in San Francisco and Arsheeya Bajwa in Bengaluru; Editing by David Gregorio and Diane Craft)
