Qualcomm Inc. blew past Wall Street’s quarterly earnings and revenue forecasts as it delivered its fiscal first-quarter 2024 results, but its stock traded lower after the smartphone chipmaker issued cautious guidance.

The company reported earnings before certain costs such as stock compensation of $2.75 per share on revenue of $9.94 billion, up 5% from a year earlier. They were strong numbers, with Wall Street analysts looking for earnings of just $2.37 per share on lower sales of $9.51 billion. All told, Qualcomm’s net income for the quarter came to $2.8 billion, up from a $2.2 billion profit in the same period one year ago.

Although the report was encouraging, Qualcomm warned investors that it still has plenty of work to be getting on with, as it could only muster a somewhat muted forecast for the current quarter. The company said it’s looking for second-quarter earnings of between $2.20 and $2.40 per share on sales of $8.9 billion to $9.7 billion. In contrast, Wall Street is calling for earnings of $2.25 per share on bigger sales of $9.3 billion.

Qualcomm President and Chief Executive Cristiano Amon (pictured) said he was “extremely pleased” with the company’s results. “Looking ahead, we are building on this momentum with our leading Snapdragon platforms and technology differentiation in connectivity, computing, on-device generative AI, across handsets, automotive, PC, XR and Industrial IoT,” he said.

Amon was referring to the diversification strategy that he implemented when he took over the CEO role a couple of years back. Under his direction, the chipmaker has been looking to expand its technology beyond its primary market of smartphones and tablets, to personal computers, cars and virtual reality headsets, among other devices. However, the company is still ultra-reliant on the smartphone market.

During the quarter, Qualcomm shipped $6.69 billion worth of handset chips, up 16% from a year earlier. Analysts see this as a positive sign for the smartphone market after almost two years of sales declines. However, Qualcomm says it thinks smartphone handset sales will ultimately be flat year-over-year.

“We see the Android market stabilizing after we’ve been through 2023,” Amon said. “That was a year of correction.”

Qualcomm’s QCT semiconductor business, which includes sales of handset, automotive and IoT chips, grew its revenue by 7% to $8.4 billion, ahead of the analyst consensus estimate of $8.1 billion. The IoT segment, which includes sales of chips used in Meta Platforms Inc.’s VR headsets, saw sales fall 32% to $1.13 billion.

Meanwhile, automotive chip sales racked up $589 million in revenue, up 31% from a year earlier. Amon told analyst on the conference call that growing the nascent automotive business is a slow process, as car parts have a much longer qualification cycle given the regulatory needs of that industry.

Qualcomm’s other main business is its profitable patent license segment, Qualcomm QTL, which delivered $1.5 billion in revenue, down 4% from a year earlier but ahead of the consensus view of $1.4 billion. QTL will benefit from a recent extension of a patent license agreement with Apple Inc., which runs until March 2027, Amon said.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that Qualcomm appears to have turned the corner, with gains in its annual revenue and net income a very positive sign. “But with a sluggish-looking handset market, investors will be watching Amon and his team to see if they can sustain revenue growth and keep going in the same direction in the second quarter,” he added. “It remains to be seen how Qualcomm will fare with such unfavorable winds ahead.”

As artificial intelligence continues to dominate technology industry narratives, Qualcomm is hoping that consumer interest in the technology will continue to propel it forward. On the call, Amon discussed the company’s latest Snapdragon chips, which sit at the heart of Samsung Electronics Co. Ltd.’s newest flagship smartphone, the S24 Ultra. That device was announced last month and is said to feature various on-device AI capabilities, including translation.

“This marks the beginning of how [generative AI] will evolve the overall smartphone experience and highlights the significant opportunity for Snapdragon platforms,” Amon said.

According to Amon, Qualcomm is also seeing favorable AI smartphone trends with its Chinese partners. “Eventually, at a minimum, it’s going to have a favorable impact on mix,” Amon said, noting that premium smartphones are the fastest-growing segment in the handset market.

During the quarter, Qualcomm spent $800 million on share buybacks and $900 million on dividends, officials said. The company’s stock initially rose a couple of percentage points higher in after-hours trading, only to give up those gains and fall about a half-point later.

Photo: Qualcomm