Chip gains: A Qualcomm sign at the company’s office in Santa Clara. The company’s shares have risen about 12.5% this year, below the 20.9% gain of the Nasdaq Composite Index. — Bloomberg
SAN FRANCISCO: Chip designer Qualcomm on Wednesday forecast first-quarter (1Q) sales and profit above Wall Street expectations, powered by a renewal of end-market demand in the smartphone industry.
Qualcomm is among the world’s biggest suppliers of the modem chips that connect smartphones to wireless data networks.
It made the forecast even as it prepares for possibly selling fewer chips to top customers such as Samsung Electronics Co.
For 1Q, Qualcomm said it expects sales and adjusted profit with a midpoint of US$12.2bil and US$3.40 per share, above analyst estimates of US$11.62bil and US$3.31 per share, according to London Stock Exchange data.
For the fourth quarter ended Sept 28 (4Q25), Qualcomm reported sales and adjusted profit of US$11.27bil and US$3 per share, compared with Wall Street expectations of US$10.79bil and adjusted profit of US$2.88 per share.
Qualcomm has been expanding into other fields such as laptops and automobiles.
It is a longtime supplier to Apple, though Qualcomm has told investors since 2021 that it expects Apple to eventually transition to its own modems.
Qualcomm shares were down 2.7% in extended trading on Wednesday.
The stock had risen nearly 4% during regular trading, suggesting that expectations were running high before the news.
Shares were down after the report because investors continue to worry about future share loss at key customer Apple, said Summit Insights analyst Kinngai Chan.
Qualcomm chief executive officer Cristiano Amon told Reuters that the results and forecast were driven by a wave of consumers upgrading midpriced smartphones to more expensive devices to handle artificial intelligence (AI) apps, with the market beginning to divide sharply between low-end devices and the pricier premium devices Qualcomm has historically relied on to drive profit.
“You don’t have anything in the middle,” Amon said.
“And that’s kind of a global phenomenon that’s happening in China, that’s happening in India.
“We continue to see an expansion of the premium tier.”
Qualcomm shares have risen about 12.5% this year, below the 20.9% gain of the Nasdaq Composite Index, as investors have worried about the impact of tariffs on the company’s smartphone chip business and whether it was positioned to profit from the AI boom.
Last month, however, Qualcomm unveiled a new series of AI chips for data centres that it said will roll out next year.
Investors have been working to understand how Apple’s transition to its own modems will affect Qualcomm’s business.
In a note to clients, Bernstein analyst Stacy Rasgon said Apple is likely using its own chips in its iPhone Air and iPhone 16e models, but has remained with Qualcomm chips for iPhone 17 models, softening the blow to Qualcomm.
But Apple, Samsung and China’s Xiaomi all still account for more than 10% of Qualcomm’s revenue, Qualcomm said in securities filings on Wednesday.
For Samsung’s most recent Galaxy S25 models, Qualcomm supplied 100%, but Amon told Reuters that Qualcomm is prepared for a lower share in Samsung’s next generation.
“When you think about Galaxy S26, we’re planning for 75% – that’s what we expect,” Amon said.
He confirmed that Qualcomm is working with Samsung’s chip manufacturing business to make some Qualcomm chips with two-nanometer technology, but declined to name specific products that would be made by Samsung.
“We’re working with them about using their foundry in our product roadmap,” Amon said.
Amon said that for the just-ended 2025, Qualcomm’s non-Apple revenue across all segments grew at 18%.
Within its chip segment, revenue from handsets rose 14% to US$6.96bil, coming in above Visible Alpha estimates of US$6.64bil.
“Phones are slowly seeing apps becoming more capable, and that drives people to buy a more capable device, no different than what we saw right after the pandemic,” Amon told Reuters.
Qualcomm expects chip revenue in 1Q25 to be between US$10.3bil and US$10.9bil, with the midpoint of the forecasted range above estimates of US$10bil.
Qualcomm’s automotive segment revenue for the first time topped US$1bil, ending at US$1.05bil in sales for 4Q25, above analyst estimates of US$1.01bil, according to Visible Alpha data.
Qualcomm said on Wednesday that the new US tax legislation resulted in a US$5.7bil non-cash charge, or about US$5.29 per share, in its 4Q25 and that it expects to be subject to the US corporate alternative minimum tax in its next financial year.
The company said the move did not affect its adjusted results. — Reuters
