Qualcomm beats estimates but faces Apple revenue concerns
- Qualcomm's fiscal first quarter results surpassed analysts' expectations with $3.41 EPS and $11.67 billion in revenue.
- The mobile handset market saw significant growth at 13% year-on-year, outperforming the expected 5% growth.
- Despite strong results, Qualcomm's stock fell nearly 5% amid concerns over future revenue with Apple shifting to internal modems.
On February 5, 2025, Qualcomm reported its financial results for the fiscal first quarter, revealing adjusted earnings per share of $3.41 on total revenue of $11.67 billion. This performance exceeded the expectations of analysts, who had forecasted earnings of $2.96 per share and revenue of $10.93 billion. A notable growth in Qualcomm’s primary market, mobile handsets, increased by 13% annually, surpassing analyst growth forecasts of about 5%. These strong results were primarily driven by demand in the smartphone sector, which accounted for 65% of total sales. Despite the positive outcome, the company experienced a nearly 5% decline in its stock during premarket trading. This drop was attributed to Qualcomm's guidance indicating anticipated slower growth in its QCT segment, which is essential to its overall business strategy. The company projected that revenue for the second quarter from this segment would range from $8.9 billion to $9.5 billion. Investors reacted cautiously as Qualcomm expressed concern regarding its future revenue stream, particularly from Apple. The analysis suggested that Apple's transition to its internal modems could significantly impact Qualcomm's earnings. Wall Street analysts have had mixed reactions to Qualcomm's results. While some maintain a neutral or overweight rating, others express concerns about Qualcomm's share loss with Apple as it gears up for the launch of its iPhone SE 4 in March 2025. Analysts from Citi predicted that this transition could create a $1.2 billion revenue headwind for Qualcomm in the next fiscal year. Conversely, Bank of America expressed more optimism, recognizing Qualcomm as a long-term beneficiary of advancements in mobile technologies, particularly in the growing markets of 3G, 4G, and 5G. The anticipation of increased QCT shipments due to smartphone upgrades underlines this potential. Furthermore, engagement with varying segments such as automotive and Internet of Things (IoT) reflects Qualcomm's strategy to diversify its portfolio, which could offset some of the revenue loss from Apple. Overall, while Qualcomm’s current results showcased its strong position in the market, the uncertainties regarding future growth and competitive pressures from major clients like Apple have led to a more cautious outlook among investors. The company's robust performance in handsets and its strategic direction in emerging technologies might help it navigate the challenges that lie ahead.