Qualcomm Forecast Beats Analysts’ Expectations as AI Energizes Smartphone Market

Qualcomm on Wednesday forecast fiscal third-quarter sales and adjusted profit above Wall Street expectations, driven by a faster-than-expected recovery in smartphone markets thanks to artificial-intelligence features.

The San Diego-based wireless pioneer forecast third-quarter sales and adjusted profit with midpoints of $9.2 billion and $2.25 per share, beating analyst estimates of $9.05 billion and $2.17 per share, according to LSEG data.

Shares were up 3% after the results in volatile after-hours trading.

Qualcomm is the world’s biggest supplier of chips for smartphones and counts both Apple and Samsung as customers. The company’s sales declined sharply last year following a boom during the pandemic. The drop was felt especially in the Android phone market where Qualcomm draws most of its business.

The company faces competitive pressure from China’s Huawei Technologies , which last year introduced a domestically made smartphone chip, and Taiwanese rival MediaTek, which last week said it expects rising sales this year as it gains market share among the premium-priced Android handsets.

For the fiscal second quarter ended March 24, Qualcomm’s sales and adjusted profit were $9.39 billion and $2.44 per share, respectively, above analyst expectations of $9.34 billion and $2.32, according to LSEG data.

Qualcomm is hoping to benefit from consumer demand to upgrade devices to run AI chatbots directly on the device rather than going over to a data center.

In a challenge to Apple, Qualcomm plans to release a chip designed to power laptops starting this summer, though that small amount of early sales is unlikely to play a major role in the company’s third-quarter forecast, analysts said.

In Qualcomm’s chip segment, the company forecast fiscal third-quarter sales with a midpoint of $7.8 billion, compared with analyst estimates of $7.74 billion, according to LSEG data.

Qualcomm predicted third-quarter patent-licensing sales with a midpoint of $1.3 billion, compared with estimates of $1.29 billion.

For the just-ended fiscal second quarter, Qualcomm said chip and licensing revenues were $8.03 billion and $1.32 billion, respectively, compared with analyst estimates of $7.95 billion and $1.32 billion, according to LSEG.

Within Qualcomm’s chip business, the company said that mobile handsets generated $6.18 billion in sales in the second quarter, compared with estimates of $6.23 billion, according to data from Visible Alpha. Automotive and Internet-of-Things chip revenues in the second quarter were $603 million and $1.24 billion, respectively, compared with analyst estimates of $578.9 million and $1.22 billion.