Qualcomm (NASDAQ:QCOM) Inc., a leading global smartphone chip manufacturer, has projected strong Q1 sales and profits due to the recovering smartphone market in China and a renewed contract with Apple. The company expects revenue between $9.1 billion and $9.9 billion, surpassing Wall Street's expectations, which has resulted in a 3.4% surge in stock value.
This forecast indicates a potential revival in phone upgrades, particularly in China, where the trend of retaining existing models for extended periods has previously impacted Qualcomm's chip demand. Despite intense competition from Huawei Technologies, Qualcomm reported a robust fiscal fourth quarter performance with sales of $8.67 billion and adjusted profits of $2.02 per share, exceeding estimates.
The company is also anticipating a 35% quarter-over-quarter sales increase to Chinese smartphone customers. Even though Samsung Electronics (KS:005930) plans to use some in-house chips after exclusively using Qualcomm's, the company remains optimistic about maintaining a significant share in Samsung’s upcoming S24 line of phones.
For the fiscal fourth quarter ending Sept. 24, Qualcomm reported a profit of $2.02 per share and a 24% decrease in revenue to $8.63 billion. The company also informed California regulators about eliminating 1,258 positions in San Diego and Santa Clara as part of cost-cutting measures.
Despite the promising outlook, Qualcomm's shares only saw a modest 4% increase in late trading following the report. This underperformance occurred against the broader rally in semiconductor-related stocks. The company expects its profit for the current quarter to be between $2.25 and $2.45 per share, aligning with the average projection of $2.25.
In an effort to diversify from the competitive smartphone market, CEO Cristiano Amon is steering the company towards breaking into personal computer components with their new Snapdragon X laptop processor designed to compete with Intel Corp (NASDAQ:INTC). and Apple Inc (NASDAQ:AAPL). In the fourth quarter, handset related sales dropped 27% to $5.46 billion, internet-connected devices sales decreased 31% to $1.38 billion, and automotive sales rose 15% to $535 million.
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