Slowing Smartphone Market Impact on Qualcomm
Shares of Qualcomm (QCOM) declined as investors expressed concerns about a potential slowdown in smartphone demand.
Qualcomm, the leading supplier of smartphone processors, projected revenue of $10.3 billion to $11.2 billion for the period ending March. However, its licensing division anticipated revenue between $1.25 billion and $1.45 billion, below analyst estimates of $1.4 billion.
CFO Akash Palkhiwala anticipates a flat or low single-digit growth in the overall smartphone market through 2025, excluding revenue from Huawei. This outlook aligns with IDC's projection of low single-digit growth in worldwide smartphone shipments.
Other industry players, including Arm Holdings and Skyworks Solutions, also reported forecasts below expectations, further exacerbating investor concerns.
Qualcomm's business model involves collecting fees as a percentage of the handset's cost, regardless of the chip used. It has established its intellectual property rights through global lawsuits, allowing it to charge royalties on patents related to basic phone-network connectivity.
Despite the slowdown in the overall smartphone market, Qualcomm's focus on high-end devices and expansion into automotive and personal computers continue to drive growth.
In the fiscal first quarter, Qualcomm reported earnings per share of $3.41 (excluding certain items) on revenue of $11.7 billion, surpassing analyst expectations. Phone-related sales grew by 13%.
While Apple, a prominent customer, is transitioning to its own modem chip, Samsung has increased its reliance on Qualcomm's components. This diversification helps offset potential revenue loss from Apple.