By Stephen Nellis and Arsheeya Bajwa
SAN FRANCISCO (Reuters) -Qualcomm on Wednesday forecast fiscal first-quarter sales and profit above Wall Street expectations, powered by a renewal of end-market demand in the smartphone industry.
For the current fiscal first quarter, Qualcomm said it expects sales and adjusted profit with a midpoint of $12.2 billion and $3.40 per share, above analyst estimates of $11.62 billion and $3.31 per share, according to LSEG data.
For the fiscal fourth quarter ended September 28, Qualcomm reported sales and adjusted profit of $11.27 billion and $3 per share, compared with Wall Street expectations of $10.79 billion and adjusted profit of $2.88 per share.
Qualcomm is among the world’s biggest suppliers of the modem chips that connect smartphones to wireless data networks but 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 2.5% after-hours on Wednesday.
In an interview, Qualcomm CEO Cristiano Amon told Reuters that the company’s results and forecast were driven by a wave of consumers upgrading midpriced smartphones to more expensive devices to handle 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 artificial intelligence boom. Last month, however, Qualcomm unveiled a new series of AI chips for data centers that it said will roll out next year, sending its shares up 20% in a single day.
Qualcomm said on Wednesday that the new U.S. tax legislation resulted in a $5.7 billion noncash charge, or about $5.29 per share, in its fiscal fourth quarter and that it expects to be subject to the U.S. corporate alternative minimum tax in its next fiscal year. The company said the move did not affect its adjusted results.
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.
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 $6.96 billion, coming in above Visible Alpha estimates of $6.64 billion.
End-market demand has also seen a boost, as consumers upgrade their devices. Global smartphone shipments increased 2.6% in the third quarter according to preliminary data from International Data Corp, as the market recovered, fueled by the premium segment.
“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 the first quarter to be between $10.3 billion and $10.9 billion, with the midpoint of the forecasted range above estimates of $10 billion.
In the fourth quarter, the company’s licensing segment generated sales of $1.41 billion, while its chip business reported revenue of $9.82 billion. Both were ahead of LSEG estimates. For the current quarter, Qualcomm expects licensing revenue between $1.4 billion and $1.6 billion. The midpoint of this range is largely in line with estimates.
Qualcomm’s automotive segment revenue for the first time topped $1 billion, ending at $1.05 billion in sales for the fiscal fourth quarter, above analyst estimates of $1.01 billion, according to Visible Alpha data.
Qualcomm said it expects its effective tax rate to remain in the range of 13% to 14% and that it expects its cash tax payments to go down in future quarters.
(Reporting by Stephen Nellis in San Francisco and Arsheeya Bajwa in New Delhi; Editing by Matthew Lewis)
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