Qualcomm profit forecast beats estimates amid AI push

By Stephen Nellis

(Reuters) – Qualcomm on Wednesday forecast fiscal second-quarter profit slightly above Wall Street estimates and sales in line with market expectations, as a new line of AI-enabled chips helps power it out of last year’s smartphone slump.

The sales outlook reflects a ramp-up in purchases of new Qualcomm chips with features designed to help run chatbots, image generators and other artificial-intelligence features directly on a device instead of in cloud computing data centers.

Qualcomm predicted sales and adjusted profit with a midpoint of $9.30 billion and $2.30 per share for the current fiscal second quarter ending in March. The outlook compares with analyst estimates of $9.30 billion and $2.25 per share, according to data from LSEG.

Qualcomm shares rose as much as 5.2% in after-hours trading.

In addition to the results, the company said on Wednesday it has reached a chip supply deal with Samsung to supply chips globally for its top-end Galaxy S24 model.

The gains, coupled with Qualcomm’s muted stock performance last year during the smartphone slump, helped draw a better response from investors than this week’s results from Microsoft and Alphabet, whose shares both fell on Wednesday after their returns from AI so far have fallen shortof lofty expectations.

For Qualcomm, “5% revenue growth and 24% earnings growth is very constructive in a skeptical earnings season environment,” said Thomas J. Hayes of Great Hill Capital.

Qualcomm is the biggest supplier of chips to a smartphone market that had its worst sales year in a decade in 2023. As the smartphone industry slowly recovers, Qualcomm is facing competition on multiple fronts, with Huawei and Samsung Electronics both selling phones powered by in-house chips and Taiwan’s MediaTek challenging Qualcomm’s stronghold in mid- and premium-tier Android phones.

But the San Diego, California, company last year renewed a chip supply deal with Apple. It is also expanding into other markets such as personal…