Qualcomm extends deals with Apple and Samsung and taps into AI growth

Qualcomm Inc. NASDAQ:QCOM it rebounded from the 50-day moving average and rallied for three consecutive sessions after beating earnings estimates for the fiscal first quarter. Among technology stocks, Qualcomm still lags other industry players over the past five sessions, although moving average support is a bullish sign.

Qualcomm was not previously among the chipmakers associated with AI applications, but that appears to be changing. Qualcomm has made its mark designing chips for smartphones, where AI applications are driving new growth for the company.

Take a look at Qualcomm earnings Data: The chipmaker beat net income forecasts by 14 cents per share and beat revenue forecasts by about $80 million.

Qualcomm guided for revenue of $8.9 billion to $9.7 billion and earnings per share of $2.20 to $2.40. This is broadly in line with Wall Street’s revenue forecasts, and slightly above forecasts on the earnings side

Chipset revenue rising on Android demand

In the earnings conference call, CEO Christiano Amon said that revenue from the company’s chipset business reached $8.4 billion, reflecting healthy demand for Alphabet Inc. NASDAQ:GOOGL Android products and continued strong momentum in the automotive industry.

He also mentioned the in-device AI capabilities for Samsung Galaxy S24 devices, which run on the Qualcomm Snapdragon system. Snapdragon is a line of system-on-a-chip technologies designed for smartphones.

Galaxy AI features include language translation and interpretation, and chat support.

“This marks the beginning of how the AI ​​generation will evolve the overall smartphone experience and highlights the significant opportunities for the Snapdragon platform,” Amon said.

Even as AI becomes an increasingly important part of Qualcomm’s product portfolio, smartphones remain at the core.

Extended agreements with Samsung, Apple

Qualcomm has extended its multi-year agreement with Samsung for the Snapdragon platform. The Apple company. NASDAQ:AAPL extended its licensing deal for another two years, and Qualcomm renewed long-term deals with two major Chinese smartphone makers.

The automotive sector continues to be an important pillar of the company’s growth and diversification strategy. Amon said 75 new car models will be launched commercially in 2023 with Qualcomm technologies. As you might imagine, many of the features in new cars, such as connected services and driver assistance, also work with artificial intelligence.

In the earnings call, the company highlighted AI for mobile devices to report that Qualcomm chips are increasingly enabled for image generators, chatbots and other AI applications more common for smartphones than hyperscalers’ data centers.

But as enterprise AI remains a huge driver of AI chip sales, Qualcomm has made sure it gets a piece of the pie.

Expanding AI to the enterprise level

Amon said a key area of ​​focus for the company was generative AI at the enterprise level.

For example, he mentioned Zebra Technologies Corp. NASDAQ: ZBRA and Toshiba demonstrating on-device generative AI capabilities for business workflows and inventory management at retail self-checkouts, respectively.

Furthermore, Honeywell International Inc. NASDAQ: HONOR launched Qualcomm-based AI equipment for warehouse applications.

One reason the report didn’t send Qualcomm stock soaring: Even as the company extended its deal with Chinese manufacturers, analysts questioned forecasts for the current quarter.

Additionally, JPMorgan Chase’s Samik Chatterjee asked whether the reemergence of Chinese tech giant Huawei, which has faced controversy due to security issues and allegations of espionage and privacy violations, is possible.

Qualcomm CEO Akash Palkhiwala said the company believes the Android sales channel has normalized, following weakness in 2023. He added that Qualcomm has seen higher demand in Chinese phones “due to the acceleration of launches Android flagship with our new chip, Snapdragon 8 Gen 3”.

Huawei boosts Android sales

He added that demand has been strong from all major Android manufacturers,

As for Huawei, Palkhiwala said Qualcomm has seen strong demand following Huawei’s 5G launch in China. Qualcomm’s Snapdragon processors are used in Huawei devices, such as the Huawei watchwhich runs on the Android platform.

Qualcomm analyst forecasts show a consensus “Moderate Buy” view on the stock, with a price target of $148.71, an upside of 3.20%.

Analyst actions were mixed following the report. Five analysts increased their price targets, while two downgraded the stock or lowered their price target.

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