Qualcomm (QCOM, Financial) is experiencing robust demand in the high-end 5G Android phone sector, particularly in China, which constitutes about 60% of its total revenue. This demand surge, driven by AI-enabled applications, contributed to a 40% revenue increase from smartphone OEMs in the first half of 2024.
Additionally, Qualcomm's automotive business has shown impressive growth, recording its third consecutive quarter of record revenue. This success contributed to Qualcomm's strong Q2 results and an optimistic outlook for Q3, forecasting earnings per share between $2.15 and $2.35 and revenue between $8.8 billion and $9.6 billion.
Despite a global slowdown in the smartphone market, as noted by Micron (MU, Financial) and others, Qualcomm's total handset revenue slightly increased by 1% to $6.18 billion. The company continues to anticipate flat to slightly higher global handset unit growth year-over-year. The expansion of AI from cloud to devices is prompting consumers to seek smartphones equipped with advanced technologies, powered by Qualcomm's Snapdragon processors.
Qualcomm's performance also bodes well for Apple (AAPL, Financial), a major customer, although competition from Chinese brands like Xiaomi might be impacting Apple's market share in China. Apple is expected to release its Q2 earnings soon.
In the automotive sector, despite a general inventory glut noted by Taiwan Semi Manufacturing (TSM, Financial) and Mobileye Global (MBLY, Financial), demand for Qualcomm's Snapdragon chassis remains high, with a 35% revenue increase to $603 million in Q2. CEO Cristiano Amon highlighted the automotive business's trajectory to surpass $4 billion in revenue by FY26.
The Internet of Things (IoT) market remains a challenge, with an 11% revenue decline to $1.24 billion. However, a quarter-over-quarter increase of 9% and gradual market recovery are positive signs for future normalization in demand.
Qualcomm's strategic positioning in the 5G handset market, particularly in China, has paid off, with expectations for continued growth as new AI technologies emerge in smartphones.
