To The Moon

After the US stock market closed yesterday, $Qualcomm(QCOM)$ , the giant of handsets chip, released its first quarter report of the fiscal year 2024, which corresponds to the three months to December 24, 2023.

Compared with analysts' expectations, Qualcomm's first quarter report exceeded expectations comprehensively!

Among them, the revenue was $99.35 billion in the first quarter, an increase of 5% year on year, which exceeded analysts' expectations of $95.37 billion, and also exceeded the management guidance of $91-9.9 billion.

By products, the handsets chip segment rebounded significantly, with revenue of $6.687 billion, an increase of 16%, exceeding analysts' expectations of $6.31 billion; The IoT segment generated $11.38 billion in revenue, a year-on-year decline of 23.3%, which was lower than analysts' expectations of $12.5 billion, and the decline was more significant than in the previous three quarters.

The automotive chip segment revenue was $5.98 billion, a record high, significantly exceeding analysts' expectations of $5.19 billion, and increased by 31.1% year on year. Technology licensing segment revenue was $14.6 billion, a year-on-year decline of 4.2%, which was narrower than the previous quarter, exceeding analysts' expectations of $14.1 billion:

The significant increase in handsets chip segment revenue was mainly due to Qualcomm launching more advanced chips and mobile phone manufacturers replenishing inventories, leading to a temporary significant recovery in revenue.

However, looking ahead to the full year of 2024, Qualcomm expects global mobile phone shipments to remain flat or grow slightly compared with last year, and 5G mobile phones may have a mid- to high-single-digit to low-double-digit growth rate.

The significant increase in the automotive chip segment revenue is mainly due to the trend of automotive intelligence, as more and more car manufacturers are adopting Qualcomm chips to achieve intelligent cockpits. In recent months, companies such as $Xiaomi Corp.(XIACY)$ cars and Krypton 007 have all adopted Qualcomm chips. At least in the Chinese automotive market, Qualcomm is expected to replicate the success of its Handsets chip segment!

The weakness in IoT segment is expected, but Qualcomm expects a mid- to high-single-digit sequential growth in IoT in the second quarter. Technology licensing revenue is related to mobile phone shipments.

Management expects revenue in the second quarter of the 2024 fiscal year to be between $8.9 billion and $9.7 billion, with a median of $9.3 billion, which is close to analysts' expectations of $9.36 billion.

Overall, Qualcomm's first quarter report and second quarter guidance were in line with expectations. However, judging from the overall growth rate, second quarter revenue growth was about 0.3%, lower than the 5% growth in the first quarter, indicating that the current recovery of consumer electronics is not smooth and the high-point moment still needs to wait.

From a valuation perspective, Qualcomm's Price-to-sales ratio is still around the mean value and not high:

Although high growth still needs to wait, Qualcomm is expected to fully benefit from AI-enabled smartphones and PCs. AI is expected to drive a recovery in smartphone and PC shipments while also increasing chip prices and improving profitability.

During the earnings call, Qualcomm revealed that its contracts with $Samsung Electronics Co., Ltd.(SSNLF)$ and $Apple(AAPL)$ have been extended, highlighting Qualcomm's unassailable position in the handsets chip market that is difficult to dislodge. AI smartphones will fully benefit Qualcomm.

AI PC chips are a new business area for Qualcomm that is expected to compete with Intel for market share. As for automotive chips, Qualcomm expects to generate annual revenue of $4 billion by 2026, which represents a doubling from current levels!

The future is bright, but the road is tortuous, and Qualcomm still deserves investors' expectations!