Earnings Digest | Why did QCOM Beat Expectations but Stock Fell?
Yesterday, $Qualcomm(QCOM)$ dropped a bomb with their FY24 Q3 earnings report, corresponding to the three months report card as of June 23 this year, the performance exceeded analyst expectations:
But here's the twist: stocks soared initially, only to dive back into the red like a rollercoaster with a mind of its own! What gives?
Let's break it down. In terms of revenue, FY24Q3 was $9.393 billion, an increase of 11.1% over the same period last year, exceeding analysts' expectations of $9.21 billion:
Segment Revenue
FY24Q3 Handsets business revenue of $5.899 billion, an increase of 12.3%, slightly exceeding analyst expectations of $5.88 billion;
IoT revenue of $1.359 billion, down 8.5% year on year, missed analysts' expectations of $1.37 billion;
Automotive chip revenue of $811 million, a year-on-year increase of 86.9%, far exceeding analyst expectations of $660 million;
Technology licensing revenue of $1.273 billion, up 3.5% year over year, but missed analysts' expectations of $1.31 billion:
So, Qualcomm FY24Q3 performance exceeded expectations, mainly driven by automotive chips, and the Handsets performance is not bright enough!
The increase in automotive chip revenue is no surprise. Just look at all those new Chinese EVs flaunting Qualcomm's 8295 chips like trophies!
Previously, Qualcomm management has expected that the quarterly revenue of automotive chips will reach $1 billion, and now it is hoped that it will become a reality!
But Handsets, Qualcomm's bread and butter? Just OK, really. Management predicts flat to slight growth in phone shipments this year. This statement made the market worried, which is a pot of cold water to the hot expectations!
What's more, they blamed the early revocation of Huawei export licenses in May for a dent in revenue, and it'll linger till Q1 FY25.
Future Outlook
Looking ahead, Qualcomm's next quarter guidance is rosy, projecting between $9.5 billion and $10.3 billion, a median increase of 14.7% year-over-year, exceeding analyst expectations of $9.76 billion.
Handsets should see modest growth, IoT jumps double digits thanks to consumer, networking, and industrial gains, and auto stays steady.
Long story short, Handsets might get a AI-powered boost, but the biggest focus is on automotive chips and AI PCs. Qualcomm's aiming for $40 billion in automotive revenue by FY26, and AI PCs? They're just getting started but could power 50% of all laptops by 2027, becoming Qualcomm's next big thing!
As for valuations, although Qualcomm's current market to sales ratio is at a high level, it has not yet approached the peak, or there is still room to rise:
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
