Xiaomi – Qualcomm rides the global 5G wave as revenue surges 65%

Despite supply constraints, Qualcomm has been riding the rising wave of 5G smartphones, with mobile technology spilling over into new industries and continuing to outperform expectations in the third quarter.

San Diego’s wireless technology giant said Wednesday that quarterly sales were up 65% from a year ago to $ 8.1 billion. Adjusted net income increased 130% to $ 2.2 billion, or $ 1.92 per share.

This was above the average estimate of Wall Street analysts who demand adjusted earnings of $ 1.67 per share for $ 7.55 billion in earnings.

“The need for our technology and products has become clearer than ever,” said Cristiano Amon, CEO, who officially took command in June. “Our products and technologies are key elements that enable digital transformation in the cloud economy, so we see demand in virtually every industry.”

While sales of processors used in smartphones make up the majority of the company’s revenue, Qualcomm has been working for years to diversify its customer base beyond smartphone manufacturers.

The effort is gaining momentum. According to the company, quarterly sales to Internet of Things customers, who manufacture laptops, headphones, virtual reality devices, asset trackers and countless other non-smartphone devices, increased 82% year-over-year. That’s $ 1.4 billion.

According to Amon, annual sales of Internet of Things, automotive and wireless frequency front-end products are expected to increase from $ 6 billion last year to $ 10 billion this year.

The pipeline continues to grow. In the automotive sector, Qualcomm’s backlog reached $ 10 billion and annual sales to automakers reached $ 1 billion in the June quarter.

On smartphones, Qualcomm benefits in several ways. Resupplying Apple’s cellular modem processor on Tuesday reported iPhone sales nearly doubled to $ 39 billion in the June quarter compared to a year ago.

Asked about Apple’s efforts to design its own cellular modem to abandon Qualcomm as a supplier, which is an important concern for investors, Qualcomm has signed a multi-year supply deal with Apple, which is just its first year. Said that he was.

“There are other phones,” he said. “We are very happy with the way things are going.”

Qualcomm, San Diego’s largest publicly traded company, also appears to be benefiting from US trade restrictions on China’s Huawei Technologies, which has shrunk its smartphone business.

It will leave a hole in the global market for flagship phones, especially Xiaomi and other Qualcomm’s current customers are rushing to fill.

“Xiaomi was the second largest shipment in the world (smartphone maker) this quarter,” said Amon. “We believe that changing market share is creating great opportunities for us. Snapdragon is synonymous with Android Premium and High Tier phones.”

Raymond James analyst Chris Caso sees the market opening on behalf of Huawei as a potential $ 4 billion annual opportunity for Qualcomm.

In addition, Caso is monitoring signs of millimeter-wave adoption. This is the fastest, yet technically most difficult version of 5G. Network operators in Japan and South Korea will soon deploy this technology. Verizon and AT & T are already deploying millimeter waves in parts of the United States, but availability is inadequate.

Qualcomm is a technology leader in millimeter waves. As these ultra-fast networks begin to gain momentum globally, “increasing millimeter-wave penetration will make it more difficult for Apple to replace Qualcomm,” said Caso.

While capacity constraints continue to plague the semiconductor industry, Qualcomm has adhered to previous expectations that the pressure on its supply will be eased by the end of 2021.

“We still have more demand than supply in every business,” Amon said. “The guidance for the next quarter is in line with our statement that supply to Qualcomm will improve significantly by the end of the year.”

The company expects revenue of $ 8.4 billion to $ 9.2 billion and adjusted earnings of $ 2.15 to $ 2.35 per share for the fourth quarter.

Analysts on Wall Street predicted fourth-quarter sales of $ 8.5 billion and adjusted price-earnings ratio of $ 2.07 per share.

The company announced the results after the market was closed. The stock closed at $ 142.44 on Wednesday. In-market after-hours trading on the Nasdaq exchange raised the share price to $ 146.25.