Qualcomm revealed it beat Wall Street estimates for its fiscal second-quarter revenue and profits on Wednesday despite COVID-19 related disruption. The chipmaker also offered a positive outlook for the third quarter, in part due to the predicted recovery of the Chinese smartphone market.
Qualcomm’s Better-than-Expected FQ2 Results
Like many manufacturers with significant Chinese production capacity, Qualcomm experienced considerable supply chain delays at the start of 2020. The Sino government initiated widespread lockdown measures in January to stop the spread of the coronavirus pandemic, which prompted the temporary closure of the component manufacturer’s local factories. However, the corporation brought its plants back to near normal output levels in March, which reflects its FQ2 gains.
In the third month ending March 29, Qualcomm recorded $5.2 billion in adjusted revenue, up 7 percent from 2019. The company brought its fiscal second-quarter adjusted income up to $1.01 billion, an annual increase of nine percent. Moreover, the firm reported earnings per share of $0.88, a year-over-year increase of 14 percent, which beat market analyst consensus estimates of $.78 per share.
Wall Street rewarded the chipmaker for exceeding its expectations with a 3 percent bump in its share price.
Qualcomm’s FQ3 Outlook
For the second quarter, Qualcomm predicts revenues between $4.4 billion and $5.2 billion and profits of $.60 to $.80 per share. By comparison, Wall Street expects the firm to generate $4.77 billion in sales during the June ending quarter.
In an interview, Qualcomm CEO Steve Mollenkopf explained his firm’s outlook is informed by smartphone demand in China, the world’s largest handset market. The executive said Sino consumer activations are at regular seasonal levels with better than expected adoption of 5G-capable mobile devices.
Mollenkopf’s assessment is consistent with a recent report from Counterpoint Research which found sales of fifth-generation smartphones rose by 120 percent sequentially last quarter.
On the other hand, a CINNO Research study indicated Chinese buyers’ interest in 5G handsets might not necessarily benefit Qualcomm. The analyst group found Sino conglomerate Huawei displaced the firm as the region’s biggest seller of mobile device chipsets last period. Counterpoint also discovered Huawei’s smartphone sales grew by 6 percent in the same period while Qualcomm clients Xiaomi and Oppo experienced 30 percent drops in unit purchases.
If Huawei continues to gobble up market share in China, it will hurt Qualcomm’s revenue throughout 2020 and beyond. That said, large orders of the 5G iPhone series in Europe and the United States in the holiday season could offset the chipmaker’s Sino losses. In truth, the manufacturer’s near-term sales depend on Western consumers’ post-coronavirus pandemic hunger for new smartphones.