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Qualcomm (QCOM) Q1 Earnings Beat on Solid 5G Chip Demand

Qualcomm Incorporated QCOM reported solid first-quarter fiscal 2021 results with record earnings, primarily driven by the ramp-up in 5G-enabled chips. Both the top and bottom-line figures increased year over year, backed by the strength of the business model and the ability to respond pro-actively to the evolving market scenario.

Net Income

On a GAAP basis, net income in the December quarter more than doubled to $2,455 million or $2.12 per share from $925 million or 80 cents per share in the prior-year quarter. The significant improvement in GAAP earnings was primarily attributable to top-line growth driven by surging demand of 5G products across handsets, along with higher automotive and IoT revenues.

Quarterly non-GAAP net income came in at $2,510 million or $2.17 per share compared with $1,151 million or 99 cents in the year-ago quarter. Undeterred by the adverse impact of the virus outbreak, record high non-GAAP earnings per share were largely driven by higher revenues across the board. The bottom line exceeded management’s guidance and beat the Zacks Consensus Estimate by 7 cents.

QUALCOMM Incorporated Price, Consensus and EPS Surprise QUALCOMM Incorporated Price, Consensus and EPS Surprise

QUALCOMM Incorporated price-consensus-eps-surprise-chart | QUALCOMM Incorporated Quote

Revenues

On a GAAP basis, total revenues in the fiscal first quarter were $8,235 million compared with $5,077 million in the prior-year quarter. The radical increase in revenues was driven by 5G ramp up, higher sales to Apple Inc. AAPL and rise in automotive and IoT revenues with diligent execution of operational plans and resilient business culture acting as catalysts.

Non-GAAP revenues in the reported quarter were $8,226 million compared with $5,057 million in the year-earlier quarter. The figure missed the consensus mark of $8,316 million but was within the company’s guided range, driven by 5G strength, high-performing core chipsets and new RF front-end content.

Segment Results

Quarterly revenues from Qualcomm CDMA Technologies (QCT) improved 81% year over year to $6,533 million driven by strength in handsets and higher demand in adjacent platforms beyond mobile (RF front-end, automotive and IoT), coupled with higher chip shipments despite adverse coronavirus impacts. EBT margin increased to 29% from 13%.

Qualcomm Technology Licensing (QTL) revenues totaled $1,660 million, up 18% year over year, driven by higher royalty revenues from Huawei, better-than-expected global handset shipments and a favorable OEM mix. EBT margin was 77% compared with 72% in the year-ago quarter on top-line growth.

Cash Flow & Liquidity

Qualcomm generated $3,175 million of net cash from operating activities in first-quarter fiscal 2021 compared with $1,118 million a year ago. At quarter end, the company had $7,076 million in cash and cash equivalents and $15,231 million of long-term debt.

Guidance

For the second quarter of fiscal 2021, Qualcomm expects GAAP revenues of $7.2-$8 billion. Non-GAAP earnings are projected to be $1.55-$1.75 per share, while GAAP earnings are likely to be $1.17-$1.37 per share, buoyed by the Huawei settlement. Revenues from QTL are expected between $1.25 billion and $1.45 billion. For QCT, the company anticipates revenues between $6 billion and $6.5 billion.

Zacks Rank & Stocks to Consider

Qualcomm currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader industry are Clearfield, Inc. CLFD and Sonim Technologies, Inc. SONM, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 62.6%, on average.

Sonim pulled off a trailing four-quarter earnings surprise of 2.2%, on average.

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