Qualcomm (QCOM) Q2 Earnings Top on Solid Automotive Revenues

Qualcomm Incorporated QCOM reported relatively healthy second-quarter fiscal 2024 results, with the bottom and top lines beating the respective Zacks Consensus Estimate, driven by healthy demand trends in Android handsets and automotive businesses. Both metrics improved year over year, led by the strength of the business model, revenue diversification and the ability to respond proactively to the evolving market scenario.

Management expects a steady improvement in the demand trajectory in the remainder of fiscal 2024. With solid quarterly results and a bullish outlook, shares were up post earnings release.

Net Income

On a GAAP basis, net income in the March quarter improved to $2,326 million or $2.06 per share from $1,704 million or $1.52 per share in the prior-year quarter. The increase in GAAP earnings was primarily attributable to top-line growth and lower operating expenses.

Quarterly non-GAAP net income came in at $2,761 million or $2.44 per share compared with $2,420 million or $2.15 per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 14 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 second quarter were $9,389 million compared with $9,275 million in the prior-year quarter. The quarterly revenues beat the consensus mark of $9,301 million. Despite soft industrial IoT demand patterns, Qualcomm registered record automotive revenues owing to solid momentum from the Snapdragon Digital Chassis platform. Strength within the handset business also buoyed the top line. Non-GAAP revenues in the reported quarter were $9,386 million compared with $9,268 million a year ago.

Segment Results

Quarterly revenues from Qualcomm CDMA Technologies (QCT) were $8,026 million, up from $7,942 million, as strength in the automotive platform and higher demand in handsets was partially offset by channel inventory drawdown within the IoT business. The segment’s revenues exceeded our revenue estimates of $7,909 million. The company witnessed solid market traction in the EDGE networking business that helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation PCs, wearables and tablets.

Automotive revenues rose 35% to a record high of $603 million, driven by increased content in new vehicle launches with its Snapdragon Digital Chassis platform. This was the 14th consecutive quarter in which Qualcomm recorded double-digit growth in automotive revenues. The company expects automotive revenues to increase to more than $4 billion in fiscal 2026. Handset revenues were up 1% to $6,180 million, primarily led by the increased deployment of the Snapdragon 8 Gen 3 mobile platform in new Android flagship launches. However, IoT revenues were down 11% to $1,243 million due to the channel inventory drawdown. EBT margin for the QCT segment rose to 29% from 27%.

Qualcomm Technology Licensing (QTL) revenues totaled $1,318 million, up 2% year over year, owing to strength in handset and automotive businesses. The segment’s revenues missed our estimates of $1,360 million. EBT margin improved to 71% from 68%.

Cash Flow & Liquidity

Qualcomm generated $6,503 million of net cash from operating activities in the first six months of fiscal 2024 compared with $4,552 million a year ago. At quarter-end, the company had $9,219 million in cash and cash equivalents and $14,543 million of long-term debt. The company repurchased 5 million shares for $731 million during the quarter.

Q3 Guidance

For the third quarter of fiscal 2024, Qualcomm expects GAAP revenues of $8.8-$9.6 billion due to market stabilization, recovery in market demand and portfolio strength. Non-GAAP earnings are projected to be $2.15-$2.35 per share, while GAAP earnings are likely to be $1.74-$1.94 per share. Revenues from QTL are expected to be between $1.2 billion and $1.4 billion. For QCT, the company anticipates revenues between $7.5 billion and $8.1 billion.

Zacks Rank

Qualcomm currently has a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Cogent Communications Holdings, Inc. CCOI is scheduled to release first-quarter 2024 earnings on May 9. The Zacks Consensus Estimate for earnings is pegged at a loss of 80 cents per share, suggesting a decline of 715.4% from the year-ago reported figure.

Cogent carries a Zacks Tank #3 (Hold).

Akamai Technologies, Inc. AKAM is slated to release first-quarter 2024 earnings on May 9. The Zacks Consensus Estimate for earnings is pegged at $1.61 per share, indicating a growth of 15% from the year-ago reported figure.

Akamai has a long-term earnings growth expectation of 7.3%. AKAM delivered an average earnings surprise of 6.5% in the last four reported quarters.

Keysight Technologies, Inc. KEYS is due to release second-quarter fiscal 2024 earnings on May 20. The Zacks Consensus Estimate for earnings is pegged at $1.38 per share, implying a decline of 34.9% from the year-ago reported figure.

Keysight has a long-term earnings growth expectation of 4.1%. KEYS delivered an average earnings surprise of 6.4% in the last four reported quarters.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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