Despite supply constraints, Qualcomm rode the rising 5G smartphone wave and continued uplift from mobile technologies spilling into new industries to post better-than-expected financial results during its fiscal third quarter.
The San Diego wireless technology giant on Wednesday said its quarterly sales rose 65 percent from a year ago to $8.1 billion. Adjusted net income jumped 130 percent to $2.2 billion, or $1.92 per share.
That beat Wall Street analysts’ average estimate calling for adjusted earnings of $1.67 per share on revenue of $7.55 billion.
“The need for our technologies and products has never been more evident,” said Chief Executive Cristiano Amon, who officially took the helm in June. “We are seeing demand across virtually every industry because our products and technologies are essential ingredients that enable digital transformation in the cloud economy.”
While selling processors used in smartphones make up the bulk of the company’s revenue, Qualcomm has been working for years to diversify its customer base beyond smartphone makers.
That effort has gained momentum. The company said sales in the quarter to Internet of Things customers making laptops, headphones, virtual reality gear, asset trackers and myriad other non-smartphone devices, rose 82 percent from the year-ago period to $1.4 billion.
Amon said full-year sales of Internet of Things, automotive and radio frequency front-end products are expected to grow from $6 billion last year to $10 billion this year.
The pipeline continues to grow. In automotive, Qualcomm’s backlog of orders has reached $10 billion, with an annual revenue run rate of sales to car makers of $1 billion as of the June quarter.
In smartphones, Qualcomm is benefiting on a couple of fronts. It is once again supplying cellular modem processors to Apple, which reported Tuesday that iPhone sales nearly doubled to $39 billion in the June quarter compared with a year ago.
Asked about Apple’s efforts to design its own cellular modem to ditch Qualcomm as a supplier, which is a key concern for investors, Amon noted that Qualcomm has a multi-year supply agreement with Apple that is just in its initial year.
“We have other phones to go,” he said. “We are very happy with the way things are progressing.”
Qualcomm, San Diego’s largest publicly traded company, also appears to be benefiting from U.S. trade restrictions on China’s Huawei Technologies, which has led the company to wind down its smartphone business.
That will leave a hole in the global market, particularly for flagship phones, that Qualcomm’s current customers such as Xiaomi and others are rushing to fill.
“This quarter Xiaomi is the No. 2 (smartphone maker) in the world in shipments,” said Amon. “We see the shift in market share as creating an incredible opportunity for us. Snapdragon is synonymous with Android premium and high tier” phones.
While capacity constraints continue to plague the semiconductor industry, Qualcomm held firm on previous predictions that its supply squeeze would ease for the company by the end of calendar 2021.
“We still have more demand than supply across all of our businesses,” said Amon. “If you look at our guidance next quarter, it is consistent with our statement that we see significant improvement in supply to Qualcomm by the end of the year.”
Looking ahead to its fiscal fourth quarter, the company expects revenue between $8.4 billion to $9.2 billion and adjusted earnings of $2.15 to $2.35 per share.
Wall Street analysts had been forecasting fourth-quarter sales of $8.5 billion and adjusted earnings of $2.07 per share.
The company released results after markets closed. Its shares ended trading Wednesday at $142.44. The stock rose to $146.25 in extended trading on the Nasdaq exchange.
