Shares of Qualcomm and Arm Holdings, two chip companies heavily dependent on the smartphone market, gained on Thursday after delivering earnings reports that signaled a tentative comeback in demand.
Both companies pointed in their earnings released Wednesday to a resurgence in demand for high-end model devices, though they stopped short of signaling that the broader industry was on solid ground. Their shares were up about two percent n New York trading on Thursday.
The return of consumer spending on expensive handsets, particularly in China, helped both companies’ revenue and profit top analysts’ estimates last quarter. Expansion into new areas also shored up results. Qualcomm and Arm are pushing deeper into computing, bringing a boost from Artificial Intelligence (AI) spending. And Qualcomm has made a successful foray into automotive chips.
The two companies — longtime partners that have increasingly become adversaries — are seen as bellwethers for the smartphone industry. Qualcomm is the biggest seller of the processors that power the devices, and Arm developed much of the underlying technology used by the industry.
Both companies have benefited from a shift to more upscale phones. At Arm, phone revenue jumped 40 percent despite overall unit shipments only gaining four percent. Qualcomm also is getting a bigger share of the Chinese market. Revenue from the sales of Android phones increased 40 percent in that country this year.
For the coming year, the company is predicting that overall phone units will grow roughly five percent or less — a sign it’s not anticipating a wide recovery. Many consumers aren’t upgrading their devices as often, a problem that has plagued much of the industry.
For Arm, the use of higher-end components in smartphones is resulting in a “huge benefit” for royalty income, Chief Executive Officer Rene Haas said in a Bloomberg Television interview. That shift is being driven by the need for more computing in phones to run artificial intelligence software, he said.
“I do think we’re in a market where we can’t get enough compute capacity,” he said.
Qualcomm and Arm released their quarterly results within minutes of each other Wednesday and held overlapping conference calls. It was notable timing for two companies engaged in an escalating legal fight.
Arm took steps last month to cancel a license that allowed Qualcomm to use its intellectual property to design chips. The move followed an Arm lawsuit against Qualcomm for breach of contract and trademark infringement in 2022.
Though Haas is confident of winning the trial, which starts in mid-December, Arm has based its financial projections on the assumption of losing. It’s taking a deliberately “bearish” position, he said.
On Wednesday, Arm projected revenue of $920 million (roughly Rs. 7,762 crores) to $970 million (roughly Rs. 8,184 crore) for the December quarter. The midpoint of that range would fall short of the $950.9 million (Roughly Rs. 8,022 crore) that analysts had estimated.
Qualcomm expects sales of $10.5 billion (roughly Rs. 88,592 crore) to $11.3 billion (roughly Rs. 95,342 crore) during the period. Analysts estimated $10.5 billion (roughly Rs. 88,592 crore on average, according to data compiled by Bloomberg. Profit, minus certain items, will be as much as $3.05 (roughly Rs. 257) a share, beating Wall Street projections.
The automotive market was a bright spot for Qualcomm, despite a slump in that category that has hurt other chipmakers. Revenue was up 55 percent in fiscal 2024. The San Diego-based company said that it’s been winning new business, helping it outshine peers.
“I think you should look at our revenue in auto less sensitive to what happens in the market, much more related to new models that are being launched,” CEO Cristiano Amon said on a conference call with analysts. “It’s reflecting a shifting share.”
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