Qualcomm Gives Rosy Forecast, Fueled by Push Into New Markets

(Bloomberg) -- Qualcomm Inc., the biggest maker of chips that run smartphones, gave an upbeat sales forecast, fueled by growth in new markets. The shares jumped 7.9% to a record high.

Revenue has the potential to top $46 billion by fiscal year 2024, Qualcomm Chief Financial Officer Akash Palkhiwala said at company event Tuesday in New York. Analysts, on average, projected Qualcomm’s sales would reach about $43.8 billion. The chipmaker’s revenue is on course to expand about 16% in its current fiscal year, 2022, before slowing to grow at 7% in the following year, according to estimates compiled by Bloomberg.

Chief Executive Officer Cristiano Amon, who was promoted to the top job at the San Diego-based chipmaker earlier this year, is trying to lower Qualcomm’s dependence on smartphones and jump on higher-growth opportunities in markets such as automotive, wireless home broadband and industrial. 

The company projected revenue from the Internet of Things, which are smart devices connected to the web, will reach $9 billion by fiscal year 2024. Chips sales for the auto industry may hit $3.5 billion in five years, Palkhiwala said.

Until the company’s Nov. 3 earnings announcement, investors had remained skeptical. The company gave a bullish outlook and posted a strong quarterly performance, sending the stock up 13% the following day. The stock closed Tuesday at a record high of $181.81 in New York, and has gained 19% this year.

Tuesday’s predictions may help gain investor acceptance for Amon’s plan for the company’s future. 

In the near term, Qualcomm is having more success at combating concern that it will lose Apple Inc. as a customer as soon as the iPhone maker can develop its own modem chips. Amon has said that the majority of growth he expects in that market will come in devices built on the Android operating system.
 
Qualcomm’s new businesses include home wireless broadband, the growing use of cellular networks to provide high-speed internet connections to homes that don’t have wired access. In cars, Qualcomm is trying to work its way into the market for self-driving vehicles with chips that connect them to wireless networks and power infotainment functions. The company is also trying to break into Intel Corp. and Advanced Micro Devices Inc.’s hold on the market for computer processors with beefed-up versions of its Snapdragon chip. Microsoft Corp. is an early customer. 

For consumers, Qualcomm chips are appearing more in tablets, virtual-reality headsets and wearables. In industrial applications, the company’s products can be found in energy metering, warehouse logistics systems and retail point-of-sale equipment. Sales at its IoT division were up 66% to $1.54 billion last quarter. 

Qualcomm’s flagship phone-chip business rose 56% to $4.69 billion in that period. Amon said he will prioritize that unit allocating supply to those more profitable chips for the time being and that will hurt IoT growth in the short term.

Like many other chipmakers, Qualcomm outsources production to companies such as Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. A surge in demand has left these foundries unable to keep up, but there have been recent signs that chip shortages may be easing.

The company is unique in the industry because a large chunk of its profit comes from technology licensing. Makers of phones pay to use Qualcomm’s technology, regardless of whether they buy its chips, because the company owns patents that cover some of the fundamentals of mobile communications.

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