Qualcomm Jumps on Outlook for Booming 5G Chip Demand

(Bloomberg) -- Qualcomm Inc. gave an upbeat forecast for the current quarter, suggesting new 5G wireless networks are persuading consumers to upgrade their smartphones. Shares of the chipmaker jumped about 14% in early trading in New York.

Revenue will be $7.8 billion to $8.6 billion in the period ending in December, the San Diego-based company said Wednesday in a statement. Analysts, on average, estimated $7.15 billion, according to data compiled by Bloomberg. Profit, excluding some items, will be $1.95 to $2.15 a share, versus Wall Street estimates of $1.66 a share.

Qualcomm is the biggest maker of chips that connect smartphones to wireless networks. That makes the company’s outlook a key indicator for the smartphone industry. The chipmaker has previously predicted rising demand as consumers trade in aging handsets for new 5G devices. The stock is up almost 50% this year.

“It’s 5G and everything playing out the way that we thought,” Chief Executive Officer Steve Mollenkopf said. “The markets have been stronger than we guided and our forward guide is for more of the same.”

In the fiscal fourth quarter, Qualcomm said revenue was $8.3 billion, a gain of 73% from a year earlier. Analysts, on average, projected $5.9 billion. Net income was $2.58 a share. Excluding certain items, profit was $1.45, compared with Wall Street’s average estimate of $1.19.

The shares traded as high as $149.80 Thursday morning following the announcement. The stock closed at $128.97 on Wednesday, leaving it up 46% in 2020.

Qualcomm has pushed to be the first to release 5G components, aiming to regain market share the company lost when the previous 4G network technology matured and phone makers looked elsewhere for parts.

Qualcomm gets the bulk of its profit from licensing patents that cover the fundamentals of modern phone systems. The company charges a percentage of the selling price of each handset, payable by phone makers regardless of whether they use its chips.

QTL, its licensing business, generated sales of $1.5 billion, up 30% from a year earlier. Chip revenue jumped 38% to $5 billion.

Mollenkopf was keen to highlight the progress he has made diversifying Qualcomm beyond the phone market. Revenue from chips sold to makers of vehicles and internet-connected gadgets totaled $3.67 billion in fiscal 2020, Qualcomm reported.

Last month, a U.S. appeals court said it won’t reconsider an earlier decision that threw out antitrust claims against Qualcomm in a case brought by U.S. Federal Trade Commission. That decision ends years of major legal fights and regulatory actions against the company.

Apple Inc. and China’s Huawei Technologies Co. became the last major handset suppliers to sign new licensing agreements with Qualcomm. Apple has also returned to using Qualcomm silicon in the iPhone.

Qualcomm said fiscal fourth-quarter results included $1.8 billion, or $1.37 a share, resulting from a settlement agreement with Huawei and royalties for sales made in previous quarters related to a new global patent license agreement with the Chinese company.

©2020 Bloomberg L.P.