Qualcomm Exceeds Revenue Forecasts Amid Strong AI Demand, Faces Trade Curbs Impact

Qualcomm projected its fourth-quarter revenue would surpass Wall Street expectations, driven by strong demand for AI-enhanced smartphone processors. However, it faced revenue loss from the U.S. export license revocation to Huawei.

Qualcomm Forecasts Strong Q4 Revenue on AI Demand, Faces Challenges from U.S. Trade Curbs on Huawei

Qualcomm, the chipmaker, anticipated its fourth-quarter revenue surpassing Wall Street projections on July 31. Qualcomm's optimism was based on the robust demand for high-end Android devices and the necessity for additional smartphone processors undergoing AI upgrades.

According to Reuters, Qualcomm's shares increased by over 5% in extended trading following the release of its results. However, they declined by 1.4% after the company disclosed a revenue loss due to the United States' revocation of one of its export licenses for Huawei, a sanctioned Chinese telecommunications company.

Despite the challenges posed by the increasing Sino-U.S. trade tensions and tighter export restrictions, chipmakers like Qualcomm are demonstrating resilience in providing services to one of the largest semiconductor markets.

"This change will impact our revenues in both the current quarter and the first quarter of fiscal 2025," CFO Akash Palkhiwala said on a post-earnings call without detailing the impact.

Qualcomm Navigates Trade Challenges, Eyes AI-Driven Smartphone Demand and Negotiations with Huawei

According to Alex Rogers, Qualcomm's licensing segment president, the company is committed to negotiating with Huawei and demonstrating its strategic decision-making.

In May, the company declared it anticipated semiconductor revenue from Huawei by 2024 at the latest. However, it was still negotiating licensing agreements with the Chinese company.

The warning regarding trade restrictions obscured Qualcomm's optimistic forecast. Integrating AI capabilities into smartphones has resulted in a resurgence in end-market demand, boosting Qualcomm's orders after the industry experienced its lowest point in years.

For instance, Qualcomm could benefit from the increased sales of Apple iPhones in China, where the world's most valuable company has reduced iPhone prices to better compete with a resurgent Huawei.

"While the smartphone market end-demand has remained somewhat muted, Qualcomm is benefiting from the stronger share position in the premium-tier segment where end-market demand has been more resilient as (smartphone makers) have been slashing prices to spur demand," said Kinngai Chan, analyst at Summit Insights.