Qualcomm sales beat estimates, shares drop after licensing forecast

By Stephen Nellis and Arsheeya Bajwa

(Reuters) - Qualcomm on Wednesday forecast sales and profits above analyst expectations as artificial intelligence features helped fuel demand for smartphones, and its share price fell after the bell on expectations of flat revenue from its patent licensing business.

For its current fiscal second quarter, Qualcomm forecast a sales range with a midpoint of $10.75 billion and adjusted profits of $2.80 per share, both above analyst estimates of sales of $10.34 billion and adjusted profits $2.69 per share, according to data from LSEG.

During a conference call with analysts, Qualcomm executives said its lucrative patent licensing business, under which makers of 5G-connected products pay Qualcomm a small fee for its technology, will not have sales growth this year after an agreement with Huawei Technologies expired.

Shares declined 4.8% after the results and executive comments. Investors have been looking for booming payoffs from AI, and Qualcomm's stock price has rallied 14% so far in 2025, outperforming a gain of about 3% in the S&P 500.

Qualcomm last year stopped selling chips to Huawei but still retained a license agreement with the Chinese telecoms giant that analysts had estimated contributed 10 cents to 15 cents per share to its profits.

"The Huawei discussions are still in play, so the numbers don't actually include the potential from a renewal with Huawei," Alex Rogers, Qualcomm's licensing chief, said when asked about the forecast.

Qualcomm, the world's biggest supplier of modem chips that connect smartphones to wireless data networks, said last month it had won a major new deal with Samsung Electronics to provide chips for the South Korean firm's flagship mobile phones around the world. San Diego, California-based Qualcomm is also working with Microsoft and computer manufacturers to offer a range of laptops and PCs based on its chips.

"Expectations were somewhat high going into the print but we think it is justified as Qualcomm has a decent storyline for total addressable market expansion in the PC client market and share gain in the smartphone market with its strong position in the premium tier segment," said Kinngai Chan, an analyst with Summit Insights.

Qualcomm reported sales of $11.67 billion and adjusted profits of $3.41 per share for its fiscal first quarter ended December 29. Both were well above analyst estimates of $10.93 billion for sales and adjusted profits of $2.96 per share, according to data from LSEG.

At the midpoints of the ranges, Qualcomm forecast second-quarter revenues of $9.2 billion for its chip business and $1.35 billion for patent licensing. Wall Street had expected $8.90 billion for chips and $1.43 billion for patent licensing, according to LSEG data.

While Qualcomm has diversified its offerings into PCs, cars and other markets, the smartphone market remains its stronghold, supplying both Apple and Chinese handset makers such as Xiaomi, Oppo and Vivo. The Chinese smartphone market has struggled with weak demand, with the Chinese government stepping in to provide subsidies for low- and mid-tier handset sales in the country.

Qualcomm said it had fiscal first quarter handset revenue of $7.57 billion, up 13% from the $6.69 billion it reported a year earlier and below the 20% growth the company saw in its chip revenues overall. Analysts expected $7.01 billion, according to data from Visible Alpha.

Qualcomm said fiscal first quarter automotive chip revenue was $961 million while sales from "internet of things" chips - into which it also lumps PC chip sales - were $1.55 billion. A year earlier, automotive chip revenue was $598 million and internet of things revenue was $1.1 billion.

Analysts had expected $905 million in automotive revenue and $1.40 billion in IoT revenue, according to data from Visible Alpha.

For the just ended quarter, Qualcomm said overall chip revenue was $10.08 billion with licensing revenues at $1.54 billion. Analysts had expected $9.29 billion for chips and $1.54 billion for licensing.

Bernstein Research last year estimated that Huawei's licensing payments to Qualcomm accounted for about 10 cents to 15 cents per share of Qualcomm's profits. But Qualcomm on Wednesday disclosed that it has secured license agreements with two other Chinese smartphone firms.

(Reporting by Stephen Nellis in San Francisco and Arsheeya Bajwa in Bengauluru; Editing by David Gregorio)