Qualcomm beats on earnings, highlights growth in Meta smartglasses

Qualcomm's fiscal third-quarter earnings report revealed a stronger-than-anticipated performance, surpassing Wall Street expectations, though its shares experienced a dip during after-hours trading. For the quarter ending June 29, the chipmaker announced adjusted earnings of $2.85 per share, alongside projected revenues of $10.7 billion. Analysts had anticipated $2.83 per share on revenue of $10.35 billion. The company reported a net income of $2.66 billion, translating to $2.43 per share, compared to $2.13 billion or $1.88 per share during the same period last year. Qualcomm's core business focuses on supplying chips for smartphones, including essential processors and modems for high-end devices from manufacturers like Samsung and Apple. However, the handset chip segment generated $6.33 billion this quarter, slightly below the expected $6.44 billion. Looking ahead, Qualcomm anticipates a future without Apple as a customer for its modem business. To mitigate this, the company is diversifying its offerings, producing chips for a range of devices, notably including Meta's Quest virtual-reality headsets and Ray-Ban smart glasses. In a brief interview, CEO Cristiano Amon emphasized the significance of Qualcomm's partnership with Meta, illustrating how the production of chips for devices like the Ray-Ban smart glasses aligns with the company's strategy to focus on 'personal AI,' which emphasizes AI applications operating directly on devices rather than relying on cloud services. Qualcomm categorizes its revenues from Meta under the 'Internet of Things' division, which reported $1.68 billion in revenues this quarter. Amon referenced Mark Zuckerberg's recent vision for AI, which emphasizes 'personal superintelligence,' highlighting Qualcomm's role in realizing this vision. CFO Akash Palkhiwala noted that chip consumption from Meta exceeded expectations during the period. Additionally, EssilorLuxottica, the parent company of Ray-Ban, stated that sales of the smart glasses had more than tripled year-over-year. Palkhiwala remarked on Zuckerberg's latest video outlining his vision for the future of personal AI, affirming Qualcomm's crucial involvement in this evolving sector. Furthermore, Qualcomm plans to begin reporting on its chip business growth independent of Apple, which is expected to grow by approximately 15% this year. Amon has identified the automotive sector as a significant growth opportunity, with this division seeing a 21% increase to $984 million in the third quarter, although this was below the 24% growth rate of the IoT segment. The company's other major revenue stream, QTL, which encompasses licensing fees for its patented technologies, including elements of the 5G standard, experienced an 11% rise to $1.32 billion. During the quarter, Qualcomm invested nearly $1 billion in cash dividends and repurchased 19 million shares, totaling $2.8 billion.