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Will Revenue Decline Impede Qualcomm's (QCOM) Q4 Earnings?
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Qualcomm Incorporated (QCOM - Free Report) is scheduled to release fourth-quarter fiscal 2023 results on Nov 1, after the closing bell. It pulled off a trailing four-quarter earnings surprise of 1.01%, on average. The San Diego, CA-based company is expected to record a top-line contraction year over year, owing to growing Sino-U.S. trade tension, intense competition and macroeconomic headwinds.
Factors at Play
During the quarter, Qualcomm extended its technology partnership with BMW to accelerate advancements in the automotive landscape. BMW will leverage Qualcomm’s Snapdragon Digital Chassis Solution for its new vehicles. This innovation will provide drivers and passengers with safer, smarter and more sophisticated in-vehicle experiences. BMW has also opted to deploy Qualcomm’s latest Snapdragon Cockpit Platform and Snapdragon Auto Connectivity Platforms for 5G connectivity. This is expected to have supported the top line during the quarter.
However, the company’s dependence on China is a major concern. The Chinese market is a major revenue source for the chip maker, but the continued Sino-U.S. trade spat is making it difficult to maintain operations in the communist nation.
Various reports indicate that Beijing will impose a ban on the use of iPhones in government offices and state-backed entities as part of its concerted effort toward self-reliance. This is likely to affect suppliers like Qualcomm as its modems have been a key feature in iPhone models. Moreover, growing competition from other established players in the mobile phone chipset market and rising operating expenses are likely to have affected margins.
Our revenue estimate for the QCT segment is pegged at $7,231.7 million, suggesting a year-over-year decline of 27%, while that for the QTL segment is pegged at $1,269.3 million, down 11.9%.
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $8,550 million, indicating a contraction from the year-ago quarter’s tally of $11,396 million. Adjusted earnings per share are pegged at $1.92, suggesting a decrease from $3.13 in the year-ago quarter.
Key Developments in Q4
In the quarter under review, QCOM entered into a multi-year agreement with Apple for an undisclosed amount to supply Snapdragon 5G Modem-RF systems for upcoming iPhone models. The specific valuation of the agreement, which is set to remain in effect until 2026, remains confidential.
Qualcomm's long-term financial planning assumes a 20% share of the chipset supply for smartphone launches in 2026. In the face of rising competition from other well-established players and the prevailing business uncertainties, the Apple deal will likely provide a substantial competitive advantage for Qualcomm.
In the fiscal fourth quarter, QCOM inked an agreement with Manchester United for an undisclosed amount for being the official shirt sponsor from next season. The premier English Premier League soccer club boasts a strong fan following worldwide. The three-year sponsorship deal will be effective from the start of the 2024-25 season and boost Qualcomm’s brand exposure globally. This is likely to be reflected in the upcoming quarterly results.
Earnings Whispers
Our proven model predicts a likely earnings beat for Qualcomm for the fiscal fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is precisely the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.37%. The Most Accurate Estimate is pegged at $2.02, while the Zacks Consensus Estimate stands at $1.92. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Qualcomm currently has a Zacks Rank #3.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this season:
Motorola Solutions, Inc. (MSI - Free Report) has an Earnings ESP of +0.47% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 2.
Qorvo Inc. (QRVO - Free Report) has an Earnings ESP of +4.46% and sports a Zacks Rank of 1. The company is set to report quarterly numbers on Nov 1.
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Will Revenue Decline Impede Qualcomm's (QCOM) Q4 Earnings?
Qualcomm Incorporated (QCOM - Free Report) is scheduled to release fourth-quarter fiscal 2023 results on Nov 1, after the closing bell. It pulled off a trailing four-quarter earnings surprise of 1.01%, on average. The San Diego, CA-based company is expected to record a top-line contraction year over year, owing to growing Sino-U.S. trade tension, intense competition and macroeconomic headwinds.
Factors at Play
During the quarter, Qualcomm extended its technology partnership with BMW to accelerate advancements in the automotive landscape. BMW will leverage Qualcomm’s Snapdragon Digital Chassis Solution for its new vehicles. This innovation will provide drivers and passengers with safer, smarter and more sophisticated in-vehicle experiences. BMW has also opted to deploy Qualcomm’s latest Snapdragon Cockpit Platform and Snapdragon Auto Connectivity Platforms for 5G connectivity. This is expected to have supported the top line during the quarter.
However, the company’s dependence on China is a major concern. The Chinese market is a major revenue source for the chip maker, but the continued Sino-U.S. trade spat is making it difficult to maintain operations in the communist nation.
Various reports indicate that Beijing will impose a ban on the use of iPhones in government offices and state-backed entities as part of its concerted effort toward self-reliance. This is likely to affect suppliers like Qualcomm as its modems have been a key feature in iPhone models. Moreover, growing competition from other established players in the mobile phone chipset market and rising operating expenses are likely to have affected margins.
Our revenue estimate for the QCT segment is pegged at $7,231.7 million, suggesting a year-over-year decline of 27%, while that for the QTL segment is pegged at $1,269.3 million, down 11.9%.
For the September quarter, the Zacks Consensus Estimate for revenues is pegged at $8,550 million, indicating a contraction from the year-ago quarter’s tally of $11,396 million. Adjusted earnings per share are pegged at $1.92, suggesting a decrease from $3.13 in the year-ago quarter.
Key Developments in Q4
In the quarter under review, QCOM entered into a multi-year agreement with Apple for an undisclosed amount to supply Snapdragon 5G Modem-RF systems for upcoming iPhone models. The specific valuation of the agreement, which is set to remain in effect until 2026, remains confidential.
Qualcomm's long-term financial planning assumes a 20% share of the chipset supply for smartphone launches in 2026. In the face of rising competition from other well-established players and the prevailing business uncertainties, the Apple deal will likely provide a substantial competitive advantage for Qualcomm.
In the fiscal fourth quarter, QCOM inked an agreement with Manchester United for an undisclosed amount for being the official shirt sponsor from next season. The premier English Premier League soccer club boasts a strong fan following worldwide. The three-year sponsorship deal will be effective from the start of the 2024-25 season and boost Qualcomm’s brand exposure globally. This is likely to be reflected in the upcoming quarterly results.
Earnings Whispers
Our proven model predicts a likely earnings beat for Qualcomm for the fiscal fourth quarter. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is precisely the case here.
Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +5.37%. The Most Accurate Estimate is pegged at $2.02, while the Zacks Consensus Estimate stands at $1.92. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
QUALCOMM Incorporated Price and EPS Surprise
QUALCOMM Incorporated price-eps-surprise | QUALCOMM Incorporated Quote
Zacks Rank: Qualcomm currently has a Zacks Rank #3.
Other Stocks to Consider
Here are some other companies you may want to consider, as our model shows that these, too, have the right combination of elements to post an earnings beat this season:
NVIDIA Corporation (NVDA - Free Report) is set to release quarterly numbers on Nov 21. It has an Earnings ESP of +6.93% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Motorola Solutions, Inc. (MSI - Free Report) has an Earnings ESP of +0.47% and carries a Zacks Rank of 3. The company is set to report quarterly numbers on Nov 2.
Qorvo Inc. (QRVO - Free Report) has an Earnings ESP of +4.46% and sports a Zacks Rank of 1. The company is set to report quarterly numbers on Nov 1.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.