Qualcomm earnings: A 5G chip on its shoulder
The big number: Even with the pandemic raging, Qualcomm managed to beat revenue expectations. It generated nearly $200 million more revenue than analysts expected for the quarter, suggesting that many people adapted to work-from-home life by buying a new gadget or two before lockdown took effect. And that's even with a roughly 21% shortfall in demand for new smartphones over what Qualcomm had expected in the quarter.
People are talking: "The sudden and dramatic change in how we're living today has impacted nearly every citizen on the planet," CEO Steve Mollenkopf said on a call with analysts. "The global stay-at-home orders highlight the critical role that broadband has played in facilitating remote workforce, distance learning, entertainment, telemedicine, communication and many other things."
Opportunities: Even with everyone cooped up at home — or maybe because of it — Qualcomm is relatively bullish about its prospects for chip sales in the coming months, especially for new devices like 5G phones. The company said that 5G network deployments were "progressing mostly as planned." "We continue to be well-positioned to drive the rapid adoption of 5G globally," it added.
Qualcomm said it expects an increase in chip revenue between 1% and 18% for the coming quarter. It released new chipsets earlier in the year, and given that so many people have shifted to working from home, it's perhaps unsurprising that people would want new laptops, tablets and phones with Wi-Fi and cellular modems in them. It would definitely help Qualcomm's bottom line the longer much of the West continues to be stuck at home.
Threats: Just like everyone else, Qualcomm is still expecting things to be rough next quarter. "Given the uncertainty caused by the COVID-19 pandemic, including the timing and pace of economic recovery, our guidance for the third quarter of fiscal 2020 is based on a planning assumption that there will be an approximate 30% reduction in handset shipments relative to our prior expectations," the company said.
Qualcomm's second-largest business, licensing out its patents and designs, looks like it's also going to be soft next quarter. The company is forecasting between $750 million and $950 million for its third fiscal quarter, a drop from the $1.1 billion the segment posted this quarter. With so many under quarantine, it's no surprise that R&D at other companies is likely to slow. The company said it expects a 42% drop in licensing revenue for the quarter when compared to the same period a year ago.
The power struggle: When it last reported earnings, Qualcomm estimated it would ship between 175 million and 225 million chips for 5G smartphones in 2020, out of about 1.75 billion to 1.85 billion total smartphone shipments overall. This time, Qualcomm hasn't changed its stance on its 5G estimate, but interestingly declined to provide specific guidance for a total smartphone shipment estimate. 5G is certainly the future of the telecom industry, but when it comes to sales, it's not really the present.
Correction: an earlier version of this story miscalculated the drop in Qualcomm's net income. This story was updated April 30, 2020.
Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.