Wireless chipmaker Qualcomm (NASDAQ:QCOM) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 1.2% year on year to $9.39 billion. The company expects next quarter's revenue to be around $9.2 billion, coming in 1.6% above analysts' estimates. It made a non-GAAP profit of $2.44 per share, improving from its profit of $2.15 per share in the same quarter last year.
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Qualcomm (QCOM) Q1 CY2024 Highlights:
- Revenue: $9.39 billion vs analyst estimates of $9.35 billion (small beat)
- EPS (non-GAAP): $2.44 vs analyst estimates of $2.32 (5.3% beat)
- Revenue Guidance for Q2 CY2024 is $9.2 billion at the midpoint, above analyst estimates of $9.05 billion
- Gross Margin (GAAP): 56.3%, up from 55.2% in the same quarter last year
- Inventory Days Outstanding: 135, up from 132 in the previous quarter
- Free Cash Flow of $3.37 billion, up 23.2% from the previous quarter
- Market Capitalization: $185.2 billion
Processors and Graphics ChipsThe biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth Qualcomm's revenue growth over the last three years has been mediocre, averaging 14% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $9.28 billion in the same quarter last year to $9.39 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
This was a sluggish quarter for the company as its revenue grew 1.2% year on year, in line with analysts' estimates. Despite these results, we believe Qualcomm is still in the early days of an upcycle, as this was just the second consecutive quarter of growth and a typical upcycle tends to last 8-10 quarters.
Qualcomm's management team believes its revenue growth will accelerate, guiding to 8.9% year-on-year growth next quarter. Wall Street expects the company to grow its revenue by 9.4% over the next 12 months.
Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Qualcomm's DIO came in at 135, which is 33 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.
Key Takeaways from Qualcomm's Q1 ResultsWe enjoyed seeing Qualcomm exceed analysts' EPS expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. On the other hand, its inventory levels increased. Overall, this quarter's results seemed fairly positive and shareholders should feel optimistic. The stock is up 5.3% after reporting and currently trades at $172.97 per share.