By Arsheeya Bajwa
(Reuters) -Chipmaker Qualcomm (NASDAQ:QCOM) forecast fourth-quarter revenue above Wall Street estimates on Wednesday, betting on strong demand for high-end Android devices and the need for more chips in smartphones that are getting AI upgrades.
Shares of San Diego, California-based Qualcomm rose more than 5% in extended trading after it reported results, but pared gains to trade down 1.4% after the firm flagged a revenue hit from the U.S. revoking one of its export licenses for sanctioned Chinese telecom firm Huawei.
Tighter export curbs on sharing high-end chip technology with China and mounting Sino-U.S. trade tensions are hindering chipmakers from serving one of the largest markets for semiconductors.
"This change will impact our revenues in both the current quarter and the first quarter of fiscal 2025," CFO Akash Palkhiwala said on a post-earnings call, without detailing the impact.
Qualcomm will continue to negotiate with Huawei, said Alex Rogers, president of the company's licensing segment.
The company said early in May that it did not expect any chip revenue from Huawei beyond 2024, but was pursuing licensing negotiations with the Chinese firm.
The warning on trade curbs overshadowed Qualcomm's optimistic forecast. The addition of AI capabilities to smartphones has driven a resurgence in end-market demand, lifting orders for Qualcomm, after the industry slumped to its lowest level in years.
The chipmaker could benefit from higher sales of Apple (NASDAQ:AAPL) iPhones in China, for instance, where the world's most valuable company slashed iPhone prices to compete better against a resurgent Huawei.
"While the smartphone market end-demand has remained somewhat muted, Qualcomm is benefiting from the stronger share position in the premium-tier segment where end-market demand has been more resilient as (smartphone makers) have been slashing prices to spur demand," said Kinngai Chan, analyst at Summit Insights.
Analysts expect Apple to return to revenue growth when the iPhone maker reports results for its fiscal third quarter on Thursday.
Qualcomm forecast a fourth-quarter revenue range with a midpoint of $9.9 billion, compared with analysts' average estimate of $9.71 billion, according to LSEG data.
The addition of AI features have also led to smartphone providers using more of Qualcomm's chips in their devices to help support advanced processing requirements.
For its core business that sells chips to customers, the company forecast a fiscal fourth-quarter sales just above analyst estimates of $8.33 billion, according to Visible Alpha.
"We believe Apple and ARM-based PCs are driving Qualcomm's handset outlook. We think the premium tier smartphone market, which Qualcomm has more market share in, is faring better than the mainstream segment," Chan said.
Qualcomm may also benefit significantly from the rebounding personal computer market where its Arm-based processors used in Microsoft (NASDAQ:MSFT)'s latest AI PCs threaten Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD)'s longstanding stronghold over the industry.