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Wireless chipmaker Qualcomm (NASDAQ:QCOM) reported Q2 CY2024 results topping analysts' expectations, with revenue up 11.1% year on year to $9.39 billion. Guidance for next quarter's revenue was also optimistic at $9.9 billion at the midpoint, 2% above analysts' estimates. It made a non-GAAP profit of $2.33 per share, improving from its profit of $1.87 per share in the same quarter last year.
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Qualcomm (QCOM) Q2 CY2024 Highlights:
- Revenue: $9.39 billion vs analyst estimates of $9.22 billion (1.9% beat)
- Adjusted Operating Income: $3.02 billion vs analyst estimates of $2.95 billion (2.2% beat)
- EPS (non-GAAP): $2.33 vs analyst estimates of $2.26 (3.3% beat)
- Revenue Guidance for Q3 CY2024 is $9.9 billion at the midpoint, above analyst estimates of $9.70 billion
- EPS (non-GAAP) Guidance for Q3 CY2024 is $2.55 at the midpoint, above analyst estimates of $2.47
- Gross Margin (GAAP): 55.6%, in line with the same quarter last year
- Inventory Days Outstanding: 131, down from 135 in the previous quarter
- Free Cash Flow of $2.67 billion, down 20.9% from the previous quarter
- Market Capitalization: $186.3 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 GrowthQualcomm's revenue growth over the last three years has been unremarkable, averaging 9.6% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $8.45 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).
Qualcomm had an average quarter as its 11.1% year-on-year revenue growth beat analysts' estimates by 1.9%. This marks 3 straight quarters of growth, implying that Qualcomm is in the middle of its cycle, as a typical upcycle generally lasts 8-10 quarters.
Qualcomm's management team believes its revenue growth will accelerate, guiding to 14.7% year-on-year growth next quarter. Wall Street expects the company to grow its revenue by 10% 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 131, which is 26 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Qualcomm's Q2 ResultsIt was good to see Qualcomm beat analysts' EPS expectations this quarter. We were also glad next quarter's revenue guidance came in higher than Wall Street's estimates. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 6.3% to $192.17 immediately after reporting.