Qualcomm gives upbeat forecast, though tax hit takes a toll

Qualcomm Inc., the largest maker of smartphone processors, gave a bullish revenue forecast for the current period, though a US tax change took a toll on profit last quarter.

Sales will be roughly $12.2 billion in the fiscal first quarter, which runs through December, the company said in a statement Wednesday. Profit will be about $3.40 a share, minus certain items. Analysts had estimated revenue of $11.6 billion and earnings of $3.26 a share.

The outlook suggests that demand remains strong in the high-end Android phone market, which generates much of Qualcomm’s revenue. At the same time, Chief Executive Officer Cristiano Amon is working to transform the company into a more diversified seller of chips for cars, personal computers and data centres. And that effort is showing signs of paying off.

But the company’s profit suffered last quarter from a US tax change. Qualcomm took a $5.7 billion writedown in the period, which contributed to a $3.12 billion net loss. Other tech companies have recently reported hefty one-time charges from tax adjustments, including Meta Platforms Inc.

The change will pay off in the long run, Qualcomm said. The company will use the alternative minimum tax, with a stable rate of 13% to 14%. The rate would have gone up without the shift, Qualcomm said.

Qualcomm shares fell about 3% in extended trading following the announcement. The stock had rallied in recent weeks, which may have made it harder for the report to impress investors.

“People were expecting some bigger upside,” Jay Goldberg, an analyst at Seaport Global Securities, said on Bloomberg Television.

Profit was $3 a share when excluding some items in the fourth quarter, which ended Sept. 28. Analysts had estimated $2.88 a share. Revenue rose 10% to $11.3 billion, topping the $10.8 billion projection.

Phone-related revenue climbed to $7 billion in the period. That beat an average analyst estimate of $6.65 billion. Connected devices provided $1.81 billion of sales, with the automotive market contributing $1.05 billion.

At the end of October, Qualcomm announced a new line of artificial intelligence chips slated to challenge Nvidia Corp.’s market dominance in data centres. The first shipment is expected next year, and the initial customer will be Humain, the AI startup backed by the government of Saudi Arabia.

The San Diego-based chipmaker is facing increasing competition in the smartphone market, especially as Apple Inc. transitions away from using its modem components. That company is switching to an in-house design for modems, which connect phones to cellular networks.

Qualcomm may see some relief on the geopolitical front, though. A recent trade détente struck between US President Trump and Chinese President Xi Jinping included agreements to terminate antitrust investigations into the company by the Asian nation.

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