Phone chip sales increase by 12% as Qualcomm surpasses estimates.

• The smartphone processors and modems business of Qualcomm experienced a 12% growth annually.
• The company's IoT and automotive businesses also beat Wall Street expectations.

Wall Street expectations were exceeded by the company's reported fiscal third-quarter earnings, particularly in terms of sales, and strong guidance was provided for the current quarter.

Qualcomm stock rose over 4% in extended trading.

In comparison to LSEG consensus estimates, Qualcomm's quarterly earnings for the period ending in June 23 were higher.

• Earnings per share: $2.33, adjusted versus $2.25 expected
• Revenue: $9.39 billion, adjusted, versus $9.22 billion expected

In the current quarter, net income was $2.13 billion, which amounts to $1.88 per share, in contrast to the $1.8 billion, or $1.60 per share, recorded in the previous year.

Qualcomm predicted sales of between $9.5 billion and $10.3 billion in the current quarter, lower than Wall Street's expectations of $9.71 billion. Analysts were looking for earnings guidance of $2.45, but the company forecast between $2.38 and $2.58.

Qualcomm's primary source of revenue is processors and modems for smartphones, which it refers to as its handsets business. Typically, the summer months represent a slower period in the smartphone industry's annual cycle, with new models being launched in the fall.

The revenue from handset sales increased by 12% year-over-year to $5.9 billion, in accordance with analyst predictions from StreetAccount. This indicates that the decline in smartphone sales over the past two years is subsiding. Qualcomm is positioning its latest Snapdragon chips as essential for "AI smartphones," such as Samsung's recent models, which can execute some generative AI tasks, like generating images.

Qualcomm sees placing more software and semiconductors into cars as one of its strongest opportunities for growth and diversification, despite automotive chips remaining small for the company. Automotive revenues rose 87% on an annual basis to $811 million, exceeding analysts' expectations of $641.7 million.

The company offers chips for low-cost devices, Meta's Quest headsets, and PC chips for Windows laptops, generating revenues through its "Internet of Things" business.

Qualcomm CEO Cristiano Amon marked the Snapdragon X launch as a "milestone" in the company's efforts to diversify, despite a 8% decline in IoT revenue to $1.4 billion on an annual basis, which surpassed StreetAccount expectations of $641.7 million.

The chip business of the company, which includes three hardware lines, reported $8.1 billion in sales, up 12% year-over-year.

Qualcomm generates revenue through licensing fees from companies that incorporate 5G or other cellular technologies into their products, which is referred to as QTL sales. Despite an increase in licensing revenue, it only grew by 3% annually to $1.3 billion.

During the quarter, Qualcomm disclosed that it paid out $949 million in dividends and bought back 7 million shares of stock for $1.3 billion.