Growing Device Shipments Drive Revenue and Earnings Higher for Qualcomm

By Markets Fool.com

Image source: Qualcomm.

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Mobile chip giant Qualcomm (NASDAQ: QCOM) reported its fiscal fourth-quarter results after the market closed on Nov. 2. The company produced strong revenue and earnings growth, driven by an increase in chipset shipments and new licensing deals in China. Guidance wasn't quite as positive, with the company expecting a decline in chip shipments during the first quarter. Here's what investors need to know about Qualcomm's fourth-quarter results.

Qualcomm results: The raw numbers

Metric

Q4 2016

Q4 2015

Growth (YOY)

Revenue

$6.18 billion

$5.46 billion

13.2%

Net income

$1.60 billion

$1.06 billion

50.9%

Non-GAAP earnings per share (EPS)

$1.28

$0.91

40.7%

MSM chip shipments

211 million

203 million

3.9%

YOY = year over year. Data source: Qualcomm Q4 2016 report.

What happened with Qualcomm this quarter?

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Both the chip segment and the licensing segment report revenue and operating income growth.

  • The Qualcomm CDMA Technologies (QCT) segment, which is Qualcomm's semiconductor business, generated $4.12 billion of revenue, up 14% year over year. Segment operating income soared 145% to $687 million.
  • The Qualcomm Technology Licensing (QTL) segment generated revenue of $1.89 billion, up 6% year over year. Segment operating income jumped 7% to $1.58 billion.
  • Total reported sales of licensed devices surged 27% year over year to $74.2 billion. A 45% rise in the number of unit shipments more than offset a 12% decline in average selling price.
  • Qualcomm pointed to new license agreements in China as a key driver of its fourth-quarter results.
  • In late October, Qualcomm announced that it planned to acquire NXP Semiconductors for $38 billion. If approved, the deal will make Qualcomm the leading supplier of automotive semiconductors.

Qualcomm provided guidance for its fiscal first quarter.

  • Revenue expected in the range of $5.7 billion to $6.5 billion, representing a decrease of 1% to an increase of 13% year over year.
  • GAAP EPS expected between $0.91 and $1.01, compared to $0.99 in the prior-year period.
  • Non-GAAP EPS expected between $1.12 and $1.22, compared to $0.97 in the prior-year period.
  • MSM ship shipments expected between 205 million and 225 million, a decline of 7%-15%.
  • Total reported licensed device sales expected in the range of $58 billion to $66 billion, compared to $60.6 billion in the prior-year period.

What management had to say

Qualcomm CEO Steve Mollenkopf summed up the quarter and the company's guidance:

Our fiscal fourth quarter EPS was above the high end of our expectations, reflecting new license agreements in China and strong chipset shipments. We are forecasting continued growth of global 3G/4G device shipments in calendar year 2017, led by growing demand in emerging regions. We are well positioned to extend our mobile technology leadership and footprint into attractive growth opportunities, accelerated by our recently announced agreement to acquire NXP.

Looking forward

While smartphone market growth has slowed recently, Qualcomm expects global shipments of 3G/4G devices to increase in 2017, driven by demand in emerging markets. Beyond mobile devices, Qualcomm's planned acquisition of NXP makes the automotive semiconductor business a major growth opportunity for the company.

Qualcomm's outlook for the first quarter wasn't quite as positive as its fourth-quarter results, with declines in MSM chip shipments and GAAP earnings expected. But both revenue and non-GAAP earnings are expected to grow, with the latter expected to increase by a double-digit percentage.

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Timothy Green has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.