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What Factors Will Affect Qualcomm’s 2019 Revenue?

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Fiscal 2019 growth drivers and deterrents

Previously, we learned that demand weakness in the smartphone market and a loss of orders from Apple (AAPL) had negatively affected Qualcomm’s (QCOM) fiscal 2019 first-quarter revenue.

However, these falls were partially offset by the company’s interim agreement with Huawei and strong demand in the IoT (Internet of Things) space. Qualcomm is a leader in 5G technology and is banking on this technology for future growth.

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On Qualcomm’s fiscal 2019 first-quarter earnings call, its CEO, Steve Mollenkopf, discussed the company’s future growth prospects as its 5G deployment ramps up later in 2019 and 2020. He stated that the company is working with over 20 operators worldwide for the use of its radio modems. He highlighted that the company’s 7 nm (nanometer) Snapdragon 855 system-on-chip has been adopted by over 100 manufacturers, including Samsung (SSNLF). The company is gaining share in the enterprise Wi-Fi market as the market transitions to Wi-Fi 6.

The strong adoption of Qualcomm’s products and increasing royalty payments could help the company report decent revenue in fiscal 2019.

Fiscal 2019 second-quarter revenue guidance

In the second quarter of fiscal 2019, Qualcomm expects its revenue to fall 7.7% YoY (year-over-year) to $4.8 billion at the midpoint, in line with analysts’ estimate of $4.8 billion. The 7.7% fall is better than the double-digit declines the company reported in the second quarters of fiscal 2018 and fiscal 2016. Its slightly better guidance shows that the move to 5G is helping it offset weak smartphone demand.

Qualcomm’s guidance has also eased investors’ fears about weak smartphone demand after several chip makers, including TSMC and Samsung, lowered their first-quarter guidances due to economic weakness in China.

Full-year 2019

On its fiscal 2019 first-quarter earnings call, Qualcomm’s CFO, George Davis, stated that the company expects 3G, 4G, and 5G device shipments to increase 5% YoY in 2019, with handset shipments increasing 1% and non-handset shipments increasing 27%.

In the handset market, Davis expects replacement rates to increase as consumers switch to 5G devices and demand picks back up in China. In the non-handset market, he expects demand to be driven by strong growth in the industrial IoT space.

Next, we’ll look at Qualcomm’s profitability.

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