Financial data indicates that Qualcomm (QCOM, Financial) and Arm (ARM), heavily reliant on the smartphone industry, are witnessing a gradual recovery. Both companies have observed a resurgence in demand for high-end smartphones, though the overall market remains fragile. Qualcomm's favorable sales forecast fueled a late trading stock price increase, whereas Arm's cautious outlook dampened its share price.
Consumer expenditure on premium smartphones, particularly in China, exceeded expectations and bolstered the revenue and profits of both companies. Expansion into new areas, especially in computing and AI spending, has also contributed positively. Qualcomm has made strides in the automotive chip sector.
Qualcomm and Arm, once long-time partners, are now competitors acknowledged as leaders within the smartphone sector. Qualcomm remains the top vendor for smartphone processors, while Arm supplies much of the industry's foundational technology.
Both firms have benefited from the shift towards premium phones. Although overall shipments only grew by 4%, Arm's revenue from smartphones increased by 40%. Meanwhile, Qualcomm's market share in China has been expanding, highlighted by a 40% boost in Android phone sales in the region this year.
Qualcomm predicts a modest 5% or less growth in overall smartphone sales next year, indicating a lack of significant recovery as consumers upgrade less frequently. These dynamics were discussed during overlapping quarterly earnings calls, with both companies embroiled in ongoing legal disputes. Last month, Arm sought to terminate a license agreement allowing Qualcomm to use its intellectual property, following a 2022 lawsuit alleging breach and trademark infringement.
On Wednesday, Arm projected December quarter revenue between $920 million and $970 million, with mid-range estimates falling short of analyst predictions. Conversely, Qualcomm anticipates current quarter sales between $10.5 billion and $11.3 billion against an average analyst forecast of $10.5 billion. Excluding certain items, earnings are expected at $3.05 per share, surpassing Wall Street estimates.
Qualcomm's automotive sector remains a standout, with automotive chip business revenue growing 55% in fiscal year 2024, despite an industry slowdown affecting other chipmakers. CEO Cristiano Amon highlighted that new model launches are driving this growth, showcasing a shift in market share.
