Qualcomm posted a better-than-expected set of Q4 FY'24 earnings and guided strong numbers for the holiday quarter. While revenue rose 9% year-over-year to $33.19 billion, earnings saw a considerable jump rising to $2.59 per share, up from $1.23 per share in the year-ago period. The smartphone market has picked up a bit this year following a post-Covid-19 lull and Qualcomm in particular is benefiting from a wave of launches of flagship smartphones by Chinese brands.
Note: Qualcomm's FY'24 ended on September 29, 2024.
Below are key drivers of Qualcomm's value that present opportunities for upside or downside to the current Trefis price estimate for Qualcomm:
For additional details, select a driver above or select a division from the interactive Trefis split for Qualcomm at the top of the page.
Qualcomm is a leading developer of Code Division Multiple Access (CDMA), a mobile device technology that facilitates communication between mobile devices and wireless towers.
Qualcomm makes money by selling chipsets for mobile devices, tablets, and femtocells. It sells chipsets to mobile device manufacturers such as Apple, Samsung, Nokia, and Motorola Mobility; and charges a royalty to mobile manufacturers on every device sold that incorporates its technology. The royalty charge is typically determined as a percentage of the selling price of the mobile device.
Qualcomm also licenses its CDMA technology to other chipset manufacturers that wish to sell CDMA-based chipsets to mobile manufacturers. In addition to licensing fees, the company also collects a royalty on every CDMA handset sold by the handset manufacturers. The company believes that competitive pricing and widespread availability of CDMA chipsets will encourage wider adoption of CDMA within mobile devices and will increase the size of its royalty base.
Qualcomm also licenses OFDMA (Orthogonal Frequency Division Multiple Access) protocols on which LTE/WiMax technology is based.
Our financial model is based on Qualcomm's fiscal year, which ends in September.
Qualcomm derives over 80% of its valuation from its mobile licensing and mobile chipset business.
The wireless industry is beginning to transition from 4G to 5G, and Qualcomm appears to have an early lead in this space, launching its X55 5G modem in early 2019. While the transition to this technology could benefit Qualcomm's licensing business, the chipset operations could stand to gain more in the interim, as 5G devices generally require a tighter coupling between the various components, potentially enabling Qualcomm to sell more related components including power amplifiers, filters, RF transceivers, and antenna tuners to OEMs.
Qualcomm charges royalties on each mobile device sold based on its technology, and one-time licensing fees from mobile chipset vendors to use its proprietary technology. Royalty rates have always been a debatable issue, and the tussle between mobile device vendors and Qualcomm has escalated, as is evident from an increasing number of lawsuits against Qualcomm.
The increasing availability of mobile high-speed data access creates opportunities for Qualcomm to provide mobile device software applications that utilize its technology. The company also developed Firethorn, which is a banking application that can be used on mobile phones for secure banking transactions.
