Qualcomm Record Earnings Surpass Expectations
11/8/2012 by: Anshel Sag
Qualcomm [NASDAQ:QCOM] yesterday announced their earnings for the calendar 3Q 2012 and the company's fiscal 4Q 2012. The company reported record revenues of $4.87B and record non-GAAP EPS of $0.89. This amounted to a year over year increase in revenue of 18% and an increase of net income of 11%. Compared to fiscal 3Q 2012, revenue was up a little over $200M and net income was up $64M from $1.207B to $1.271B. Qualcomm's guidance for this past quarter was revenues of $4.45 to $4.85B and non-GAAP EPS of $0.78 to $0.84. This represents Qualcomm beating all of their previous estimates, which explains why the stock rallied nearly 8% in after hours resulting in the stock being up $2.55 or 4.39% in regular trading.
Qualcomm also reported MSM shipments of 141 million, hitting the top end of their estimated range of 134M-142M. This achievement is mainly due to increasing demand and the fact that Qualcomm has significantly improved their 28nm capacity. Without the added 28nm capacity at places like Globalfoundries, Qualcomm shipments and revenues would likely continue to be constrained by a lack of global 28nm capacity.
As a result of Qualcomm's continued double digit quarter over quarter growth for many consecutive quarters, Qualcomm has been able to grow from a $10.9B company in 2010 to a $19.1B company in 2012. In the span of 2 years, Qualcomm has been able to nearly double their revenue. This is without a doubt a herculean task for any company, especially a company that is already pulling in $10B in revenues. In addition to that, Qualcomm has taken themselves from being a company that takes in $1.6B in net income per year (2009) to a company that takes in $6.1B of net income per year (2012). Admittedly, this is accomplished with much higher revenues, but doubling revenue and then nearly quadrupling profit is also quite an impressive task. Another reason for so much growth is the consistent double digit growth of Qualcomm's licensing business of both 3G and 4G technologies to hundreds of licensees.
Taking all of this into consideration, Qualcomm grew their revenues year over year by 28% and their non-GAAP EPS 16% over the previous year. This was also possible due to an increase of MSM chip shipments of 22% from the previous year. These figures also placed Qualcomm in the higher end of their guidance for FY2012 and in some cases beating their guidance as well.
Qualcomm's guidance for 2013 indicates that Qualcomm expects to have a very strong calendar 4Q 2012 with revenues of $5.6-6.1B being forecasted and non-GAAP EPS of $1.08-$1.16b expected. This is in contrast to the same period a year ago reporting $4.86B in revenues and a non-GAAP EPS of $0.97. The difference may be due in part to the fact that Qualcomm expects to ship between 168M and 178M chips compared to 156M in the period a year ago.
Part of the large increase in EPS is likely due to the fact that more devices that have come out late last quarter will be shipping in volume to customers in the current quarter. These devices are important because they carry Qualcomm's most advanced (and expensive) SoC, the APQ8064 which features four Krait CPU cores and an Adreno 320 GPU. This is Qualcomm's most powerful SoC, ever, as we saw at their press day and have experienced with our LG Optimus G. Qualcomm's APQ8064 is also inside of Google's new Nexus 4 flagship phone, which is already getting a lot of good reviews and will likely sell well across the world. It may end up being the best selling Android phone in the quarter or even for the next year, partially due to its incredibly low $300 off-contract price.
Qualcomm is also the only SoC of choice in Windows Phone 8 which will also ramp in the calendar 4Q 2012/ fiscal 1Q 2012. As if this weren't enough, Qualcomm is also found in some Windows 8 tablets with WinRT. We actually do not see this being as big of an influence on Qualcomm's earnings as others may believe, but we do believe that extremely strong sales of high-end Android devices and Windows Phone will be the major driving forces for growth in calendar 4Q 2012/ fiscal 1Q 2013.
Right now, it looks like Qualcomm has very little competition from the likes of companies like Nvidia and Intel in the rapidly growing Android smartphone arena. We do believe, though, that once Nvidia refreshes their Tegra 3 with Tegra 4 featuring A15 ARM cores and current-gen graphics, Qualcomm may get a run for their money. But until then, they will continue to compete with themselves and somewhat with Samsung. After all, most Samsung phones shipping in the US right now ship with Qualcomm chips in them anyways. The future for Qualcomm in the short term is bright, but in this business you never know when someone can come out of the blue.
Qualcomm, Snapdragon, Snapdragon S4, Snapdragon S4 Pro, APQ8064, Nexus 4, Optimus G, LG, LG Optimus G, Nvidia, Samsung, 28nm, Shipments, MSM
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