Introduction
Qualcomm (NASDAQ: QCOM), a prominent wireless chipmaker, recently released its financial results for the Q4 of fiscal year 2023. The company’s performance not only beat Wall Street analysts’ expectations but also provided an optimistic outlook for the upcoming quarter.
In this blog post, we will delve into Qualcomm’s Q4 highlights and examine the factors influencing the stock.
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Qualcomm Q4 FY2023 Highlights
Revenue: Qualcomm reported revenue of $8.63 billion for the fourth quarter of 2023, surpassing analyst estimates of $8.52 billion. This represented a 1.31% beat, even though revenue was down 24.3% compared to the same period in the previous year.
Earnings Per Share (EPS): On a non-GAAP basis, Qualcomm recorded an EPS of $2.02, which exceeded analyst estimates of $1.91 by 5.93%. However, this figure was lower than the previous year’s EPS of $2.54.
Revenue Guidance for Q1 2024: Qualcomm’s forward-looking guidance for the first quarter of 2024 was particularly encouraging. The midpoint estimate for revenue was $9.5 billion, which exceeded analysts’ estimates of $9.19 billion.
Free Cash Flow: Qualcomm’s free cash flow for the quarter was -$298 million, a notable decrease from the previous quarter’s $2.35 billion.
Inventory Days Outstanding: Qualcomm’s inventory days outstanding (DIO) came in at 151, which was 56 days above its five-year average. These numbers indicate that inventory levels were higher than usual during this quarter.
Gross Margin: The gross margin for the quarter was 55%, a decline from 57.3% in the same quarter the previous year.
| Metric | Q4 FY2023 Value | Analyst Estimates | Change vs Analyst Estimates |
|---|---|---|---|
| Revenue | $8.63 billion | $8.52 billion | +1.31% |
| Earnings Per Share (non-GAAP) | $2.02 | $1.91 | +5.93% |
| Revenue Guidance (Q1 2024) | $9.5 billion (midpoint) | $9.19 billion | +3.36% |
| Free Cash Flow | -$298 million | N/A | N/A |
| Inventory Days Outstanding | 151 days | 95 days (5-year average) | +56 days |
| Gross Margin (GAAP) | 55% | 57.3% (previous year) | -2.3% |
Read More: Qualcomm Challenges Intel’s Dominance in Desktop CPU Market
Factors Affecting Qualcomm’s Performance
Market Position: Qualcomm has been at the forefront of developing cellular connectivity standards for over four decades. The company is renowned for its innovative wireless technology chips used in smartphones, automobiles, and Internet of Things (IoT) devices.
Demand Drivers: The demand for processors (CPUs) and graphics chips is driven by several secular trends, including the rollout of 5G, IoT, autonomous driving, and high-performance computing, particularly in AI and machine learning applications.
Revenue Growth: While Qualcomm has demonstrated strong revenue growth over the past three years, the recent quarter saw a significant decline in revenue, indicative of the cyclicality of the semiconductor industry.
Read More: Hotel Administration to Billion Dollar Company: Story of Qualcomm
Investment Considerations
Given the Q4 FY2023 results and the broader context, here are some key investment considerations for Qualcomm:
Positive Earnings Beat: Qualcomm exceeded revenue, adjusted operating profit, and EPS expectations for the quarter.
Additionally, the company provided an optimistic outlook for the next quarter, which contrasts with weaker guidance from some of its semiconductor peers.
Cyclicality: Semiconductor companies, including Qualcomm, are subject to cyclical fluctuations in revenue.
Long-term investors should be prepared for periods of both high growth and revenue contractions.
Inventory Levels: Qualcomm’s elevated inventory days outstanding (DIO) may be a sign of weaker demand, which could lead to downsizing production if the trend continues.
Market Position: With a market capitalization of $122 billion, significant cash reserves, and positive free cash flow, Qualcomm is well-positioned for future growth and investment.
Read more: Bankruptcy to Trillion-Dollar Company: Story of Nvidia
Conclusion
While Qualcomm’s Q4 FY2023 results showcased both strengths and challenges, the company remains a prominent player in the semiconductor industry.
The positive earnings beat and optimistic guidance for the next quarter indicate that Qualcomm is on a promising trajectory.
However, investors should be mindful of the cyclicality of the semiconductor market and the potential implications of elevated inventory levels.
