Qualcomm Gives Bullish Forecast After Phone Demand Perks Up

(Bloomberg) — Qualcomm Inc. (QCOM), the world’s biggest seller of smartphone processors, gave a strong revenue forecast for the current period, indicating that demand for phones is rebounding.

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Revenue in the quarter ending in September will be $9.5 billion to $10.3 billion, the company said in a statement Wednesday. Analysts had estimated $9.7 billion on average. The latest results also topped projections, helping send the shares up more than 6% in extended trading.

The outlook provides further evidence that the smartphone industry is emerging from a slump. Qualcomm is the largest maker of processors and radio chips that handle the main functions in the devices. That makes it a bellwether for one of the largest markets in electronics.

There’s growing optimism about a “sharp” uptick in global smartphone demand during the second half of the year, Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said in a note.

Qualcomm shares rose as high as $195.79 following the announcement. They had earlier closed at $180.95 in regular New York trading Wednesday, leaving them up 25% for the year.

In the third quarter, which ended June 23, profit was $2.33 a share, excluding some items. Revenue rose 11% to $9.39 billion. Analysts had estimated profit of $2.24 a share and sales of $9.21 billion.

Phone-related revenue rose 12% to $5.9 billion in the period. Automotive sales, meanwhile, surged 87% to $811 million in the quarter.

Fourth-quarter profit will be $2.45 to $2.65 a share, excluding certain items, Qualcomm said. That compares with a projection of $2.45 a share. The outlook outshined that of Arm Holdings Plc, another chip company closely tied to the phone industry. Its shares tumbled after Arm maintained a forecast that fell short of analysts’ estimates.

Phone makers have been helped by a spending recovery among Chinese consumers, and that’s translating into more orders for component makers like Qualcomm.

Under Chief Executive Officer Cristiano Amon, the San Diego-based company is pushing its products into personal computers and vehicles — an effort to reduce its reliance on phones. But the smartphone market still accounts for an outsized portion of its revenue.

Apple Inc., which reports earnings on Thursday, and Samsung Electronics Co., a maker of Android-based phones, are major phone customers. Apple’s iPhone relies on Qualcomm for connectivity chips, not the main processor, and the Cupertino, California-based company is attempting to develop its own radio components.

Another main driver of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks. Phone manufacturers pay these fees to Qualcomm whether or not they use its chips.

(Updates with analyst commentary in fourth paragraph.)