Qualcomm FY2021 Q1 Earnings:
Revenue $8.24B, up 62% year over year;
GAAP gross margin 57.6%, down 0.8 ppt year over year;
Net income $2.46B, up 165% year over year;
By segment, driven by the iPhone 12 supercycle, Qualcomm's QCT handset and RF front-end businesses grew 79% and 157% year over year respectively, delivering a record-breaking scorecard; naturally, the QTL licensing business also benefited.
Earnings this bright, why did the stock plunge?
Frankly, after seeing the results this morning, it was unclear why the stock fell so much after hours. Was guidance disappointing?
Or was it the Weibo chatter about Samsung capacity constraints? Neither makes sense, so I dug into the call transcript.
Earnings Call Highlights:
Q: Can you supply Honor, even Huawei, in the future? A: Next quarter's guidance does not include shipments to Honor or Huawei. Even if we can't supply Huawei, we can win orders for the 16% share Huawei loses.
Q: How much does the industry-wide chip shortage affect Qualcomm? A: The shortage affects the entire semiconductor industry, mainly due to the V-shaped rebound and accelerated digital transformation. We have an opportunity to capture the 16% share freed up by HiSilicon's collapse; our premium-tier share is rising in FY2021, and we believe the industry shortage will normalize in the second half.
Q: RF front-end growth is so fast, is it sustainable? A: We are in the 5G explosion era; our 5G portfolio is comprehensive, and we believe growth will sustain as 5G penetrates. Q: Why such a big drop in next quarter QCT gross margin (from 29% to 23%/25%)? A: The company typically concentrates OpEx in the next quarter, and we've recently seen margin trends diverge from last quarter, so we lowered the margin guide.
Q: Apple contributed so much this quarter; Android looks like it's declining. How do you view the Android market? A: Mainly seasonality. Our Android premium share is rising steadily; we see big growth opportunities in the "post-Huawei era."
Q: What opportunities does 5G penetration bring for QTL? A: The more expensive the 5G phone consumers buy, the more QTL earns, but we also want low-end 5G phones to drive penetration. So we're not making overly optimistic QTL predictions.
Q：
Skeptical about the 16% share freed up by HiSilicon's collapse—what if Huawei has ample inventory?
A：
We've been tracking industry dynamics closely and done extensive analysis. Whether Apple, Samsung, Xiaomi, Oppo/Vivo, or Honor wins in the future, I win.
Nuvia acquisition opportunity? PC opportunity?
Nuvia helps us redesign Snapdragon chips. For PC, we have experience bridging Windows and Chrome.
5nm chip shortage? Is it because of Samsung?
The chip shortage is an industry-wide issue, mainly due to the V-shaped rebound and accelerated digital transformation. 5nm yields are normal and within our expectations; mature nodes are also severely constrained. We expect the entire semiconductor industry to resolve supply issues in the second half.
(Call content for reference only; please refer to official recording for accuracy)
Overall, Qualcomm's quarter was very strong but also heavily Apple-dependent. The plunge is more sentiment-driven, a mispricing.
But I've long worried about Qualcomm's future: Apple will eventually develop its own modem and RF front-end chips. When that day comes, what does Qualcomm do? Will Nuvia become Qualcomm's new technical crutch? Worth deep thought.