Qualcomm Q1 Preview: MSM Business In Focus

by Trefis Team
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Qualcomm (NYSE:QCOM) is expected to publish its Q1 FY’19 results on January 30, reporting on a quarter that is likely to see the company’s financials reflect some pain from its souring relationship with Apple. While the iPhone marker has been withholding licensing fee payments to Qualcomm for multiple quarters now, it also recently dropped Qualcomm’s chips from its latest iPhones. The company has guided for revenues of $4.5 billion to $5.3 billion for the quarter, with its adjusted EPS projected to come in between $1.05 and $1.15 per share. Below, we take a look at some of the key trends to watch when the company reports earnings on Wednesday.

View our interactive dashboard analysis on Qualcomm’s Qualcomm’s expected performance over 2019 to see our forecasts and valuation estimate.

Qualcomm Mobile Station Modem Business In Focus 

While Qualcomm shipped 232 million chips over Q4 FY’18, marking a 5% year-over-year increase, it provided a tough outlook for Q1 FY’19, with chipset shipments projected to come in at 175 to 195 million units, down from 237 million in the year-ago quarter. This is driven primarily by the loss of business from Apple, which has excluded Qualcomm’s modems from its latest iPhone XS, XS Max and XR handsets, in favor of components from Intel. While Qualcomm is gaining traction in China, where OEMs such as Xiaomi and One Plus are opting for more premium chips, it’s unlikely that it will compensate for the loss of business from Apple.

Updates On RF Front End Business

Qualcomm is also ramping up sales of its RF front-end business, which the company indicated almost doubled year-over-year during FY’18, driven by its deal with TDK as well as more orders from key OEMs. RF front-end includes the various components that come between the antenna and the modem system of a wireless device. Qualcomm expects to gain an edge in this area, as the market transitions to 5G, which will require tighter coupling between the modem, transceiver, RFFE, and antennas. Qualcomm has indicated that it expects to grow RF front-end revenues by double-digit percentages in fiscal 2019. We will be looking for updates from the company on this front.

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