Qualcomm Inc 3Q22 preview: chip demand remains strong; business growth in automotive and Internet of Things is remarkable

Thanks to a sharp rise in 5G penetration in 2021 and strong modem and RF front-end design wins, fiscal 2021 sales grew nearly 43% for Qualcomm. Morningstar expects fiscal 2022 sales to grow about 26%, as broad- based chip demand remains strong, particularly in non-handset segments. Morningstar assumes QCT revenue grows at a 10% CAGR over the next five years, coupled with modest growth in QTL. It also assumes a top-line CAGR for all of Qualcomm of 8% through fiscal 2026. Driving QCT growth is the 5G ramp, increased RF front-end content, as well as adjacencies such as automotive and Internet of Things for Qualcomm’s Snapdragon chipsets among other products.

Qualcomm is the clear market leader in wireless chips, with a leading market share position in 5G chipsets and relationships with every prominent smartphone maker. It has leveraged this expertise into the automotive and Internet of Things end markets.

The firm has done a solid job of controlling operating expenses in recent years, and we expect operating margins for Qualcomm stabilizing near 30%. Furthermore, Qualcomm has strengthened its offerings at the flagship smartphone level while also branching off into new growth vectors in automotive and Internet of Things that require low-power and high-performance chips as well as low-latency and speedy connectivity, which is right in Qualcomm’s wheelhouse.

Bloomberg's consensus estimate isrevenue of $10.865B, +35.9%, adj. net income of $3.270B, +48.6%,and adj. EPS of $2.862, +49.0%.