Qualcomm beats estimates and phone chip sales are up 12%

Qualcomm reported fiscal third-quarter earnings on Wednesday that beat Wall Street expectations, particularly for sales, and provided strong guidance for the current quarter.

Qualcomm stock was flat in extended trading after initially rising 7% at one point.

Here's how Qualcomm did versus LSEG consensus estimates for the quarter ending in June 23:

Net income during the quarter was $2.13 billion, or $1.88 per share, versus $1.8 billion, or $1.60 per share in the year-ago period.

Qualcomm said it expected between $9.5 billion and $10.3 billion in sales in the current quarter, compared to Wall Street expectations of $9.71 billion. Analysts were looking for earnings guidance of $2.45, versus the company's forecast of between $2.38 and $2.58.

Qualcomm's biggest and most important business is processors and modems for smartphones, which it calls its handsets business. The summer months are traditionally a slower part of the annual cycle for smartphones, because most new models launch in the fall.

Handset sales rose 12% on a year-over-year basis to $5.9 billion in revenue, in line with analyst estimates from StreetAccount, which suggests that a deep slump in smartphone sales over the past two years is abating.

Qualcomm is also framing its most advanced Snapdragon chips as necessary for "AI smartphones," such as recent Samsung models, which can run some generative AI tasks like creating images.

"AI has expanded the size of the premium tier," Qualcomm CEO Cristiano Amon said on the earnings call. "So even in a market which it's kind of flattish to low single digits in growth, the premium tier is actually growing faster and we've seen that."

Automotive chips remains small for Qualcomm but the company sees placing more software and