Wireless chipmaker Qualcomm (NASDAQ:QCOM) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 17.5% year on year to $11.67 billion. On top of that, next quarter’s revenue guidance ($10.75 billion at the midpoint) was surprisingly good and 4.2% above what analysts were expecting. Its non-GAAP profit of $3.41 per share was 14.9% above analysts’ consensus estimates.
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Qualcomm (QCOM) Q4 CY2024 Highlights:
- Revenue: $11.67 billion vs analyst estimates of $10.94 billion (17.5% year-on-year growth, 6.7% beat)
- Adjusted EPS: $3.41 vs analyst estimates of $2.97 (14.9% beat)
- Adjusted EBITDA: $4.75 billion vs analyst estimates of $4.29 billion (40.7% margin, 10.6% beat)
- Revenue Guidance for Q1 CY2025 is $10.75 billion at the midpoint, above analyst estimates of $10.32 billion
- Adjusted EPS guidance for Q1 CY2025 is $2.80 at the midpoint, above analyst estimates of $2.71
- Operating Margin: 30.5%, in line with the same quarter last year
- Free Cash Flow Margin: 36.9%, up from 27.5% in the same quarter last year
- Inventory Days Outstanding: 111, down from 146 in the previous quarter
- Market Capitalization: $191.3 billion
Company Overview
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Processors and Graphics Chips
The biggest demand drivers for processors (CPUs) and graphics chips at the moment are secular trends related to 5G and Internet of Things, autonomous driving, and high performance computing in the data center space, specifically around AI and machine learning. Like all semiconductor companies, digital chip makers exhibit a degree of cyclicality, driven by supply and demand imbalances and exposure to PC and Smartphone product cycles.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Qualcomm grew its sales at a solid 10.7% compounded annual growth rate. Its growth beat the average semiconductor company and shows its offerings resonate with customers, a helpful starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.
We at StockStory place the most emphasis on long-term growth, but within semiconductors, a half-decade historical view may miss new demand cycles or industry trends like AI. Qualcomm’s recent history marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.7% over the last two years. 
This quarter, Qualcomm reported year-on-year revenue growth of 17.5%, and its $11.67 billion of revenue exceeded Wall Street’s estimates by 6.7%. Company management is currently guiding for a 14.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4.8% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below the sector average. At least the company is tracking well in other measures of financial health.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business’ capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Qualcomm’s DIO came in at 111, which is one day below its five-year average. At the moment, these numbers show no indication of an unusual inventory buildup.
Key Takeaways from Qualcomm’s Q4 Results
We were impressed by Qualcomm’s strong improvement in inventory levels. We were also excited it beat analysts' estimates across all key metrics. Zooming out, we think this was a good quarter, and the outlook was encouraging. The stock traded up 1.6% to $178.90 immediately after reporting.
Qualcomm put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
