Qualcomm Inc.’s (NASDAQ:QCOM) shares moved down over 1.62% in pre trading session on Thursday as the Akash Palkhiwala, the company’s finance head, is debating how much to dedicate to the company’s growing automotive-chip industry as consumer demand for smartphones, a significant revenue source for the company, continues to slow.
In recent quarters, the San Diego-based firm (best known for its smartphone processors) has worked to diversify its business by selling chips for automobiles and internet-connected devices. The approach was implemented by the CEO.
Cristiano Amon projected in November that customer demand for cellphones would plummet in recent months due to rising inflation and financial uncertainty. In July, Qualcomm reduced its forecast for smartphone shipments this year and issued a cautious outlook for gross sales.
Late last week, the company stated that it expected its automotive revenue to hit $4 billion in 2026 and $9 billion in 2031, up from $3.5 billion and $8 billion, respectively, in November. The company predicted $1.3 billion in vehicle income for the fiscal year ending Sunday, up 33% from the previous year.
Automotive revenue, which the company began reporting in 2020, accounts for a tiny but growing portion of total revenue, accounting for 3.2% for the quarter ended June 26, compared to 56.2% for handsets. Qualcomm announced $10.9 billion in earnings for the fiscal quarter ending June 26, up 35.7% from the previous year. Its web sales were $3.73 billion for the quarter, an increase of 84% over the prior-year period.
Mr. Palkhiwala mentioned, including he’s concerned in these selections, “The challenge for us in the automotive business is, how do we get the right mix of where we invest and how much do we invest.
In April, Qualcomm doubled down on its automotive chip efforts by purchasing Swedish auto-technology business Veoneer Inc. for $4.5 billion, together with its autonomous driving software division Arriver. The company declined to say how much it has invested or expects to invest in the automotive industry in general, but it did say it plans to spend roughly $200 million per year on Arriver.
