Qualcomm's sales and adjusted profit for the third quarter are expected to exceed Wall Street's expectations, driven by increased sales of more expensive chips with artificial intelligence features for Android smartphones.
The Chinese Android market, crucial for Qualcomm, has begun to recover after a slump in smartphone sales last year. Consumers are now shifting towards purchasing higher-priced devices that can support AI chatbots.
Qualcomm's sales to Chinese smartphone makers have increased by 40% in the first half of its fiscal year, indicating a recovery in that market.
"AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models," Chief Executive Cristiano Amon told analysts. "Users want to buy a more capable phone that can run AI."
Qualcomm forecast third-quarter sales and adjusted profit with midpoints of $9.2 billion and $2.25 per share, beating analyst estimates.
Qualcomm's forecast for the recovery in China's smartphone market recovery may not extend to Apple's iPhone.
Apple reports results later this week, and analysts expect its deepest quarterly revenue decline in over a year as it wrestles with competition in China.
While Qualcomm executives talked about signs of recovery among Android handset customers, wireless connectivity chipmaker Qorvo forecast quarterly results below Wall Street estimates, citing weak demand from the flagship smartphone market.
For Qualcomm's fiscal second quarter ended March 24, sales and adjusted profit were above analyst expectations.
Qualcomm is hoping to benefit from consumer demand to upgrade devices to run AI chatbots directly on the device.
In a challenge to Apple, Qualcomm plans to release a chip designed to power laptops starting this summer.
"Demand for all their products overall seems strong," said analyst Ben Bajarin. "The auto business is particularly interesting as they keep growing while others who compete there keep struggling.