All You Need to Know About Qualcomm’s Share Price

Qualcomm (NASDAQ: QCOM) is a leading multinational technology company that is behind some of the world’s most advanced wireless technologies and platforms. The company is best known for its patented technologies that are essential for connecting billions of mobile devices globally. Qualcomm has played a pivotal role in revolutionizing wireless communications from 3G to 4G and now 5G networks. Beyond mobile, the company is also focused on building technologies for emerging areas like automotive, IoT, AI and more.

As one of the prominent technology innovators globally, Qualcomm’s share price and market valuation has been closely tracked by investors. This blog takes a closer look at the key factors impacting Qualcomm’s share price over the years.

Qualcomm’s Business Model and Revenue Streams

To understand the major factors impacting Qualcomm’s share price, it’s important to first understand the company’s business model and revenue streams.

Qualcomm primarily makes money by licensing its patented wireless technologies and innovations to mobile device makers. This includes patents essential for cellular standards like 3G, 4G and 5G. The company charges device makers a patent licensing fee for using its intellectual property (IP) and patents in their devices. This patent licensing business accounts for a majority of Qualcomm’s pre-tax profits.

The company also designs and sells wireless chipsets and processors based on its technologies for mobile devices and other applications. This includes its popular Snapdragon application processors used in many Android smartphones. While chip sales account for a major chunk of Qualcomm’s revenues, the segment’s operating margins are much lower compared to the highly profitable licensing business.

Beyond this, Qualcomm also generates revenues via other businesses like IoT chips, RF front-end modules, automotive semiconductors and more. As the company expands beyond mobile, these emerging segments will become bigger revenue contributors.

Key Factors Impacting Share Price

Qualcomm’s licensing business and chipset sales have been the prime catalysts driving its growth and share price over the years. Here are some of the major factors that have impacted its valuation:

Global 3G/4G/5G Device Growth – As a leading technology innovator behind wireless standards, Qualcomm has benefitted tremendously from the global proliferation of 3G/4G/5G smartphones and devices. More device sales = higher patent licensing revenues.
Settlement of Major Legal Disputes – Qualcomm has been involved in high-stakes legal battles with regulators and major customers like Apple over the years. Settlement of these major disputes eliminated regulatory overhang and drove share price upside.
Loss of Major Customer Contracts – When Apple stopped using Qualcomm’s chips from 2018 to 2019 during their legal battle, it impacted revenues and share price. Regaining Apple contract was a big positive catalyst.
New Market Expansion – Qualcomm’s push into adjacent growth segments like automotive, IoT and networking has enhanced its long-term revenue prospects and supported share price.
Product Leadership – Qualcomm’s technology leadership in 5G and competitive edge in mobile chipsets has allowed it to command premium pricing and fueled share price strength.
Acquisitions and Strategic Deals – Acquisitions like NXP and other strategic partnerships have opened new expansion opportunities, though regulatory roadblocks have also caused uncertainties.
Supply Chain Challenges – Global chip shortages, COVID disruptions and other supply chain issues have posed recent headwinds impacting financial outlook and valuation multiples.

Conclusion

Qualcomm has come a long way since its founding in 1985 to become a global semiconductor and telecom giant today. The company’s ability to spearhead new wireless technology transitions from 3G to 5G has been the cornerstone of its success and share price outperformance over the decades. Despite facing turbulence in the form of legal disputes and loss of major customer contracts at times, Qualcomm has managed to maintain its leadership position with its wireless IP and innovations. Its push into adjacent growth areas also holds promise for diversifying revenues streams in the long run.