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Qualcomm (QCOM.O) shares jumped 10.3% before the bell on Thursday, as investors latched on to the chief executive's optimism about a recovery in its smartphone business and data center opportunities, eclipsing a weak third-quarter forecast.
CEO Cristiano Amon, in an interview with Reuters on Wednesday, said the company was confident that the smartphone market will start to rebound after its fiscal third quarter.
Qualcomm, one of the world's largest suppliers of smartphone chips, has increasingly sought to reduce its dependence on the cyclical handset market by expanding into high-growth segments such as data center processors and autonomous vehicle chips.
The diversification strategy follows heightened uncertainty from smartphone makers this year, as a sharp rise in memory chip prices has driven up the cost of global consumer electronics, prompting customers to rein in purchases.
The company, which counts major Android smartphone makers as well as iPhone maker Apple (AAPL.O) among its customers, is working to break into the booming data center chip market, which it will start shipping products for before the end of the year.
While the chip designer's shares rose on investor optimism, some analysts disagreed with Amon's remarks.
"While Qualcomm will have visibility into stabilizing handset revenues, the smartphone industry is hardly out of the woods with the likelihood of further pressure in the underlying market, with further worsening of memory shortages and memory price increases," analysts at J.P. Morgan said.
"We disagree with the view that memory shortages will ease in CY27, so these challenges are going to be here for a while," Morgan Stanley analysts said.
Amon said the company is working with customers on three kinds of chips: central processor units, accelerators for inference and custom chips called ASICs.
ASICs is a booming market that has benefitted rivals such as Broadcom (AVGO.O) and Marvell Technology (MRVL.O).
The shift to the data center business comes as Samsung and Apple increasingly opt for their in-house chips.
Earlier this week, an analyst report said Qualcomm and Taiwan's MediaTek (2454.TW) are co-development partners for an AI-first smartphone that OpenAI plans to build.
At least 10 brokerages raised their price targets on Qualcomm's stock following results, according to data compiled by LSEG.
