A Li Auto L9 electric vehicle (EV) is seen displayed at the Qualcomm booth during the first China International Supply Chain Expo (CISCE) in Beijing, China November 28, 2023. REUTERS/Florence Lo

By Stephen Nellis and Arsheeya Bajwa

SAN FRANCISCO (Reuters) -Chip designer Qualcomm on Wednesday forecast fiscal first-quarter sales and profit above Wall Street expectations, powered by a renewal of end-market demand in the smartphone industry.

Qualcomm is among the world's biggest suppliers of the modem chips that connect smartphones to wireless data networks. It made the forecast even as it prepares for possibly selling fewer chips to top customers such as Samsung Electronics Co .

For the current fiscal first quarter, Qualcomm said it expects sales and adjusted profit with a midpoint of $12.2 billion and $3.40 per share, above analyst estimates of $11.62 billion and $3.31 per share, according to LSEG data.

For the fiscal fourth quarter ended September 28, Qualcomm reported sales and adjusted profit of $11.27 billion and $3 per share, compared with Wall Street expectations of $10.79 billion and adjusted profit of $2.88 per share.

Qualcomm has been expanding into other fields such as laptops and automobiles. It is a longtime supplier to Apple, though Qualcomm has told investors since 2021 that it expects Apple to eventually transition to its own modems.

Qualcomm shares were down 2.7% in extended trading on Wednesday. The stock had risen nearly 4% during regular trading, suggesting that expectations were running high before the news.

Shares were down after the report because investors continue to worry about future share loss at key customer Apple, said Summit Insights analyst Kinngai Chan.

Qualcomm CEO Cristiano Amon told Reuters that the results and forecast were driven by a wave of consumers upgrading midpriced smartphones to more expensive devices to handle AI apps, with the market beginning to divide sharply between low-end devices and the pricier premium devices Qualcomm has historically relied on to drive profit.

"You don't have anything in the middle," Amon said. "And that's kind of a global phenomenon that's happening in China, that's happening in India. We continue to see an expansion of the premium tier."

Qualcomm shares have risen about 12.5% this year, below the 20.9% gain of the Nasdaq Composite Index, as investors have worried about the impact of tariffs on the company's smartphone chip business and whether it was positioned to profit from the artificial intelligence boom. Last month, however, Qualcomm unveiled a new series of AI chips for data centers that it said will roll out next year.

Investors have been working to understand how Apple's transition to its own modems will affect Qualcomm's business. In a note to clients, Bernstein analyst Stacy Rasgon said Apple is likely using its own chips in its iPhone Air and iPhone 16e models but has remained with Qualcomm chips for iPhone 17 models, softening the blow to Qualcomm.

But Apple, Samsung and China's Xiaomi all still account for more than 10% of Qualcomm's revenue, Qualcomm said in securities filings on Wednesday. For Samsung's most recent Galaxy S25 models, Qualcomm supplied 100%, but Amon told Reuters that Qualcomm is prepared for a lower share in Samsung's next generation.

"When you think about Galaxy S26, we're planning for 75% - that's what we expect," Amon said.

He confirmed that Qualcomm is working with Samsung's chip manufacturing business to make some Qualcomm chips with 2-nanometer technology, but declined to name specific products that would be made by Samsung.

"We're working with them about using their foundry in our product roadmap," Amon said.

Amon said that for the just-ended 2025, Qualcomm's non-Apple revenue across all segments grew at 18%. Within its chip segment, revenue from handsets rose 14% to $6.96 billion, coming in above Visible Alpha estimates of $6.64 billion.

"Phones are slowly seeing apps becoming more capable, and that drives people to buy a more capable device, no different than what we saw right after the pandemic," Amon told Reuters.

Qualcomm expects chip revenue in the first quarter to be between $10.3 billion and $10.9 billion, with the midpoint of the forecasted range above estimates of $10 billion.

Qualcomm's automotive segment revenue for the first time topped $1 billion, ending at $1.05 billion in sales for the fiscal fourth quarter, above analyst estimates of $1.01 billion, according to Visible Alpha data.

Qualcomm said on Wednesday that the new U.S. tax legislation resulted in a $5.7 billion noncash charge, or about $5.29 per share, in its fiscal fourth quarter and that it expects to be subject to the U.S. corporate alternative minimum tax in its next fiscal year. The company said the move did not affect its adjusted results.

(Reporting by Stephen Nellis in San Francisco and Arsheeya Bajwa in New Delhi; Editing by Matthew Lewis)