What happened
Shares of Qualcomm (QCOM +10.86%) were climbing after the chipmaker announced a new supply agreement with Apple, ensuring a key revenue stream will continue through at least 2026.
As of 10:24 a.m. ET, the stock was up 2.8% after opening the session trading up as much as 5.4%.
NASDAQ: QCOM
Key Data Points
So what
In a press release this morning, Qualcomm said it has entered into an agreement with Apple to supply Snapdragon 5G Modem-RF Systems for smartphone launches in 2024, 2025, and 2026.
Apple is one of Qualcomm's two biggest customers, making up more than 10% of its revenue last year, along with Samsung.
In a presentation, Qualcomm said that the deal assumes a 20% share of chipset supply for the 2026 smartphone launch.
Apple has been increasingly designing its own chips for its smartphones, but the move shows that the company is still interested in working with partners like Qualcomm as Apple has become both a customer and competitor of Qualcomm's. The news also reverses earlier indications that Apple was going to make its own modems after the company acquired Intel's model assets in 2019 in order to develop its own modem products.
Now what
Wall Street seems to be reacting favorably to the news. KeyBanc analyst John Vinh said it removes an overhang for Qualcomm and called the deal a "positive" for the company.
The agreement could represent several percentage points of Qualcomm's revenue over the next three years and also paves the way for the companies to continue working together beyond 2026.
Like other chip companies, Qualcomm has been struggling with the industrywide downturn in the semiconductor sector, posting a 23% decline in revenue in its most recent quarter to $8.45 billion, but the Apple deal should give investors confidence in its ability to return to long-term growth.
