Fed's Beige Book: Illusion of Eased Inflation? Tesla Q3 Beats Estimates, Cybertruck Profitable; Arm Challenges Qualcomm in CPU Market
③ Arm "Rips" Qualcomm: Plans to Cancel License for Chip Design, Escalating Dispute Shakes Up CPU Market
Reports suggest that Arm is planning to cancel the license that allows its long-term partner Qualcomm to use Arm's intellectual property to design chips. According to relevant documents, Arm has given Qualcomm a 60-day notice to terminate the architectural license agreement. Arm stated in an email reply to a First Financial Daily reporter, "No comment on this matter." Qualcomm responded to the reporter, saying that Arm's "act of desperation" seems to be an attempt to disrupt the legal process before the upcoming court hearing in December. The request to terminate the license agreement is unfounded, "This is Arm's usual approach—more baseless threats aimed at forcing long-term partners, disrupting our performance-leading CPU products, and ignoring the extensive rights already covered by our architectural license agreement to increase licensing fees." The dispute between Qualcomm and Arm originated from Qualcomm's acquisition of Nuvia, another Arm licensee, in 2021, without negotiating a new license with Arm. In 2022, Arm sued Qualcomm for breach of contract and trademark infringement. The legal dispute between Arm and Qualcomm has been ongoing for two years without resolution, and this "breaking of faces" may indicate an escalation of the conflict. As a major Android processor manufacturer, Qualcomm is one of Arm's largest customers, with many of its products using the ARM architecture; the two companies are deeply intertwined. If their relationship completely breaks down, the financial impact on both sides will not be small.
For now, competition in the chip market is becoming increasingly fierce, and it remains the best option for the two companies to resolve their issues through negotiation rather than judicial rulings. On Arm's side, according to a document, Arm has given Qualcomm a 60-day notice to cancel the architectural license agreement. This license allows Qualcomm to design its own chips based on the standards owned by Arm. The Arm terminal CSS (Compute Subsystem) is a more comprehensive upgrade to the TCS (Total Compute Solutions) released in 2023 and is expected to provide Arm with 20% of its licensing revenue over the next two years. On Qualcomm's side, the company is collaborating with Google to develop an Android automotive operating system that runs smoothly on Qualcomm chips. Additionally, to break free from Arm, Qualcomm is "full steam ahead" in developing the ORYON architecture, which will put pressure on competitors.
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Given the deep business ties between Qualcomm and Arm, the market expects a higher probability of an eventual settlement. However, in the short term, this may disrupt the performance of related companies in the A-share industry chain.
④ Third-Quarter Consulting and Infrastructure Business Slump Leads to IBM's Post-Market Plunge of 8%
IBM announced its financial report after the market closed on Wednesday, showing that due to the slowdown in consulting demand, the third-quarter performance did not meet market expectations, and the stock price plummeted by 8% post-market. Specifically, IBM's third-quarter revenue was $14.97 billion, a year-over-year increase of 1.5%, below analysts' expectations of $15.07 billion; third-quarter operating earnings per share were $2.30, while analysts expected $2.22; third-quarter consulting revenue was $5.15 billion, below analysts' expectations of $5.22 billion; third-quarter software revenue was $6.52 billion, above analysts' expectations of $6.37 billion; third-quarter free cash flow was $2.06 billion, below analysts' expectations of $2.08 billion; the company still forecasts full-year free cash flow to exceed $12 billion. In recent years, IBM has been committed to transforming from a traditional computer company to a company focused on high-growth software and services. IBM has expanded its product line through acquisitions, including the announced plan to acquire Hashicorp Inc. in April and the $4.6 billion acquisition of Apptio last year. The company stated that the generative AI business has broken through $3 billion, growing by $1 billion from the second quarter.
IBM's third-quarter performance reflects the outstanding growth of generative AI business, proving that IBM's strategic layout in high-growth areas is forward-looking, especially in AI and hybrid cloud areas. However, the weakness in traditional consulting and infrastructure business indicates that the company faces the并存的局面 of shrinking traditional business and transformation pressure. The decline in consulting business revenue is closely related to the global macroeconomic weakness, especially as companies are more cautious about IT spending. Looking deeper, IBM's medium and long-term investment value depends on whether it can successfully transform from traditional hardware and service business to AI and cloud computing. The company's current AI business has shown its core position in corporate digital transformation, but the key is whether it can commercialize these technologies on a large scale to offset the continuous decline risk of traditional business. In the short term, attention needs to be paid to the drag of traditional business on overall profits. Although innovation in the AI field has long-term potential, in terms of revenue proportion, IBM still faces a transition period between new and old businesses, which may lead to unstable profit growth. However, in the medium and long term, attention should be paid to its competitive development in the fields of AI, hybrid cloud, and enterprise services, and its ability to balance traditional and innovative businesses should be carefully assessed.
⑤ Boeing's Third-Quarter Revenue of $17.84 Billion, Down 1% Year-on-Year
Boeing announced its financial report for the third quarter of 2024 on October 23, showing revenue of $17.84 billion, compared to $18.104 billion in the same period last year, a decrease of 1%. The revenue for the first three quarters was $51.275 billion, compared to $55.776 billion in the same period last year, a decrease of 8%. According to GAAP, the loss per share in the third quarter was $9.97, compared to a loss of $2.70 per share in the same period last year. The operating cash flow in the third quarter was negative $1.345 billion, and the free cash flow was negative $1.956 billion. Boeing stated that this financial performance mainly reflected the impact of the union members' strike and the previously announced costs of commercial and defense projects. On the same day, a filing with the U.S. Securities and Exchange Commission (SEC) showed that Boeing has been approved to sell up to $25 billion in equity and bonds, which may help the aircraft manufacturer resist strikes and avoid becoming junk stocks. Boeing's CEO stated that the company will re-prioritize and create a more streamlined organization.
Last month, the market focused on Boeing and its largest union, IAM 751, reaching a preliminary agreement on a new four-year contract, which avoided a strike that would severely affect its aircraft manufacturing. In addition, according to Boeing's financial report, interest expenses were $728 million, and capital expenditures were $611 million, both higher than market expectations, indicating that operating pressure still exists. The GAAP loss per share in the third quarter was $9.97, and the core (non-GAAP) loss per share was $10.44. If the continued strike affects Boeing's financial restructuring, it may affect Boeing's credit rating.Due to the impact of macro factors, domestic airlines have been under severe performance pressure in recent years. However, from the mid-year performance observations, some companies have shown significant improvements. Subsequently, with domestic consumption promotion and positive macro expectations, the sector may be able to embark on a recovery trend.
⑥ The chip industry "barometer" Texas Instruments reported better-than-expected earnings for the third quarter, but the fourth quarter guidance was lackluster.
Recently, Texas Instruments released its latest financial report, with cumulative revenue of $11.634 billion for the first three fiscal quarters of fiscal year 2024, compared to $13.442 billion for the same period last year, a decrease of 13.45% year-on-year. The cumulative net profit for the first three fiscal quarters of fiscal year 2024 was $3.594 billion, compared to $5.139 billion for the same period last year, a decrease of 30.06% year-on-year. The cumulative basic earnings per share for this fiscal year were $3.9242, compared to $5.6399 for the same period last year. Texas Instruments CEO Haviv Ilan stated in a conference call following the release of the financial report that, supported by a rebound in terminal market demand, orders from smartphone and personal computer suppliers have improved, boosting the sales of Texas Instruments' semiconductors for power electronic devices. At the same time, revenue from the automotive market also saw a growth of more than a single digit, with a significant improvement in demand from the Chinese automotive market. However, Texas Instruments remains pessimistic about the future. The company expects fourth-quarter revenue and profit performance to be below analyst expectations, as they anticipate continued weakness in the industrial market and difficulty for customers to clear existing inventory. Texas Instruments closed at $201.740 in US stocks overnight, with a gain of 4.01%.
There are several highlights in Texas Instruments' latest financial report: First, the operating profit margin for analog ICs reached 40.8%, better than the 16.7% for embedded processors; second, the strong momentum of China's electric vehicle development, with China's region achieving a 20% sequential growth for two consecutive quarters, setting a new record for automotive business; third, the company revised down its capital expenditure for 2026; fourth, the company's quarterly revenue was $4.151 billion, with a gross margin of 59.6% and earnings per share of $1.47. In addition, in the fourth-quarter outlook, the company's median revenue is $3.85 billion, with a profit of $1.18 per share.
From the disclosed forecasts and mid-year performance, the performance of A-share semiconductor companies is expected to continue to strengthen, and the fundamental logic may expand the industry's upward space.
⑦ Coca-Cola's third-quarter revenue exceeded expectations, but net revenue decreased by 1% to $11.9 billion.
On October 23rd, local time, before the US stock market, Coca-Cola released its third-quarter (three months ending September 27th) financial report. During the reporting period, Coca-Cola's revenue was $11.95 billion, a year-on-year decrease of 1%, with analysts expecting $11.6 billion; net revenue decreased by 1% to $11.9 billion, with expectations of $11.6 billion; net profit was $2.85 billion, a year-on-year decrease of 7.8%; adjusted earnings per share were $0.77, with analysts expecting $0.74. Coca-Cola stated that the company's product prices increased by 10% this quarter (exceeding Wall Street's expectation of 6.51%), with about 4% of the increase coming from markets with severe inflation such as Argentina. However, due to weak international market demand, Coca-Cola's unit case volume decreased by 1% year-on-year in the third quarter, with analysts expecting a growth of 0.42%. In addition, Coca-Cola updated its 2024 performance guidance, revising the growth rate of comparable currency-neutral earnings per share (non-GAAP) to 14%-15%, higher than the previously expected 13%-15%, demonstrating a strong confidence in the company's long-term stable development. At the same time, the company expects a 10% organic revenue growth for the full year of 2024; the growth rate of earnings per share is expected to be 5% to 6%, consistent with the previously released guidance.
According to NIELSEN data, as of the week ending 10/5, the total revenue of carbonated beverages in the United States increased by 6.2% (with volume growth of 0.9% and price growth of 5.2%), while the "leader" Coca-Cola saw a volume growth of 2.4% and a price increase of 4.7%, while Pepsi saw a volume decrease of 4.2% and a price increase of 5.1%.
With the overseas interest rate reduction cycle and domestic policy drive, the consumer sector may continue to benefit. The beverage sector is expected to have a positive medium to long-term trend.
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