Qualcomm defies Wall Street sales and earnings expectations in FQ3

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Qualcomm teams with Imint to improve chipset video capabilities.
Image: Qualcomm

Qualcomm posted its FQ3 forecast on Wednesday with a report defying Wall Street’s expectations. The chipmaker also disclosed it resolved its patent dispute with Huawei, and a huge payment is forthcoming. The company provided a bright outlook for the current period, even though it anticipates taking a revenue hit due to a client’s delayed release of a product.

Qualcomm’s Expectation Defying FQ3

In the quarter ending June 28, Qualcomm generated $4.9 billion in adjusted revenue with net income of $845 million or $0.86 per share. Bloomberg reports market analysts predicted the firm would report sales of $4.8 billion with profits of $0.70 per share. From 2019, the San Diego-based company kept its adjusted gross income stable and improved its earnings by 7.5 percent.

Qualcomm’s sales fell within the range it offered in April, but it topped the high end of its earnings forecast.

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The chipmaker explained its recent success is due to its investments in developing 5G handset components. As the technology offers considerable bandwidth and latency upgrades compared to 4G, consumers have taken to 5G capable smartphones. Accordingly, Qualcomm has experienced a revenue bump as 5G rollouts continue worldwide.

Qualcomm’s Positive FQ4 Forecast

For the September ending quarter, Qualcomm expects to make $5.5 billion to $6.3 billion with adjusted earnings per share of $1.05 to $1.25. Last year, the firm took in $4.8 billion in sales and adjusted earnings of $0.42 per share in the same time frame. Market watchers pegged the brand’s FQ4 revenue at $5.77 billion.

In an investor call, CEO Steven Mollenkopf said his firm inked a new multi-licensing agreement with Huawei. The new deal brings outstanding patent-related litigation between the two firms to a close and will see the handset maker pay its partner $1.8 billion in back fees in FQ4. With the lump payment factored in, Qualcomm anticipates FQ4 revenue of $7.3 billion to $8.1 billion.

The other issue is the company predicted the coronavirus pandemic would cause a 15 percent drop off in 5G handset shipments this year. Qualcomm specified the outbreak had prompted a delay in the launch of a “global 5G flagship.” Bloomberg asserts the unmentioned device is the next iPhone. Since analysts forecast Apple will sell 168 million 5G handsets in 2020, a shipment postponement would affect the chipmaker’s income.

Nevertheless, Qualcomm’s strong non-Apple chip sales and the Huawei settlement payment should make its FQ4 very lucrative.

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