Qualcomm's upbeat profit forecast, results send shares higher

Joanna Estrada
November 8, 2019

Management expects the first calendar quarter in 2020 to represent an inflection point in 5G revenue, and we project QCT to be up in the double-digits in fiscal 2020.

"Most estimates for 5G have been going up lately", Rasgon said. They also have a more flexible network architecture to allow cellular to connect many more gadgets beyond smartphones, including smart cities infrastructure, cars, environmental sensors and health devices. Concerning the latter, Qualcomm continues to negotiate with Huawei on a license agreement. "Longer-term, we maintain our positive thesis".

Revenue in the fourth-quarter fell about 17% to $4.81 billion, but beat analysts' estimates of $4.70 billion.

Qualcomm also announced Wednesday afternoon that interim Chief Financial Officer Akash Palkhiwala will remain in the position permanently.

Qualcomm is unique in the chip industry because the company gets the bulk of its profit from licensing patents that it says cover the fundamentals of all modern phone systems. After adjusting for stock-based compensation and other effects, the chip maker reported earnings of 78 cents a share, down from 90 cents a share a year ago.

Qualcomm Inc QCOM.O on Wednesday forecast current-quarter profit above Wall Street expectations, as its all-important licensing segment benefits from a deal with Apple Inc AAPL.O and the annual holiday-quarter boost it brings.

"For Qualcomm, the cloud was largely due to what many in the silicon community saw as bogus patent/royalty litigation from Apple", King said.

During a two-year legal fight, Apple stopped paying Qualcomm patent fees.

"Akash's deep understanding of our business both operationally and strategically makes him the ideal individual to lead our finance function as we embark on a period that, I believe, may present the biggest opportunity for growth in Qualcomm's history", Mollenkopf said in a separate news release. In China, Huawei Technologies Co., which supplies itself with the majority of its crucial components, has been gaining market share, hurting demand for Qualcomm chips used by Huawei's rivals. It's embroiled in a lengthy dispute with Qualcomm over patent fees, which doesn't show signs of ending soon amid trade tensions between the US and China.

Analysts on average expected adjusted earnings of 71 cents a share on sales of $4.76 billion, according to FactSet, down significantly from expectations ahead of Qualcomm's previous earnings report.

The company expects first-quarter adjusted profit of US$1.20 per share, above estimates of 83 cents, according to IBES data from Refinitiv.

The company's shares have been approaching five-year highs in recent trading - in part because of investor bets on the potential of 5G.

Investors appeared to share the analysts' enthusiasm, as Qualcomm's stock jumped nearly 6% in after-hours trading.

Other reports by Click Lancashire

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