Qualcomm soars after striking patent deal with Huawei

FAN Editor

Steven Mollenkopf, CEO of Qualcomm

Mike Blake | Reuters

Qualcomm soared more than 13% after hours on Wednesday as the company reported fiscal third-quarter earnings that beat expectations and announced a long-term patent agreement with Huawei, settling a major unanswered legal question for the company.

Here’s how it did versus Refinitiv consensus estimates:

  • EPS: $0.86 (non-GAAP), vs $0.71 estimated.
  • Revenue: $4.89 billion vs. $4.8 billion estimated.

However, it’s difficult to compare reported earnings to analyst estimates, as the coronavirus pandemic continues to affect global economies and makes forecasting difficult. 

Revenue was flat year-over-year and diluted EPS was up 8% year-over-year. 

Qualcomm stands to benefit heavily from 5G networks being built and issued a strong forecast for its upcoming quarter, suggesting that 5G is starting to become an economic force. Qualcomm sells modem chips to phone makers, and licenses critical patents to anyone using 5G technology.

Qualcomm said it had entered into a long-term patent agreement with Huawei, which will be a major vendor of 5G phones and network equipment. Qualcomm settled similar patent lawsuits with Apple, a major handset customer, last year. 

“Qualcomm signed a long-term licensing agreement with Huawei, indicating that Qualcomm is entering a period where it has long-term license agreements with every major handset maker for the foreseeable future,” said Patrick Moorhead, analyst at Moor Insights.

Qualcomm said that it expected that 5G handset shipments would be 15% lower year-over-year in the quarter ending in September, partially due to a customer delaying a “global 5G handset launch.” Qualcomm expects a decrease in non-GAAP EPS of $0.25 per share. Qualcomm said it still expects between 175 million and 225 million 5G handsets to be shipped in 2020.

Qualcomm’s view on 5G handset schedules has shifted from last quarter, when Qualcomm said that its customers, which include Apple, were likely to continue to release 5G phones on previous schedules.

Qualcomm said it expected to report between $1.05 and $1.25 in non-GAAP diluted EPS, and revenue excluding certain items would be between $5.5 billion and $6.3 billion in the quarter ending in September. 

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