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Qualcomm beats Q4 estimates

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(Image: Corinne Reichert/ZDNet)

Qualcomm published its fourth quarter financial results on Wednesday, beating market expectations.

The semiconductor giant reported non-GAAP earnings per share of 92 cents on GAAP revenue of $5.96 billion. A year prior, the company reported adjusted earnings of $1.28 per share on GAAP revenue of $6.18 billion.

Wall Street was looking for adjusted earnings of 81 cents per share on revenue of $5.8 billion.

For the full fiscal year 2017, Qualcomm reported non-GAAP earnings per share of $4.28 on GAAP revenue of $22.3 billion.

Qualcomm’s licensing business took a hit as a result of its ongoing legal battle with Apple and other licensees, but its core business saw solid growth.

“Our fourth quarter and fiscal 2017 results reflect continued product leadership and profitability improvement in our semiconductor business, including strength in adjacent opportunities outside mobile,” CEO Steve Mollenkopf said in a statement. “We continue to see strong growth trends for global 3G/4G device shipments and are focused on protecting the established value of our technologies and inventions. We are leading the industry to 5G and are well positioned with our product and technology leadership to continue our expansion into many exciting new product categories, such as automotive, mobile computing, networking and the Internet of Things.”

For the second quarter in a row, Qualcomm said its financial results “were negatively impacted as a result of actions taken by Apple and its contract manufacturers as well as the previously disclosed dispute with another licensee, who underpaid royalties due in the second quarter of fiscal 2017 and did not report or pay royalties due in the third and fourth quarter of fiscal 2017.”

Qualcomm added, “We expect these licensees will continue to take such actions in the future until the respective disputes are resolved.”

Qualcomm’s epic struggle with Apple started in January, when Apple filed a lawsuit that accused the semiconductor giant of overcharging for chips. Earlier this week, the Wall Street Journal reported that Apple is designing its iPhone and iPads for next year without any Qualcomm components.

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The Apple dispute has put significant pressure on Qualcomm Technology Licensing (QTL), Qualcomm’s licensing division, which accounts for a significant portion of Qualcomm’s earnings. The company’s other business segment, QCT (Qualcomm CDA Technologies), accounts for most of its revenue.

The QCT segment in Q4 saw solid growth: QCT revenues for the quarter came to $4.65 billion, a 13 percent year-over-year increase. The segment generated $973 million in earnings before taxes for the quarter, a 42 percent year-over-year increase.

Still, QTL revenues declined 36 percent year-over-year, totaling $1.21 billion. The segment generated $829 million in earnings before taxes, a 48 percent year-over-year decrease.

While overall earnings and revenues were down year-over-year, analyst Patrick Moorhead, founder of Moor Insights Strategy, said it was worth evaluating the sequential change in Qualcomm’s performance — thereby factoring in the company’s dispute with Apple.

Revenue was up 12 percent sequentially, operating income up 29 percent sequentially and net income up 11 percent sequentially.

“These results were driven by the company’s strength in 4G LTE, particularly given they’re the only company to have Gigabit LTE shipping and operational in phones today,” Moorhead said. “QCT saw strength with its Snapdragon SoC line too, the 835.”

And while 5G doesn’t impact earnings this quarter, Moorhead said his firm estimates that Qualcomm holds a 12 to 24 month time advantage on mobile 5G.

“This matters as in 4G, it will be hard for any OEM to not work with Qualcomm if they want to have 5G phones early-on,” he said. “We expect 5G smartphones to arrive in two countries in the end of 2018 followed by pervasiveness in premium Android in 2H 2019.”

Meanwhile, Qualcomm on Wednesday that its major deal to acquire NXP Semiconductor, which will help it move into IOT and automotive, may not close until early 2018. “We continue to work to close by the end of calendar 2017,” the company said.

For the first quarter of fiscal 2018, Qualcomm projects a non-GAAP diluted EPS between 85 cents and 95 cents, on revenues between $5.5 billion and $6.3 billion.

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