Takeaways From Qualcomm's Q1 Earnings

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Qualcomm ( QCOM ) published its fiscal Q1 results on Wednesday, January 31, reporting a stronger than expected set of results that were driven by its semiconductor operations. The company’s CDMA technologies unit saw revenues rise by 13% to $4.65 billion, as mobile station modem shipments rose 9% year-over-year to 237 million units. However, the company’s licensing revenues dropped by 28% to $1.30 billion, weighed down by its ongoing dispute with Apple, which has been withholding payments to its contract manufacturers for the royalties they owe Qualcomm. Qualcomm’s outlook for the second quarter came in weaker than expected, on account of lower smartphone demand in China and a steeper drop in orders for its modem-only products. Separately, there have been reports that Apple will cut production of its iPhone X and this could also hurt Qualcomm’s modem shipments. Qualcomm projects MSM chip shipments at between 170 million to 190 million in Q2, compared to shipments of 179 million in the year-ago quarter. The company expects Q2 sales projected to come in at between $4.8 billion to $5.6 billion, with adjusted earnings of 65 cents to 75 cents per share, below Street estimates.

We have created an interactive dashboard analysis outlining Qualcomm’s guidance for Q2 2018 .

On a positive note, Qualcomm inked a broad multi-year deal with Samsung Electronics that allows the companies to share patents in multiple areas including mobile devices while working together on the transition to 5G technologies. While the exact terms of the deal were not disclosed, Qualcomm said that it would charge Samsung royalties based on the total price of its smartphone, and not the price of the chip – which is a practice that has been at the core of its litigation with Apple. Additionally, Samsung has agreed to withdraw its support for regulatory actions against Qualcomm in South Korea and other jurisdictions. As Samsung is the world’s largest smartphone vendor by volumes, this agreement could help to lower the uncertainty surrounding Qualcomm’s licensing business.

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