Qualcomm (QCOM) Q3 2020 Results

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Qualcomm climbed to 13% after hours on Wednesday as the company announced better-than-expected third quarter tax results and announced a long-term patent deal with Huawei, settling a major unanswered legal issue for the society.Here’s how that happened compared to Refinitiv’s consensus estimates:

  • EPS: $ 0.86 (non-GAAP), compared to an estimated $ 0.71.
  • Returned: 4.89 billion dollars against 4.8 billion dollars estimated.

However, it is difficult to compare the reported profits with analysts’ estimates, as the coronavirus pandemic continues to affect global economies and makes forecasting difficult.

Revenue was stable year over year and diluted EPS increased 8% year over year.

Qualcomm is expected to benefit greatly from building 5G networks and has released a strong forecast for its next quarter, suggesting 5G is starting to become an economic force. Qualcomm sells modem chips to phone makers and grants critical patents to anyone using 5G technology.

The company also said it has entered into a long-term patent deal with Huawei, which will be a major supplier of 5G phones and networking equipment. Qualcomm said it expects to record $ 1.8 billion in settlement payments from Huawei in the quarter ending September. Qualcomm settled similar patent lawsuits with Apple, a major cellphone customer, last year.

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

Qualcomm said it expected 5G phone shipments to be 15% lower year over year in the quarter ending September, in part due to an anonymous customer delaying the ” global launch of a 5G handset ”. Qualcomm expects non-GAAP EPS to drop by $ 0.25 per share. Qualcomm said it still expects between 175 million and 225 million 5G handsets to ship in 2020.

Qualcomm’s take on 5G phone schedules changed from last quarter, when Qualcomm said its customers, including Apple, would likely continue to release 5G phones based on previous schedules.

Company plans to report between $ 1.05 and $ 1.25 in non-GAAP Diluted EPS and sales excluding certain items between $ 5.5 billion and $ 6.3 billion, for the quarter ending September.

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