Qualcomm Inc on Wednesday predicted current-quarter earnings above the forecasts of Wall Street, as its all-important software division profits from a deal with Apple Inc and annual holiday-quarter sales gave the company the momentum it needs.
Qualcomm, the world's largest mobile phone chip manufacturer, generates most of its revenue from a business segment that invents or licenses technology.
The business expects sales for that division for its fiscal first half from $1.3 billion to $1.5 billion, lower than analyst expectations of $1.23 billion, according to IBES information from Refinitiv.
According to Refinitiv, the licensing company guided the adjusted income outlook at a midpoint of 85 cents per share, much better than analyst expectations of 83 cents per share.
Apple's return on revenue also provides Qualcomm with an annual gain in its fiscal first quarter starting in December, when Apple typically produces its highest number of devices, charging the most royalties.
On the technology hand, the chief executive of Qualcomm, Steve Mollenkopf, told Reuters in an interview that the firm had secured contracts to supply 230 5G mobile system models, up from 150 a quarter earlier.
"We are still seeing strength in the licensing business, especially after the company added boost to the deal signed with Apple this year, and we're at the front end of the 5G transition that will impact our business," Mollenkopf said.
"We are shifting to that and we're really seeing the indicators we ought to be optimistic about," Mollenkopf added. In after-hours market, the report took stocks down almost 5.1 percent to $89.00.
For major customers including Samsung Electronics Co Ltd and Apple, the firm has settled licensing conflicts.
It helps that most of Qualcomm's clients are actually paying, said Moor Insights & Strategy's Patrick Moorhead. Yet Qualcomm is in a license conflict with Huawei.
Although talks proceed, they have not achieved a final agreement with Huawei, the company disclosed. Qualcomm said it plans between 1.75 billion and 1.85 billion modem chip smart devices.
The results come a week after Apple eased the nerves of Wall Street with stronger revenues in China, the world's largest smartphone market, and last month chipmaker Intel Corp followed suit with its own solid profits.
Qualcomm said sales in its licensing division was $1.16 billion for the fiscal fourth quarter ending Sept. 29, exceeding expectations of $1.10 billion, according to FactSet reports.
The company earned 78 cents per share, beating the average estimate of 71 cents from analysts. Revenue fell by about 17 percent to $4.81 billion in the fourth quarter, but exceeded analysts' estimates of $4.70 billion.
