The stock dropped as much as 5% in after-hours trading.
Here’s a look at Qualcomm’s earnings versus expectations:
- Earnings: $0.80 per share, excluding certain items, vs $0.75 expected according to analysts polled by Refinitiv
- Revenue: $4.89 billion vs $5.08 billion expected
Analyst Take: A quick look at Qualcomm earnings show that the company came in a little light on revenue but had a solid quarter for profit margins as their earnings beat estimates despite the lower than expected revenue.
It’s also worth noting that the numbers (obviously) do not reflect a 4.7 Billion dollar one time payment from Apple. This certainly helps the company’s cash position, while not impacting the quarter results.
Perhaps what drew investors ire, and the subsequent overnight drop of the stock was the forward looking guidance that had the company down between 500 million and half a billion from early analyst estimates. This also put the company’s EPS estimates down giving a somewhat gloomy outlook to those investing that aren’t as familiar with Qualcomm’s work or the current shift that is taking place in 5G.
Over the next few years, 5G is going to be a catalyst for innovation. Not just in mobile devices, but in AI, Autonomous Driving, Smart Cities and so much more. Qualcomm, as one of the leaders in the space, with a lucrative licensing business around their standard essential patents (SEPs) contributed to the standard, as well as their non-SEPs, which have driven a plethora of innovation into mobile devices, means that Qualcomm stands to benefit from the growth of 5G in mobile devices, vehicles, IoT and more. My feeling is that this will be significant, however, the real growth for 5G is still a year or two out as we are in early days.
I am confident that Qualcomm will see a massive uptick as a result of their participation in 5G over the course of the next 8 quarters with a ramp that will escalate as we head into the calendar year, 2020. It will be important to watch the legal and regulatory environment around the company as the FTC ruling continues to be looked at. I feel the company will be able to much more rapidly address the opportunities of 5G if they win their appeal in the 9th circuit. Judge Koh’s rulings, if put into effect, will likely be detrimental to the company’s future performance, not to mention the United States leadership in 5G.
Overall, there is room to grow for Qualcomm. Despite the earnings related headlines, the miss on revenue wasn’t significant, especially given that they made up for it with higher margins and an earnings beat.
Futurum Research provides industry research and analysis. These columns are for educational purposes only and should not be considered in any way investment advice.
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