Qualcomm beats Q3 estimates, announces patent deal with Huawei

However, the chipmaker also noted that it anticipates about a 15 percent year-over-year reduction in handset shipments in the fourth quarter due to COVID-19.

Qualcomm on Wednesday reported better-than-expected third quarter financial results. The chipmaker also said it has resolved its dispute with Huawei and signed a new long-term patent license agreement with the Chinese firm. The new agreements should bring in revenues of approximately $1.8 billion from Huawei for the fourth quarter, Qualcomm said. 

Qualcomm's shares were up by double digits in after-hours trading. 

However, the chipmaker also noted that it anticipates about a 15 percent year-over-year reduction in handset shipments in the fourth quarter due to COVID-19, including "a partial impact from the delay of a global 5G flagship phone launch." 

For Q3, Qualcomm posted non-GAAP earnings of 86 cents per share on revenue of $4.89 billion. 

Analysts were expecting earnings of 71 cents per share on revenue of $4.81 billion. 

"As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins," CEO Steve Mollenkopf said in a statement. "We delivered earnings above the high end of our range, continued to execute in our product and licensing businesses and entered into a new long-term patent license agreement with Huawei, all of which position us well for the balance of 2020 and beyond."

Third quarter revenues from the Qualcomm Technology Licensing (QTL) segment, Qualcomm's licensing division, came to $1.04 billion, a 19 percent decrease year-over-year. QTL 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. QCT revenues in Q3 were $3.8 billion, a 7 percent increase year-over-year. Within QCT, MSM (mobile station modem) chip shipments in Q3 reached 130 million, a decrease of 17 percent year-over-year.

The results do not include revenues from the Huawei settlement or global patent license agreements, Qualcomm said. 

For the fourth quarter, Qualcomm anticipates non-GAAP earnings per share in the range of $1.05 to $1.25 and non-GAAP revenues in the range of $5.5 billion to $6.3 billion.  

Qualcomm entered into a settlement agreement with Huawei just this month, the company said. The companies also came to new long-term, global patent license agreement, including a cross license granting back rights to certain of Huawei's patents, covering sales beginning January 1, 2020. 

That means for Q4, Qualcomm currently expects QTL revenues for royalties due on sales made by Huawei in the September 2020 quarter. The estimated Q4 revenues of approximately $1.8 billion include amounts due from Huawei under the settlement agreement and estimated amounts due for the March 2020 and June 2020 quarters under the new global patent license agreement. This amount will be excluded from non-GAAP results.

The expected reduction in handset shipments in Q4 due to COVID-19 could have a negative 25-cent impact on Q4 EPS, the company said.