Qualcomm beat estimates for its second quarter financial results on Wednesday, but the tech giant said the novel coronavirus pandemic has reduced demand for smartphone chips and 5G handsets.
Qualcomm said the pandemic caused a 21% reduction in demand for 3G, 4G and 5G handsets compared to previous expectations. The company's GAAP results also took a hit due to "non-marketable investment impairments" of $265 million.
Overalll, the chipmaker reported second quarter revenue of $5.206 billion, up 5% from a year ago. Non-GAAP earnings were 88 cents a share. Wall Street was looking for earnings of 78 cents per share with $5.02 billion in revenue.
Revenues from the Qualcomm Technology Licensing (QTL) segment, Qualcomm's licensing division, came to $1.07 billion, down 4% from a year ago. QTL accounts for a significant portion of Qualcomm's earnings. Meanwhile, revenue from Qualcomm's QCT segment, its largest business, came to $4.1 billion, an increase of 10% year-over-year. Qualcomm said MSM chip shipments were 129 million, down 17% year-over-year
In terms of guidance, Qualcomm expects third quarter earnings from 60 cents to 80 cents a share with between $4.4 billion and $5.2 billion in revenue. Wall Street is expecting earnings of 75 cents a share on revenue of $4.89 billion.
Qualcomm said its guidance is based on the assumption that there will be a roughly 30% reduction in handset shipments relative to previous expectations for the third quarter.
"We executed extremely well in the second fiscal quarter, with strong Non-GAAP results in line with our guidance, demonstrating the strength of our business model and the resilience of our team to respond quickly to the unique challenges presented by the global pandemic," said Qualcomm CEO Steve Mollenkopf.