Qualcomm stock tumbles on revenue miss in Q3, weak guidance

For the third quarter, semiconductor manufacturer Qualcomm (Nasdaq: QCOM) posted revenues of $9.6 billion, riding on the $4.7 billion in licensing revenues resulting from the settlement with Apple (Nasdaq: AAPL). Without this one-time gain, revenues would have been $4.9 billion, down 13% year-over-year, and lower than the street projection of $5.08 billion.

The lower-than-expected top line sent the stock tumbling 4.5% during after-market trading on Wednesday.

Despite its cost-cutting initiatives, adjusted earnings fell 20% to 80 cents per share, but this was 5 cents higher than the average analysts’ estimate.

Steve Mollenkopf, CEO of Qualcomm, said, “We delivered another solid quarter operationally in the midst of slower demand for 4G devices as the market prepares for the global transition to 5G. “Our 5G design wins have doubled over the last three months, leaving us extremely well positioned as 5G ramps in early calendar year 2020.”

For the fourth quarter, the company expects further declines. It sees a 12-26% fall in revenues to $4.3 billion to $5.1 billion during this period.  Adjusted EPS is projected to be $0.65 – $0.75, down 16-27% year-over-year.

The chipmaker is currently going through a highly volatile phase. The positive sentiment that followed the settlement of the patent case with Apple (Nasdaq: AAPL) was short-lived as the company suffered a setback after the Federal Trade Commission recently issued an anti-trust ruling against it.

READ: Apple Q3 2019 earnings call insights: iPhone takes back seat, Wearables grab the limelight

It is alleged that Qualcomm misused its dominant position in the microprocessor industry and engaged in business practices that violated the anti-competition rules. However, the market’s mood turned positive once again after the Department of Justice recently issued a statement favoring the company.

Qualcomm shares witnessed severe fluctuations this year, marked by sharp gains prior to the last earnings report and the subsequent retreat. The stock has gained 31% since the beginning of 2019 and 15% in the past twelve months.

Last week, Intel (NASDAQ: INTC) reported a 2% increase in second-quarter earnings to $1.06 per share, despite a decline in revenues. A modest rise in the Data Center business was more than offset by a sharp decline in client computing.

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