Qualcomm Inc. (NASDAQ:QCOM) Beats Q3 Earnings Estimates As It Announces Patent Settlement Agreement With Huawei

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Qualcomm Inc. (NASDAQ:QCOM) reported Better than expected Q3 earnings that topped estimates. The company has also announced that it has secured a patent agreement with Chinese tech-giant Huawei, effectively settling a major legal issue.

Qualcomm tops Q3 revenue estimates

The company reported revenue of $4.89 billion against an estimated $4.8 billion and earnings per share of $0.86 against an estimated $0.71. Qualcomm saw its YoY diluted EPS grow 8% while YoY revenue was flat. However, a comparison of the reported earnings against analysts projection continues to be a challenge amid the COVID-19 pandemic that has continued to wreck global; economies and thus rendering forecasting challenging.

Qualcomm will significantly benefit from the 5G network that is being developed, and as a result, it issued a strong forecast for the next quarter. The company manufactures modem chips for smartphone manufacturers and licenses vital patents to those using 5G tech.

The company agreed on a patent settlement with Huawei, which includes $1.8 billion backdated payment for amounts not received for over three years. Huawei is one of the main vendors of 5G smart[hones and infrastructure equipment. In 2018, Huawei made interim payments of $600 million and $450 million last year. Interestingly total royalty sum since Q3 2017 is around $2.85 billion, which is roughly $219 million for each quarter.

Qualcomm settled a patent agreement with Apple in 2019

Qualcomm, which settled with Apple Inc. (NASDAQ:AAPL) last year on the same patent issue. The company had estimated that lack of license revenues from the smartphone makers had cost its around $2.25 in EPS yearly.

The CEO of the company said that following the patent agreement with Huawei, Steve Mollenkopf, is now going into a period where they expect multiyear license agreements with various handset OEMs. The company expects 5G shipments will drop 15% YoY for the quarter ending September. This is due to one of its customers delaying the launch of its flagship 5G phone. Qualcomm expects shipments of 5G phones of around 175 million to 225 million in 2020.

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