What To Expect As Qualcomm Reports Q4 Results

Wireless technology behemoth Qualcomm (NYSE:QCOM) is expected to publish its Q4 FY’18 results on Wednesday, November 7, reporting on a quarter that is likely to see the company post a mixed performance amid slowing global demand for smartphones and the company’s ongoing licensing disputes with Apple. The company has guided for revenues of $5.1 billion to $5.9 billion for the quarter, with earnings projected to come in at $0.75 – $0.85 per share. Below, we take a look at some of the key trends that could drive the company’s results.

View our interactive dashboard analysis on Qualcomm’s Qualcomm’s expected performance over 2018 to see our forecasts and valuation estimate.

Chipset Business Will Be Driven By Demand From Chinese OEMs

Qualcomm is guiding for chipset shipments of 205 million to 225 million for the QCT business this quarter, compared to 220 million shipments last year, marking a slight decline at the midpoint, although there is likely to be a sequential improvement. While the company has been seeing stronger demand for app processors and modems from Chinese device makers, its key customer Apple has been increasingly depending on Intel for its modem chips and is expected to drop Qualcomm as a chip vendor altogether from its next-generation iPhone. Margins for the QCT business are likely to see a sequential increase to 16% – 18%, driven by a more favorable product mix that is likely to be skewed toward its premium Snapdragon’s 700 and 800 products.

Disputes Will Continue To Weight On QTL

Qualcomm expects revenues from its technology licensing business, QTL, to come in between $1 billion and $1.2 billion. Revenues from this business have been weighed down by its wide-ranging dispute with Apple, which has accused Qualcomm of unfair patent licensing practices. Apple has been withholding royalties that its contract manufacturers owe Qualcomm (the total arrears are reported to stand at about $7 billion). While Qualcomm previously indicated that it was looking to settle the dispute with Apple by the end of this year, that now appears unlikely. However, the transition to 5G could prove to be a big driver for the business over the next two years, considering the company’s leadership in the standards arena and standard essential patents space.

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