Qualcomm beats fiscal Q2 estimates but disappoints on Q3 outlook, again

Chipmaker Qualcomm  (QCOM)  on Wednesday beat analyst estimates and said it had resolved a dispute with customer LG Electronics in the quarter ended March 27 but still saw revenue slide 19.5% to $5.55 billion, a less severe slide than the $5.34 billion analysts had expected.

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In its fiscal second quarter, Qualcomm said EPS, excluding one-time items, slipped 26% to $1.04, above the $0.96 forecast by analysts. Including exceptional items, most notably the sale of U.K. cellphone frequencies in the U.K., the company saw EPS gain 24% to $0.78.

Just as it has with past earnings releases, Qualcomm gave lower-than-expected guidance for the current quarter, saying it expects revenue of between $5.2 billion and $6 billion in its fiscal third quarter, after $5.8 billion in the same quarter a year earlier. EPS is expected to come in at between $0.90 and $1 after $0.99 a year earlier.

Analysts were expecting revenue of $5.6 billion and EPS of $1.02.

"We are continuing to build momentum into the second half of our fiscal 2016 with traction for our Snapdragon processors in the premium and high tiers and strong execution of our strategic realignment plan," Qualcomm CEO Steve Mollenkopf said during a conference call. "We've continued to make gains on the licensing side in China and this continues to be positive for the company."

Qualcomm's earnings have been buoyed by the company's ability to win back electronics company Samsung. Samsung is using Qualcomm's Snapdragon 820 chip in its new flagship line of Galaxy S7 phones after the predecessor processor was rejected for Samsung's predecessor phone. And Qualcomm signed a number of supply agreements with other manufacturers such as Lenovo  (LNVGY)  and Xiaomi as well as long-fought licensing agreements with chip suppliers such as Yulong Computer Telecommunication Scientific (Shenzhen) Co.

During the conference call, Qualcomm said it would be able to book about $200 million in revenue in its fiscal third quarter that was withheld during a dispute with LG that was resolved in the first three months of 2016. LG and Qualcomm quibbled over the amount LG owed as part of a licensing agreement.

Despite beating expectations, investors were concerned about the downward guidance for the current quarter. The stock slipped 3.1%, or $1.59, in after-hours trading to $1.59. The shares had gained $0.26 during regular trade Wednesday.

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