Qualcomm cashed in on the momentum around the rollout of faster 5G smartphones during its fiscal fourth quarter, posting strong financial results that beat Wall Street analysts' expectations.
The San Diego cellular technology giant — a leader in 5G smartphone processors and intellectual property — said Wednesday that it benefited from a host of 5G trends during the quarter.
They include Apple's launch of four new 5G iPhone models in October that use Qualcomm chips; a settlement payment in a long-running patent licensing dispute with China's Huawei; more Android smartphone buyers upgrading from 4G to 5G devices across the globe; and additional chip content from Qualcomm in many 5G phones.
The company also reported traction for cellular technologies in new industries beyond its core smartphone stronghold — such as work-from-home gear and connected cars.
"The challenges of the COVID-19 pandemic highlight the critical importance of our products," said Chief Executive Steve Mollenkopf in a conference call with investors. "As you can see from our results, the early stages of the 5G ramp are well underway, with our strategy playing out largely as expected."
For the quarter ended Sept. 27, Qualcomm posted adjusted revenue of $6.5 billion, a 35% increase over the prior year.
Adjusted net income came in at $1.7 billion, or $1.45 per share.
Wall Street analysts predicted fourth quarter sales of $5.9 billion and adjusted earnings of $1.17 per share.
"We concluded the year with exceptional fourth quarter results and are well positioned for growth in 2021 and beyond," said Mollenkopf.
Qualcomm's adjusted financial results excluded catch up payments from Huawei as part of a patent licensing settlement.
So, including the Huawei payments, Qualcomm booked $8.3 billion in revenue and earnings of $2.58 per share for the quarter under Generally Accepted Accounting Principles.
The company's share price has surged 49% so far this year thanks to 5G growth expectations and what appears to be the end of legal battles that have dogged the company for years.
Most recently, the 9th Circuit Court of Appeals threw out a lower court's anti-monopoly judgment against Qualcomm in a lawsuit brought by the U.S. Federal Trade Commission. The full court last week re-affirmed the reversal after the FTC asked it to take a second look at a three-judge panel's findings that Qualcomm business practices are legal.
Apple settled a similar legal fight over patent fees with Qualcomm in April 2019. The two companies signed a multi-year patent license and chip supply agreement that paved the way for Qualcomm's silicon to be used in the latest 5G iPhones unveiled last month.
In the fourth quarter, the company's cellular baseband chip shipments reached 162 million, up 7% from the prior year and ahead of analysts' expectation of 155 million.
Baseband processors mange the cellular connection between smartphones and cell towers to help deliver wireless broadband. While basebands make up the bulk of Qualcomm's chip sales, the company has diversified with the rollout of 5G to add filters, transceivers, antenna modules and other signal processing components known as the Radio Frequency Front End to its product lineup.
RF Front End chips sales reached $2.4 billion in fiscal 2020, making Qualcomm a significant competitor to Skyworks, Murata and others in this market.
In addition, Qualcomm's Internet of things silicon for gadgets such mobile hotspots, wireless routers and connected laptops reached $3 billion last year.
For its full fiscal year ended Sept. 27, Qualcomm said sales dipped 3% to $23.5 billion but net income increased 19% to $5.2 billion under Generally Accepted Accounting Principles.
Despite the pandemic, the company ended the year with 41,000 global employees, up from 37,000 the prior year.
Qualcomm released financial results after markets closed. Its shares ended trading at $128.97 on Wednesday, but they soared 13% to $145.80 in after-hours trading following better than expected earnings.
