Qualcomm Inc. (NASDAQ:QCOM) has posted non-GAAP earnings for its fiscal second quarter that came in ahead of analyst estimates, but the maker of digital communications products is forecasting lackluster third-quarter results.
Qualcomm said its net income in the quarter that ended 25 March 2018 fell by half, to US$363mln, or US$0.24 a share, from US$749mln, or US$0.50 a share, in the year-earlier second quarter. On a non-GAAP basis, Qualcomm said its earnings totaled US$1.2bn, or US$0.80 a share, which beat the average estimate of US$0.70 a share among analysts surveyed by Yahoo Finance.
Revenue at Qualcomm rose 5%, to US$5.26bn from US$5.02bn. Yahoo Finance put the average estimate of analysts at US$5.19bn.
"Our fiscal second-quarter results reflect better-than-expected performance in our semiconductor business and lower operating expenses," Qualcomm CEO Steve Mollenkopf said.
Citi lowers target
Citi analyst Christopher Danely was not as effusive as Mollenkopf. Danely views Qualcomm's second-quarter results as "OK," but notes the company lowered its guidance.
Qualcomm is forecasting third-quarter revenue in a wide range of US$4.8bn to US$5.6bn, which means revenue would come in anywhere from 11% below to 4% above its year-earlier revenue of US$5.4bn. Analysts surveyed by Yahoo Finance are estimating revenue at $US5.32bn on average.
Likewise, Qualcomm has put its guidance for third-quarter non-GAAP earnings in a range of US$0.65 to US$0.75 a share. That range is below Qualcomm's non-GAAP earnings of $0.83 a share in last year's third quarter and also below the US$0.76 a share that is the average estimate of analysts surveyed by Yahoo Finance.
Danely, the Citi analyst, said he believes royalty rates, which represent roughly two-thirds of earnings, will continue to decline at Qualcomm and that the pending NXP Semiconductors (NASDAQ NXPI) merger deal "may be fraught with problems."
Danely reiterated a Neutral rating on Qualcomm and lowered his price target for the shares to US$56 from US$58.
In early trading, shares of Qualcomm were up 0.7%, at US$50.10.