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Qualcomm shares surge on Huawei deal and 5G progress

Qualcomm shares soared to a record high in after-market trading on Wednesday after the chipmaker posted strong revenue projections and announced a long-term licensing deal with China’s Huawei.

The California-based company said it was “realising the benefit of the investments we have made” in 5G mobile technology, projecting that adjusted revenues could be as high as $6.3bn in the current quarter, versus a $5.8bn estimate from analysts polled by Refinitiv.

Qualcomm also said it would net $1.8bn in the next quarter from a royalty deal with Huawei that allows the Chinese telecoms equipment maker to design and manufacture products based on its technology.

This agreement ends a multiyear period of legal uncertainty for Qualcomm, as Huawei had been withholding revenues and complaining about the US company’s licensing practices.

“With the signing of the Huawei agreement we are now entering a period in which we have multiyear licence agreements with every major handset [maker],” Steve Mollenkopf, Qualcomm’s chief executive, told analysts.

The deal with Huawei, which was only second to Samsung by smartphone sales in 2019, follows a similar agreement with Apple last year.

A report from Counterpoint Research last week suggested that a third of new smartphones sold last quarter in China, the world’s biggest handset market, were 5G-capable.

“Traction in 5G continues to be high,” said Cristiano Amon, Qualcomm president. “We now have more than 80 commercial networks in 35 countries . . . so 5G momentum has not slowed down and it’s giving us confidence in [our earlier] estimates.”

Geoff Blaber, analyst at CCS Insight, said: “Qualcomm’s earnings show its multiyear 5G investments are blossoming having overcome several roadblocks and despite a difficult economic environment.”

In the quarter ended in June, the chipmaker reported $4.9bn in revenue and earnings per share of $0.86, beating estimates of $4.8bn and $0.71, respectively.

Qualcomm said the figures would have been even better were it not for a “partial impact from the delay of a global 5G flagship phone launch”.

The reference was widely assumed to be the delay to Apple’s upcoming iPhone 12, which would confirm reports that the model is one to two months behind schedule.

Shares jumped more than 13 per cent in after-hours trading to $105.35, indicating the stock will open at a record high on Thursday. As recently as February last year, the stock was trading below $50 a share.

The chipmaker AMD experienced a 12.5 per cent rally earlier in the day, also hitting a record high after it lifted its full-year sales forecast. By contrast, Intel shares have shed a fifth of their value in recent days, after saying it has fallen a year behind schedule in developing its next generation of chips.

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