Qualcomm announces record Q3 F2014 earnings despite increased R&D expenses

It looks like Qualcomm's increased expenses into researching an developing better 3G CDMA and 4G LTE modems are paying off as the chip-maker has announced record earnings for the third quarter of the 2014 fiscal year. Revenues are up 9 percent year-over-year making a growth in net income of a whopping 42 percent compared to the previous year.

That means that Qualcomm ($QCOM) brought in $6.81 billion from its businesses, which include making Snapdragon processors, and spent $2.08 billion to generate that money. This leaves the company with $2.24 billion at the end of the day, an increase of 14 percent from the prior quarter.

Here is a summary of the GAPP earnings:

  • Revenues: 1 $6.81 billion, up 9 percent year-over-year (y-o-y) and 7 percent sequentially.
  • Operating income: $2.08 billion, up 24 percent y-o-y and 4 percent sequentially.
  • Net income: $2.24 billion, up 42 percent y-o-y and 14 percent sequentially.
  • Diluted earnings per share: $1.31, up 46 percent y-o-y and 15 percent sequentially.
  • Effective tax rate: 10 percent.
  • Operating cash flow: $2.67 billion, up 29 percent y-o-y; 39 percent of revenues.
  • Return of capital to stockholders: $2.06 billion, including $1.35 billion through repurchases of 17.0 million shares of common stock and $706 million, or $0.42 per share, of cash dividends paid.

Regarding its increase in expenses, particularly in R&D where the company is investing in itself, Qualcomm says:

Non-GAAP research and development (R&D) expenses increased 11 percent y-o-y primarily due to an increase in costs to develop CDMA-based 3G, OFDMA-based 4G LTE and other technologies for integrated circuit and related software products and to expand our intellectual property portfolio.

As a result of a strong quarter, Qualcomm is increasing its guidance for next quarter.

Qualcomm Announces Record Third Quarter Fiscal 2014 Results

Revenues $6.8 billion

GAAP EPS $1.31, Non-GAAP EPS $1.44

SAN DIEGO, July 23, 2014 /PRNewswire-FirstCall/ -- Qualcomm Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies, products and services, today announced results for the third quarter of fiscal 2014 ended June 29, 2014.

"We are pleased to report another record quarter with revenues, earnings per share and chip shipments reaching all-time highs, driven by broad-based demand for our industry-leading 3G/4G chipset solutions," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "Looking forward, although we have lowered our near-term financial outlook for the licensing business, we are pleased to be raising our fiscal year earnings per share guidance on better than expected performance in our semiconductor business."

Third Quarter Results (GAAP)

  • Revenues: 1 $6.81 billion, up 9 percent year-over-year (y-o-y) and 7 percent sequentially.
  • Operating income: 1 $2.08 billion, up 24 percent y-o-y and 4 percent sequentially.
  • Net income: 2 $2.24 billion, up 42 percent y-o-y and 14 percent sequentially.
  • Diluted earnings per share: 2 $1.31, up 46 percent y-o-y and 15 percent sequentially.
  • Effective tax rate: 1 10 percent.
  • Operating cash flow: $2.67 billion, up 29 percent y-o-y; 39 percent of revenues.
  • Return of capital to stockholders: $2.06 billion, including $1.35 billion through repurchases of 17.0 million shares of common stock and $706 million, or $0.42 per share, of cash dividends paid.

1 Throughout this news release, revenues, operating expenses, operating income, earnings before tax (EBT) and effective tax rates are from continuing operations (i.e., before adjustments for noncontrolling interests and discontinued operations), unless otherwise stated.

2 Throughout this news release, net income and diluted earnings per share are attributable to Qualcomm (i.e., after adjustments for noncontrolling interests and discontinued operations), unless otherwise stated.

Non-GAAP Third Quarter Results

Non-GAAP results exclude the QSI (Qualcomm Strategic Initiatives) segment and certain share-based compensation, acquisition-related items and tax items.

  • Revenues: $6.81 billion, up 9 percent y-o-y and 7 percent sequentially.
  • Operating income: $2.43 billion, up 19 percent y-o-y and 4 percent sequentially.
  • Net income: $2.47 billion, up 35 percent y-o-y and 10 percent sequentially.
  • Diluted earnings per share: $1.44, up 40 percent y-o-y and 10 percent sequentially.
  • Effective tax rate: 13 percent.
  • Detailed reconciliations between GAAP and Non-GAAP results are included within this news release.

The following should be considered in regards to the year-over-year and sequential comparisons:

The third quarter of fiscal 2014 results included:

  • $208 million of income, or $0.12 per share, of which $184 million was recorded in other income, due to the reversal of accruals related to our litigation with ParkerVision; and $164 million of charges, or $0.08 per share, that resulted from an impairment on goodwill and long-lived assets related to our QMT (Qualcomm MEMS Technologies) division.

The third quarter of fiscal 2013 results included:

*$158 million charge, or $0.06 per share, that resulted from an impairment on long-lived assets related to our QMT division.

Third Quarter Key Business Metrics

  • MSM™ chip shipments: 225 million units, up 31 percent y-o-y and 20 percent sequentially.
  • March quarter total reported device sales: approximately $58.1 billion, up 3 percent y-o-y and down 13 percent sequentially.
  • March quarter estimated 3G/4G device shipments: approximately 250 to 254 million units, at an estimated average selling price of approximately $228 to $234 per unit.
 

Reader comments

Qualcomm announces record FQ3 2014 earnings despite increased R&D expenses

4 Comments

Qualcomm's leaving little competition in their wake... Funny how we went from over half a dozen ARM SoC manufacturers for mobile, to like one and a half in two year's time.

It's not that huge, world wide there are a lot of Samsung phones with there own soc. Not to mention mediatek with many cheapness cheap phones (counting also Chinese market)
Huawei also seems to be on the rise with p6 and so on that has its own soc

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GAAP lets you play a shell game with money. You really need to get into the details to find out what's going on, can't get a good pictures just from a byline.