Qualcomm released their Q2 financial results today, and they had another strong quarter. Revenues increased 8% from Q2 2014, coming in at $6.9 billion. On a GAAP basis, operating Income took a nose dive to $1.3 billion, down from $2.0 billion last year and $2.1 billion last quarter. This of course means that net income is also much lower, with $1.1 billion being reported for Q2 2015, which is down 46% from last year and 47% from last quarter. GAAP earnings per share came in at $0.63, down from $1.14 last year and $1.17 last quarter.

Qualcomm Q2 2015 Financial Results (GAAP)
  Q2'2015 Q1'2015 Q2'2014
Revenue $6.894B $7.099B $6.367B
Gross Margin 19.4% 29.1% 31.3%
Operating Income $1.336B $2.064B $1.990B
Net Income $1.053B $1.972B $1.959B
Earnings Per Share $0.63 $1.17 $1.31

The reason for the large hit to operating income, net income, and EPS is due to Qualcomm having to pay out $975 million to the China National Development and Reform Commission or NDRC. This charge is the resolution that was enacted due to Qualcomm falling afoul of China’s Anti-Monopoly Law, and as such it is a one-time fee. As such, Qualcomm has also released Non-GAAP results which exclude this one time hit to get a better look at how the business is operating. On a Non-GAAP basis, operating income was up 16% year-over-year to $2.7 billion, which is also a 7% gain over last quarter. Net income was up 4% at $2.3 billion, and EPS came in at $1.40 for Q2, as compared to $1.31 last year and $1.34 last quarter.

Qualcomm Q2 2015 Financial Results (Non-GAAP)
  Q2'2015 Q1'2015 Q2'2014
Revenue $6.894B $7.099B $6.367B
Gross Margin 39.3% 35.7% 36.7%
Operating Income $2.707B $2.531B $2.337B
Net Income $2.339B $2.263B $2.255B
Earnings Per Share $1.40 $1.34 $1.31

Qualcomm actually had negative cash flow for the quarter. The already mentioned fine paid to China accounted for some of it, and Qualcomm also performed a prepayment of $950 million to secure long-term capacity from one of their suppliers. Those two hits resulted in a $0.7 billion shortfall in cash flow. Last year, they had $1.8 billion in positive cash flow, and last quarter it was $2.4 billion.

For the second quarter, Qualcomm shipped 233 million MSM chips, which is up 24% year-over-year, but down from the 270 million shipped in Q1. Total device sales from Qualcomm licencees was $75.8 billion for the quarter, up 14% year-over-year and up 34% quarter-over-quarter. The company is estimating that 384-388 million 3G/4G devices shipped in Q2, which is up 30% over Q2 2014 and up 35% over Q1 2015. Average Selling Price of 3G/4G devices was $193-$199, which is down 13% year-over-year and 1% from last quarter, as the market moves towards lower cost devices.

Qualcomm Devices
  Q2'2015 Q1'2015 Q2'2014
MSM Chip Shipments 233M 270M 188M
Total Reported Device Sales $75.8B $56.4B $66.5B
Est. reported 3G/4G device shipments 384-388M 284-288M 295-299M
3G/4G Device Average Selling Price $193-$199 $194-$200 $221-$227

Qualcomm repurchased 27.8 million shares in Q2, plus paid out $0.42 per share, returning $2.6 billion to shareholders of the company. On March 9th, they announced a new $15 billion stock repurchasing program which includes $10 billion in shares to be bought back in the next twelve months. Additionally, they will be paying out $0.48 per share on June 24th to any shareholder of record as of June 3rd, which is 14% more than last quarter’s payout.

However not everything to come out of the results was good news. Qualcomm has lowered their outlook for the semiconductor business for the second half of FY 2015. Greater competition has reduced Qualcomm’s market share in the SoC space, especially within flagship phones. The two largest phone makers, Samsung and Apple, both use their own designs in their flagship products. This will change Qualcomm’s product mix more heavily towards modem chipsets. There has also been some uncertainly created due to the existing licensing agreements Qualcomm has in place in China due to the resolution with the NDRC. With the case now concluded, the company is hopeful that these arrangements can be sorted out, as they believe that not all devices sold in calendar year 2014 were reported to them.

For Q3, the estimate is that revenues will decline by 9-21% over Q3 2014, which will drop EPS 31% to 41% on a Non-GAAP basis, or 37% to 49% based on GAAP reporting. For FY 2015, Qualcomm is estimating revenue to be between negative 6% and positive 2%.

Source: Qualcomm

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  • jjj - Wednesday, April 22, 2015 - link

    Actually fiscal Q2 was not strong , their outlook for the quarter and expectations were low so they beat those by a little but if you go 3 month back you'll remember that these results are not great.

    "Total device sales from Qualcomm licencees was $75.8 billion for the quarter, up 14% year-over-year and up 34% quarter-over-quarter. The company is estimating that 384-388 million 3G/4G devices shipped in Q2"
    That's not true,they accounted for that but that includes quite a big chunk of devices from previous quarters (so before Q4) that were reported now. The outlook also includes some of that.

    The outlook details you provide are very poor and the last sentence is rather funny since you don't specify that's on year and it sounds like they might have negative revenue and that's a 26+ billions difference from reality "For FY 2015, Qualcomm is estimating revenue to be between negative 6% and positive 2%."
  • jjj - Wednesday, April 22, 2015 - link

    Noticed one more mistake, the devices reported are 1 quarter behind so in fiscal Q2 they account for devices from fiscal Q1. So 75.8B and 384-388 million are mostly from calendar Q4/fiscal Q1.
  • Laststop311 - Thursday, April 23, 2015 - link

    Once the effects of the crappy 810 soc are fully represented there should be a big tanking of the numbers.
  • Marc GP - Thursday, April 23, 2015 - link

    So Qualcomm incomes per quarter ($1.05 billion) are exactly the same amount that Intel have been spending quarterly for the last couple years with no sweat subsidizing (bribing?) manufacturers to get them to use their SOCs.

    It must be tough to fight against such unbalanced fight.
  • jjj - Thursday, April 23, 2015 - link

    They payed a 975 million finethis quarter, their usual income is a lot higher.
    And to be fair, they get like 8 billions per year income from licensing (or trolling if you consider that they get 10 times more than they should).
  • jospoortvliet - Friday, April 24, 2015 - link

    Trolling if it is patents, but if they license out the modems and GPU they designed, like ARM does - isn't that an entirely ok and cool business model?
  • jjj - Friday, April 24, 2015 - link

    ARM gets a tiny fraction of what Qualcomm gets and that's the problem.
    If you look at the numbers they reported you can do the math.
    Total reported devices 75.8 billion , estimated device shipments 384-388 million 3G/4G devices.. The 75.8 billions is the total price for those 384-388 million devices.
    Revenues for QTL (the licensing segment) were 2.414 billions so they got payed on average 6.25$ per device. The device ASP they reported was 196$. That means that their licensing is some 3.2% of the sale price of the ENTIRE device.
    Now this in an average %, for some devices they get payed more,for some less ,depending on the technology those devices use.
    As opposed to that ARM's Q1 revenue was 348.2 millions but that's not all from licensing and royalties and it comes from a hell of a lot more chips.Some 3.8billion chips to be precise.
    So Qualcomm gets a huge cut from the entire device and that's just insane ,while ARM gets a small cut from the price of the actual chip.
    That's why nobody sane should accept the way Qualcomm does business, it's absurd and if every technology in a phone would have such insane costs ,we just couldn't afford to own smartphones
    3G/4G is important enough but so are many other technologies in a phone but no other technology gets this kind of insane licensing model.
    It's beyond ridiculous what Qualcomm is allowed to do.
  • djvita - Tuesday, April 28, 2015 - link

    samsung reported that they are saving money on the s6.

    this report is telling, the market is moving to mid range. they will not be able to sustain the markup or the volume as the market saturates even more. competition is getting stronger, the good old 2012-14 years are over
  • toyotabedzrock - Thursday, April 23, 2015 - link

    So they are spending all their money on stock buybacks instead of bettering the product.

    That is the same thinking that lost them the lead in the market when everyone rushed to 64bit.

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