Qualcomm (QCOM) has dominated the financial news cycle over the past few months due to Broadcom’s (NASDAQ:AVGO) failed attempt to acquire the company, and Qualcomm’s failed attempt to acquire NXP (NXP). I have been bearish on the stock due to its stagnant revenue and public tete-at-tete with Apple (AAPL). It’s never good to fight with your largest customer, especially one as powerful as Apple. That said, Qualcomm may have just changed the narrative and things could finally be looking up for the company.

Revenue Growth Remains Stagnant …

Revenue for the most recent quarter was $5.6 billion, up 4% Y/Y. Equipment revenue (QCT) of $4.1 billion was up 1% Y/Y, while licensing revenue (QTL) of $1.5 billion was up 25%. The company has gone through a lot. Qualcomm has been under siege from entire countries like China and South Korea for what they described as excessive licensing fees. The company also has been punished by a fall off in licensing fees from Apple, one of its largest customers.

In the past Qualcomm reduced licensing fee rates for certain Chinese OEMs. The reductions were particularly damaging because margins at QTL were so robust. In Q3 the company’s EBIT at QTL was 72%, practically flat compared to the 73% margin achieved in the year earlier period. However, it paled in comparison to margins in the high-80% range from a few years ago. EBIT margin at QCT was 15%, up from 14% in the year earlier period. Read more:



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