Qualcomm shares surged over 10% in after-hours trading Wednesday after the company announced a long-term patent licensing agreement with its Chinese competitor Huawei.
The San Diego-based wireless pioneer made the announcement as it reported quarterly earnings following the close of financial markets in New York. Qualcomm stock closed up 1.7% at 93.03, then spiked above 106 after the licensing announcement.
“As 5G continues to roll out, we are realizing the benefits of the investments we have made in building the most extensive licensing program in mobile and are turning the technical challenges of 5G into leadership opportunities and commercial wins,” said Qualcomm CEO Steve Mollenkopf.
“We delivered earnings above the high end of our range, continued to execute in our product and licensing businesses, and entered into a new long-term patent license agreement with Huawei, all of which position us well for the balance of 2020 and beyond,” he added.
The company reported earnings of $845 million, or 74 cents per share, on revenue of $4.89 billion for its third fiscal quarter ended June 28. The same quarter the previous year included a $4.7 billion settlement payment by Apple and its contract manufacturers, making quarter-to-quarter comparisons not meaningful.
Huawei is expected to be a major vendor of 5G phones and network equipment, though it is under pressure from the U.S. government over security concerns.
Qualcomm said it expects to record $1.8 billion from Huawei in settlement of a patent lawsuit similar to the one with Apple that concluded last year.
The company said it expected to deliver revenue in the range of $7.3 billion to $8.1 billion in the current quarter, and earnings per share in the range of $2.12 to $2.32.