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Qualcomm Technologies Inc. posted better-than-expected earnings today, but its guidance signaled that the lucrative resolution of its yearlong legal battle with Apple Inc. won’t be enough to counter the impact of slowing sales of smartphones that use its chips.

The company also revealed more details about that settlement, which ensures its mobile chipsets will continue to power Apple’s iPhones for years to come.

The chipmaker reported second-quarter earnings before certain costs such as stock compensation of 77 cents per share on revenue of $5 billion, down 5% from a year ago. Wall Street was looking for earnings of 71 cents on revenue of $4.8 billion.

But the bigger news concerned Qualcomm’s settlement with Apple, which will see the iPhone maker reimburse the chip maker with a onetime payment of between $4.5 billion and $4.7 billion. That payment covers the royalty fees Apple held back from Qualcomm while it was locked in its legal dispute with the company.

”While we continue to assess the accounting impacts of the agreements, our financial guidance for the third quarter of fiscal 2019 includes estimated revenues of $4.5 billion to $4.7 billion resulting from the settlement (which will be excluded from our Non-GAAP results), consisting of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities,” Qualcomm said in a statement.

But Qualcomm’s general guidance for the third quarter suggests that Apple’s licensing fees aren’t enough to offset slowing demand in the wider smartphone market. The company said that excluding that payment, it estimates revenue of between $4.7 billion and $5.5 billion for the next quarter, lower than the $5.29 billion consensus of Wall Street analysts.

Qualcomm said it was being hurt in China, where consumers are holding off on buying new smartphones until the rollout of 5G networks later in the year.

As a result, Qualcomm’s shares fell by about 3.5% in the after-hours trading session. Still, the company’s stock remains up more than 40% since its settlement with Apple was announced last month. Update: Shares were flat in Thursday trading.

That settlement includes a new six-year patent licensing and chip supply agreement with Apple and could lead to additional earnings of as much as $2 per share, Qualcomm said.

Qualcomm Chief Executive Steve Mollenkopf said in a statement that he was pleased to have reached multiyear agreements with Apple and that he’s looking forward to supporting it as a customer.

“We are executing well on our strategic priorities as 5G commercial launches begin around the world,” Mollenkopf added.

Qualcomm’s legal woes aren’t completely done. The company remains locked in a license dispute with Huawei Technologies Co. Ltd., but that company has at least been making interim payments as negotiations continue. Qualcomm had resolved a similar dispute with another customer, Samsung Electronics Co. Ltd., last year.

“We feel that the Apple resolution enhances our ability to resolve issues with Huawei,” Alex Rogers, Qualcomm’s patent licensing chief, said in a conference call with investors.

On the product front, the quarter was a fairly quiet one for Qualcomm, although it did find time to launch new Snapdragon 730 and 665 processors aimed at midrange smartphones that should give sales a boost in that segment, at least.

Analyst Holger Mueller of Constellation Research Inc. said it was time for Qualcomm to put its legal battles behind it and focus on its business challenges, including the slowing handset refresh and purchase cycle.

“The good news is that 5G is coming and Qualcomm is well set up to take advantage of the next generation of wireless standards,” Mueller said. “The only question is, when will 5G take off, and can Qualcomm better manage its guidance until then?”

Photo: Kārlis Dambrāns/Flickr