Smartphone chipmaker Qualcomm Technologies Inc. says it’s feeling the heat from the ongoing ruckus between the U.S. and China over trade, with the ban on U.S. firms doing business with Huawei Technologies Co. Ltd. hurting sales.

The company today reported third-quarter earnings that beat estimates, but revenue for the period came up short. Guidance for its fourth quarter was also below expectations, and its stock fell more than 5% in after-hours trading as a result.

For the quarter, Qualcomm reported earnings before certain costs such as stock compensation of 80 cents per share, down 20 percent from the same period a year ago. Revenue fell 13%, to $4.9 billion. Wall Street had forecast earnings of 75 cents per share on revenue of $5.08 billion.

Breaking down the numbers, Qualcomm’s technology licensing business saw revenue of $1.29 billion, down 10% year-over-year. Those numbers notably include the royalties Qualcomm earned from Apple Inc. and its contract manufacturers for sales during the quarter, which were not included in the year-ago period. The figure also included a $150 million payment from Huawei, which is another licensee that’s in a dispute with Qualcomm.

“The windfall from the litigation with Apple this quarter makes the numbers look good, but regulatory issues around 5G and the Huawei situation make it hard for Qualcomm to deliver,” said Constellation Research Inc. analyst Holger Mueller. “Qualcomm needs to find a way to grow more steadily without depending too much on the uncertain parts of its intellectual-property royalty revenue stream.”

Qualcomm CDA Technologies, the company’s biggest business unit which covers its actual hardware sales, reported revenue of $3.57 billion, down 13% from a year ago.

Qualcomm Chief Executive Officer Steve Mollenkopf (pictured) initially tried to put a positive spin on the numbers, saying the company “delivered another solid quarter operationally in the midst of slower demand for 4G devices.”

But that didn’t matter much to investors, as Qualcomm’s guidance for the fourth quarter fell well short of what Wall Street had forecast. Qualcomm said it’s expecting earnings of between 65 and 75 cents per share on revenue of $4.3 billion to $5.1 billion. Wall Street was expecting earnings of $1.08 per share on revenue of $5.63 billion.

In addition, Qualcomm said it’s lowering its estimates for global 3G, 4G and 5G device shipments in calendar 2019 by 100 million units to a range of 1.7 billion to 1.8 billion.

Explaining the miserable outlook, Mollenkopf said in a conference call that industry conditions, especially in China, were expected to create “significant headwinds” for the next two quarters. He said there were two particular problems, namely the ban on U.S. firms selling products and services to Huawei and a pivot by smartphone makers from 4G to 5G handsets.

“Huawei shifted their emphasis to building market share in the domestic China market where we do not see the corresponding benefit in product or licensing revenue,” he said.

The other problem is that Qualcomm’s Chinese customers are said to be working through their existing 4G inventory and “deemphasizing” those product launches in the second half of 2019. Instead, they are more focused on launching new 5G products in early 2020. “As a result, we do not expect the typical seasonal benefits given this unique market dynamics,” the CEO added.

Still, analysts said Qualcomm remains in a good position to turn things around in the long term. Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, told SiliconANGLE that it’s still in a good spot since it’s the only company that has an end-to-end 5G chip play that supports both mmWave and sub6 gigahertz.

“5G will grow even bigger, beyond smartphones and into self-driving cars and ‘internet of things,’ and I think Qualcomm will do well in those spaces too,” Moorhead said.

Charles King, an analyst with Pund-IT Inc., said Qualcomm was simply being punished by investors for U.S. President Donald Trump’s trade war with China, which is a situation that’s beyond the company’s control.

“It’s possible that Qualcomm’s fortunes could turn around pretty quickly if the impasse with China were resolved,” King said. “Will that happen? Anything’s possible as an election cycle begins to heat up.”

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