Smartphone chipmaker Qualcomm Inc.’s stock is down slightly today despite beating expectations on both earnings and revenue in its fiscal first quarter.

The company reported earnings before certain costs such as stock compensation of 99 cents per share on revenue of $5.05 billion, up 5% from a year ago. That was better than Wall Street was hoping for, with analysts having earlier forecast earnings of just 85 cents per share on revenue of $4.83 billion.

Qualcomm Chief Executive Officer Steve Mollenkopf said the strong quarter reflected a “significant inflection point” for the company as it starts to realize the benefits of an industry transition to 5G networks.

Qualcomm delivered better-than-expected guidance for its next three-month period. It said it’s expecting second-quarter revenue of between $4.9 billion and $5.7 billion, well ahead of Wall Street’s $5.08 billion forecast. But investors, who sent shares down about 2% in after-hours trading, might have been disappointed that the company believes real growth from 5G won’t happen until the fourth quarter, according to comments from Chief Financial Officer Akash Palkhiwala during a conference call.

At the same time, the company faces another headwind in 5G: It revealed in a regulatory filing that the European Union is investigating whether it engaged in anti-competitive behavior. The probe is looking at whether Qualcomm leveraged its market position in 5G modem chips into the radio frequency chip market.

Qualcomm CDA Technologies, the company’s largest business unit in terms of revenue, accounted for $3.62 billion of the total in the quarter, down 3% year-over-year. Qualcomm didn’t say anything, but the unit is likely still hurting from the drop in sales that arose from the ban on U.S. firms selling certain products and services to China’s Huawei Technologies Co. Ltd. Huawei was previously one of Qualcomm’s biggest customers.

Meanwhile, Qualcomm Technology Licensing, the unit responsible for licensing the company’s patented technologies, pulled in $1.4 billion in revenue, up 38% from a year ago. Whereas the QCT business has suffered, the QTL unit has benefited from the conclusion of the Qualcomm’s legal wrangles with another major customer, Apple Inc., which last year had been withholding royalty payments.

Moor Insights & Strategy analyst Patrick Moorhead told SiliconANGLE that Qualcomm had delivered an “exceptional quarter” with both revenue and earnings at the high end of its guidance. He said the strong performance was the result of several factors, including the company’s growth in the smartphone market and the increased success of its RF business.

“5G looks to be paying dividends financially, and it also helps that most of Qualcomm’s customers are actually paying for licenses,” Moorhead said. “The company’s 5G outlook still looks quite positive, too, sticking with 5G handset forecast between 175 million and 225 million units in 2020. I believe Qualcomm is positioned for big 5G volume given its mainstream and premium digital and end to end RF capability.”

Indeed, he added, he thinks 5G is an even bigger opportunity beyond the smartphone — “potentially five to 10 times larger, when massive IoT, lower latency and automotive 5G comes online.”

Qualcomm began its push into 5G in December with the launch of its first batch of 5G smartphone processors. They included its new, high-end Snapdragon 865 chip, which is based on a seven-nanometer architecture and uses a separate X55 modem module to provide 5G connectivity.

Also in the quarter, Qualcomm announced a new chip for augmented and virtual reality headsets that it said is the first of its kind to support 5G. In addition, the company announced it’s getting into the automotive sector with the launch of its first self-driving car platform at the Consumer Electronics Show in Las Vegas last month.

Photo: Kārlis Dambrāns/Flickr