Qualcomm said its fiscal third-quarter profit rose 42 percent, as the company's chipset sales showed considerable strength.
However, shares fell because of weak guidance projections, dropping 3.3 percent to $78.90 in after-hours trading.
The chipmaker, whose technology is part of the iPhone and of Samsung's Galaxy gadgets, warned that it believes some licensees in China are underreporting their licensed-product sales to Qualcomm. That looks to be dragging on the company's financial projections, and the issue also provides fresh concerns about Qualcomm's ability to collect license revenue in that country.
Additionally, an ongoing investigation by the China National Development and Reform Commission into Qualcomm's business practices seems to be weighing on demand, with unlicensed companies potentially delaying business with Qualcomm until that inquiry ends, the company said.
"China continues to present significant opportunities for us, particularly with the rollout of 4G LTE, but also presents significant challenges," the company said Wednesday.
Though Qualcomm holds a dominant position selling wireless processors, many companies have tried to rival the company in providing 3G and 4G LTE chips that connect devices to wireless networks. Still, efforts to challenge Qualcomm haven't been easy. Broadcom said Tuesday that it will shutter its wireless operations and cut 2,500 employees, while Nvidia's efforts to combine its baseband chip with its Tegra apps processor have flopped. Intel, meanwhile, hasn't made as much progress as the company had hoped, despite investing considerable time and funds into its wireless business. Last week, Intel reported an operating loss of $1.12 billion in its mobile and communications business, adding to a string of losses from the segment.
Chinese vendor MediaTek is one of the few companies seen as a strong potential rival to Qualcomm's chip operations in the short term.
Top-selling devices around the world use Qualcomm's chips. Apple's iPhone line ships with Qualcomm's 4G LTE technology, while Samsung's Galaxy S devices, including the Galaxy S5, use Qualcomm's Snapdragon chips.
For the quarter ended June 29, Qualcomm posted earnings of $2.24 billion, or $1.31 a share, up from $1.58 billion, or 90 cents a share, a year earlier. Excluding share-based compensation and other items, profit grew to $1.44 a share from $1.03 a share a year ago.
Revenue improved 9 percent to $6.81 billion. The equipment and services segment, which includes chipset sales, posted 15 percent higher revenue at $4.92 billion. Licensing revenue slipped 3.7 percent to $1.88 billion.
The company in April predicted adjusted earnings of $1.15 to $1.25 a share and revenue of $6.2 billion to $6.8 billion.
Bernstein analyst Stacy Rasgon said Wednesday that "chipsets are on fire" and continue to be a positive for the company. But, he said, softer licensing revenue will be a problem, since licensing provides the bulk of Qualcomm's profits.
For the fiscal fourth quarter, the company forecast adjusted earnings of $1.20 to $1.35 a share, below estimates of $1.39 a share from analysts surveyed by Thomson Reuters. Revenue is expected to come in at $6.5 billion to $7.4 billion, with the midpoint just below Wall Street predictions of $7.15 billion.
Qualcomm also cut back its 2014 projections for estimated device shipments, saying it believes there may be device shipments that aren't being reported to it, are in dispute, or are currently unlicensed. It said it's working to address these issues.
CNET's Shara Tibken contributed to this report.