Chip giant Qualcomm (QCOM 0.74%) posted solid results for its fiscal second quarter, and yet, the market seemed unimpressed. Qualcomm cemented its position as an industry leader and is clearly benefiting from the boom in global smartphone shipments. And, since the industry has a lot of room left for growth, Foolish investors should embrace Qualcomm's sell-off as a buying opportunity.

There's a recurring theme among technology stocks and that's to reward their shareholders with hefty share buybacks and dividends. Qualcomm, like other technology giants, such as Cisco Systems (CSCO 0.33%), has a lot of cash piling up on the balance sheet. Big technology companies like Qualcomm and Cisco generate strong cash flow with very little debt. That's why, although it's easy to be concerned with Qualcomm's drop after posting earnings, the long-term fundamental case for Qualcomm is still intact.

Playing the expectations game
Unfortunately in the constant tug-of-war between corporate management teams and sell-side analysts, sometimes a company's underlying performance doesn't matter as much as whether it met expectations. In Qualcomm's case, the company couldn't keep up with the Wall Street expectations embedded in its valuation. The result was a painful sell-off after earnings, even though Qualcomm's business performance was quite strong.

The company generated 4% revenue growth and 8% growth in earnings per share. The reasons for growth were the widespread adoption of Qualcomm's multi-mode 3G and LTE chips, as well as record licensing revenue. During the quarter, Qualcomm shipped 188 million units of its MSM chips, representing 9% growth year over year.

Going forward, strong demand for its chips should continue, that's why management increased its full-year forecast. For 2014, Qualcomm expects 5% to 11% revenue growth and at least 12% earnings growth. The current quarter should be strong as well. The company expects 198 million MSM shipments this quarter, which would represent at least 15% growth.

Cash piling up
Qualcomm has a very strong balance sheet, with a mountain of cash on the books. As of the end of the most recent quarter, Qualcomm's cash and cash equivalents totaled more than $32 billion, up from $30 billion this time last year. That represents about one-quarter of the company's entire market capitalization.

Not surprisingly, Qualcomm is using that cash to reward shareholders. The company bought $1 billion of its own stock in the second quarter, and paid $589 million in dividends. In addition, Qualcomm recently increased its dividend by 20%.

Likewise, Cisco is in a similar position. Cisco repurchased $4 billion of its own shares in the most recent quarter, with more than $12 billion remaining in its existing share repurchase authorization. Plus, Cisco increased its dividend by 12%. At the end of the last quarter, Cisco had $47 billion in cash and equivalents on its books, representing nearly 40% of its market capitalization.

The bottom line
What investors should take away from Qualcomm's earnings report is that it's still doing a lot of things right. The stock sold off after reporting earnings, but that's largely because Wall Street expectations got ahead of themselves. There's not much management can or should do to manage irrational analyst expectations. Instead, Qualcomm needs to keep doing what it's doing, which is consistently producing strong shipment growth and turning solid profits.

Technology giants like Qualcomm and Cisco are seeing the cash pile up. In response, they're increasing dividends to shareholders and buying back billions of their own stock. While it's understandable to be disappointed by Qualcomm's results based on its ensuing stock sell off, the company now has an opportunity to buy back shares at even better prices.