Qorvo's (QRVO -1.92%) second-quarter report in November made it clear that the competition is eating its lunch. The wireless semiconductor specialist's growth has hit a ceiling, and its shares have dropped thanks to the increasing clout of rivals Skyworks and Broadcom at key smartphone brands such as Apple (AAPL -0.57%) and Huawei.

QRVO Chart

QRVO data by YCharts

Will Qorvo be able to spring a surprise and get back into the good graces of Wall Street when it releases its third-quarter results for fiscal 2018 on Jan. 31? Let's find out.

Mobile woes will weigh on Qorvo's performance

Qorvo expects to report $840 million in third-quarter revenue, according to the midpoint of its guidance. By comparison, the company's year-ago sales stood at $826 million, indicating that its business is expected to hardly grow year over year.

Qorvo's earnings growth, however, could be its saving grace. The company expects $1.60 in earnings per share for the recently concluded quarter, a significant jump from the prior-year period's figure of $1.35. Impressive bottom-line growth can be attributed to Qorvo's focus on margin expansion.

Artist's rendering of an integrated circuit with a chip.

Image source: Getty Images.

The company sees gross margin of 47.5% for the third quarter of fiscal 2018, an increase of 3.2 percentage points from last year. In fact, Qorvo's gross margin has increased for four consecutive quarters now, thanks to its focus on boosting factory utilization rates, improving the product mix, increasing productivity savings, and lowering headcount.

Qorvo has done a commendable job of boosting its bottom line in tough times, but the fact that its business is falling prey to the competition cannot be overlooked. After all, you can't keep cutting costs to enhance earnings forever, and this is why sales growth is important.

Qorvo expects to fall short on that front, and investors should be alarmed, because it was in a much stronger position last year. In fact, the company's top line had jumped an impressive 33% year over year during the third quarter of fiscal 2017. A massive drop in Qorvo's growth rate is the result of a drop in its mobile-related revenue.

Qorvo gets a huge chunk of its revenue by selling chips to smartphone companies. Mobile accounted for just over 76% of its total revenue during the second quarter of the ongoing fiscal year. But the segment had shrunk almost 11% year over year even as Qorvo listed its "largest customer and stronger demand in China" as tailwinds.

The bottom line is that Qorvo needs to make a comeback in the smartphone space to win back investor confidence, but will it be able to?

Gauging Qorvo's smartphone prospects

Qorvo's biggest client, reportedly Apple, supplies 35% of its total revenue, so Apple is going to play a key role in its smartphone fortunes. Recent speculation around iPhone production hasn't helped Qorvo stock. What's more, the latest chatter suggests that Apple could  discontinue its flagship iPhone X.

As AppleInsider reports, noted Apple analyst Ming-Chi Kuo of KGI Securities believes that weak demand for the top-of-the-line iPhone has forced Cupertino's hand into reducing production. He adds that the device will reach the end of its life this summer. If this is indeed the case, Apple will rapidly wind down production of the iPhone X, which would affect component suppliers such as Qorvo.

But it's best to take such predictions with a pinch of salt. Consider that just last month, Apple infused $390 million into one of its suppliers to ramp up production of Face ID components for use in the iPhone X.

So investors will have to wait until the earnings report for more color on Qorvo's business from its biggest client. And don't forget, the relationship with Apple may already have been on the rocks, as one teardown of the iPhone X didn't identify any Quorvo chips, though one analyst was quoted as saying the chips were likely present in the Intel baseband version.

Meanwhile, global smartphone sales growth is expected to slow to 5% this year, after a 6.5% increase in 2017, according to TrendForce. Apple is expected to be one of the few bright spots in this space, as iPhone sales are expected to grow 7.5%.

There are a bunch of Chinese smartphone makers -- including Xiaomi, OPPO, Vivo, and Huawei -- that Qorvo is also counting on. But they didn't do much to improve its mobile business during the second quarter, even though Qorvo claimed that it landed substantial content at Xiaomi and supported Huawei's latest flagship with several chips.

So investors shouldn't be surprised if Qorvo fails to deliver the goods once again because of the challenges it faces in the mobile business.