By Don Clark And Tess Stynes

Qualcomm Inc. showed surprising growth in its latest quarter, but lowered its sales targets to reflect shifting fortunes among smartphone makers and stiffer competition in China.

The San Diego-based chip maker benefited in its fiscal first quarter from sales of wireless modem chips used by Apple Inc., which on Monday said it sold a whopping 74.5 million handsets in the same period. Qualcomm, which has been grappling with an antitrust investigation in China, said it settled a dispute with a Chinese hardware company that had resisted making payments to the chip company.

Qualcomm's revenue rose about 7.2% in the quarter that ended in December, while profit was up 5.2% from a year earlier.

But the company cut its forecast for the fiscal year ending in September, and its stock fell 8% in after-hours trading on Wednesday.

One factor Qualcomm cited was shifting market share among premium makers of smartphones. Though no customers were named, Qualcomm's comments appeared to acknowledge that Apple's phones have been gaining in the market at the expense of Samsung Electronics Co.

Samsung has at times bought products like Qualcomm's Snapdragon that combine wireless modems with microprocessor capability, whereas Apple tends to buy modem chips alone. The Snapdragon line commands a higher price tag and is more profitable for Qualcomm, noted Stacy Rasgon, an analyst at Bernstein Research.

Qualcomm also cited expectations that its new Snapdragon 810 processor won't be used in a large customer's flagship device. It didn't identify the customer. But Bloomberg recently reported that Samsung had decided not use the new chip in a forthcoming smartphone amid reports of overheating issues.

Qualcomm Chief Executive Steve Mollenkopf declined to discuss the specific customer or the heating issue, but said more than 60 handset models are being developed using the Snapdragon 810. "It's performed well," he said in an interview.

At the same time, Mr. Mollenkopf said, rivals in China have become more aggressive and are cutting prices to win business. As a result, Qualcomm is not winning as much market share in China as it expected.

Besides selling chips used in smartphones, Qualcomm charges phone makers royalties for use of its patents, based on a percentage of the wholesale price of their handsets. Aspects of the company's patent-licensing practices are believed to be a focus of the antitrust investigation in China, which was launched in November 2013.

Derek Aberle, Qualcomm's president, said the company has discussed "a number of proposals" to address concerns of the Chinese authorities. "We believe we are making progress toward a potential resolution," he said, though he said the timing remains uncertain.

Qualcomm said Wednesday it continues to believe that certain licensees in China aren't fully complying with their contractual obligations to report sales of licensed products to the company.

Reporting its fourth-quarter results in November, the company disclosed that the U.S. Federal Trade Commission and European Union have also launched antitrust investigations.

Qualcomm has been grappling with other issues, too. Responding to slower growth, Qualcomm said in December it was laying off about 600 people, or less than 2% of its workforce.

For the period ended Dec. 28, Qualcomm reported a profit of $1.97 billion, or $1.17 a share, compared with $1.88 billion, or $1.09 a share, a year earlier. Revenue rose to $7.1 billion from $6.6 billion. Excluding items such as results from an investment unit, Qualcomm said per-share earnings came to $1.34.

Analysts polled by Thomson Reuters expected per-share earnings of $1.25 on revenue of $6.94 billion.

For the quarter ending in March, Qualcomm projected per-share earnings, excluding items, of $1.28 to $1.40 on revenue of $6.5 billion to $7.1 billion, compared with analyst estimates of $1.28 a share on $6.74 billion.

For the full fiscal year, the company reduced its outlook for per-share earnings, excluding items, by 30 cents. It now expects between $4.75 and $5.05. Its revenue view also was cut, by $800 million, to between $26 billion and $28 billion.

Write to Don Clark at don.clark@wsj.com and Tess Stynes at tess.stynes@wsj.com

Access Investor Kit for Apple, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US0378331005

Access Investor Kit for QUALCOMM, Inc.

Visit http://www.companyspotlight.com/partner?cp_code=P479&isin=US7475251036

Subscribe to WSJ: http://online.wsj.com?mod=djnwires