What Happened
Qualcomm, a leading semiconductor and telecommunications equipment company, reported its fiscal third-quarter earnings for 2025, which exceeded Wall Street expectations. The company announced adjusted earnings of $2.77 per share on revenue of $10.37 billion, slightly surpassing the anticipated $2.71 per share and $10.35 billion, respectively. However, despite the positive earnings report, Qualcomm’s stock price fell in after-hours trading following the announcement.
The company’s handset chip business, which is critical to its overall revenue, generated $6.33 billion during the quarter, falling short of the expected $6.44 billion. Qualcomm’s CEO, Cristiano Amon, highlighted the company’s efforts to diversify its business, particularly in the Internet of Things (IoT) sector, where revenues reached $1.68 billion, partly driven by strong demand for Meta’s smart glasses powered by Qualcomm chips.
Key Details
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Earnings Report: Qualcomm’s adjusted earnings per share were $2.77, exceeding the expected $2.71. Revenue for the quarter was $10.37 billion, slightly above the forecast of $10.35 billion.
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Handset Chip Revenue: The handset chip division reported $6.33 billion in revenue, which was below the anticipated $6.44 billion. This division is crucial as it includes chips for high-end smartphones, particularly those made by Samsung and Apple.
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Future Guidance: For the upcoming quarter, Qualcomm expects adjusted earnings of $2.85 per share on revenue of approximately $10.7 billion, which aligns closely with analyst expectations.
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Diversification Efforts: Qualcomm is actively working to reduce its reliance on Apple, which is expected to cease using Qualcomm’s modem chips in the coming years. The company is focusing on expanding its presence in IoT and automotive sectors, with the latter growing 21% to $984 million in the latest quarter.
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Stock Buyback and Dividends: During the quarter, Qualcomm repurchased 19 million shares of its stock for $2.8 billion and spent nearly $1 billion on cash dividends.
Multiple Perspectives
Analysts have mixed views on Qualcomm’s performance and future prospects. Some, like those at LSEG, noted the company’s ability to beat earnings expectations, highlighting its strong position in the IoT market as a positive sign for growth. They argue that Qualcomm’s diversification strategy could mitigate the risks associated with losing Apple as a customer.
Conversely, some analysts expressed concern about the decline in revenue from the handset chip business, which is a significant part of Qualcomm’s overall revenue. The shortfall in this area raised questions about the company’s ability to maintain growth in a competitive market. Additionally, the stock’s decline in after-hours trading suggests that investors may be cautious about the company’s future performance despite the positive earnings report.
Context & Background
Qualcomm has been a significant player in the semiconductor industry, particularly known for its Snapdragon processors used in smartphones. The company has faced challenges in recent years, including legal battles with Apple and increasing competition from other semiconductor manufacturers. The shift towards 5G technology and the growing demand for IoT devices present both opportunities and challenges for Qualcomm as it navigates a rapidly evolving market.
The company’s efforts to diversify its revenue streams are crucial as it anticipates losing a major customer in Apple. Qualcomm’s focus on IoT and automotive sectors is part of a broader strategy to ensure sustainable growth and reduce dependency on the smartphone market.
What We Don’t Know Yet
While Qualcomm’s earnings report provides insights into its current performance, uncertainties remain regarding its long-term strategy and market position. The impact of losing Apple as a customer for modem chips is still unclear, and it remains to be seen how effectively Qualcomm can transition to other markets. Additionally, the company’s future revenue growth in the IoT and automotive sectors is contingent on successful partnerships and product development, which have yet to be fully realized.
Investors will be closely monitoring Qualcomm’s performance in the upcoming quarters, particularly how it adapts to the challenges posed by the competitive landscape and shifts in consumer demand. The company’s ability to execute its diversification strategy and maintain profitability will be critical in shaping its future trajectory.
