Qualcomm (QCOM) Stock: Why Beating Earnings Wasn't Enough for Investors

TLDR

Table of Contents

Qualcomm reported Q3 earnings of $2.77 per share, beating Wall Street estimates of $2.71
Revenue reached $10.4 billion, ahead of analyst expectations of $10.3 billion
Stock dropped 4.9% in after-hours trading despite the earnings beat
Company faces pressure from Apple’s shift to in-house modem chips starting with iPhone 16e
Non-Apple chip revenue grew over 15% this fiscal year, driven mainly by premium Android devices

Qualcomm delivered better-than-expected earnings for the June quarter but investors weren’t impressed. The chip giant’s stock fell 4.9% in after-hours trading despite beating both earnings and revenue forecasts.

The company reported earnings per share of $2.77, topping Wall Street’s consensus estimate of $2.71. Revenue came in at $10.4 billion, ahead of analysts’ expectations of $10.3 billion.

For the current quarter, Qualcomm provided revenue guidance ranging from $10.3 billion to $11.1 billion. The midpoint of this range sits close to the average analyst estimate of $10.6 billion.

Qualcomm, $QCOM, Q3-FY25. Results:
📊 Adj. EPS: $2.77 🟢
💰 Revenue: $10.4B 🔴
🔎 Record Automotive revenue and continued strength across Handsets, IoT, and Automotive drove QCT performance. Expanded AI and edge initiatives with new strategic partnerships and acquisitions. pic.twitter.com/cdRDb8ydB5
— EarningsTime (@Earnings_Time) July 30, 2025

The stock’s decline following positive results reflects the high bar investors have set. Qualcomm shares have rallied since early April, leaving little room for disappointment.

“Our leadership in AI processing, high-performance and low-power computing and advanced connectivity positions us to become the industry platform of choice,” CEO Cristiano Amon said. The company continues to push its AI capabilities as a key differentiator.

Apple Modem Loss Weighs on Outlook

The elephant in the room remains Apple’s decision to develop its own modem chips. The iPhone 16e, launched earlier this year, became the first Apple smartphone to use an in-house modem instead of Qualcomm’s technology.

Qualcomm has repeatedly warned that Apple’s shift will hurt its chip segment revenue. This transition removes a major revenue source for the San Diego-based company.

The loss of Apple business puts more pressure on Qualcomm’s other customers. Non-Apple chip revenue has grown over 15% this fiscal year, but analysts note this growth comes mainly from higher prices on premium Android devices rather than increased volume.

Competition Heats Up in Smartphone Chips

Taiwan’s MediaTek has overtaken Qualcomm as the global leader in smartphone chipset market share this year. MediaTek’s strength in affordable and mid-range segments, particularly in markets like India, has driven its rise.

This shift highlights Qualcomm’s heavy reliance on premium smartphone chips. While these high-end processors generate better margins, they also expose the company to market volatility.

Global smartphone shipments climbed just 1% in the second quarter, according to research firm IDC. The modest growth reflects a challenging environment for chip suppliers.

Tariff concerns add another layer of uncertainty. President Trump has warned about potential sector-specific tariffs targeting semiconductors, though smartphones and chips currently have exemptions from Chinese import tariffs.

CFO Akash Palkhiwala told Reuters the company hasn’t seen customers ordering chips ahead of normal schedules to avoid potential tariffs. This suggests businesses aren’t panicking about immediate tariff impacts.

Qualcomm is expanding beyond smartphones into new markets. CEO Amon highlighted the company’s work on augmented-reality glasses, including Meta’s Ray-Bans.

“The number of designs like the Meta glasses is now up to 19, and that continues to accelerate,” Amon said. This diversification could help offset smartphone market challenges.

Bernstein analyst Stacy Rasgon maintained his Outperform rating and $185 price target for Qualcomm shares. He believes the stock offers value despite current headwinds.

For the fiscal fourth quarter, Qualcomm forecast chip segment sales at a midpoint of $9.3 billion, compared with analyst estimates of $9.19 billion. The company expects adjusted profit of about $2.85 per share, above estimates of $2.83 per share.

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