Shares of Qualcomm Inc. declined on Thursday even after the chipmaker reported quarterly results that topped Wall Street expectations, as investors weighed solid fundamentals against expense growth, soft automotive guidance, and persistent licensing concerns.
Earnings beat and strong chip performance
For its fiscal fourth quarter, Qualcomm reported adjusted earnings of $3.00 per share, surpassing analyst estimates of $2.87, according to FactSet.
Revenue reached $11.27 billion, ahead of Wall Street’s $10.77 billion forecast.
Despite the strong results, shares fell about 1.9% in premarket trading, although it has recovered to being down 0.4% down.
Chip revenue, which is Qualcomm’s largest segment, came in at $9.8 billion, above the Street’s $9.4 billion consensus.
The company posted growth across all three chip categories: core smartphone processors, automotive systems, and Internet-of-Things (IoT) products.
Chip sales rose 13% year-over-year, and excluding its diminishing business with Apple, were up 18%.
While global Android handset sales remain muted, Qualcomm continues to dominate the high-end smartphone market, where it has benefited from rising demand for premium devices.
Licensing revenue, which often faces regulatory scrutiny, was lower year-over-year but fared better than expected.
The company’s first-quarter guidance also came in above expectations, though management noted that expense growth would exceed earlier projections and automotive chip sales were expected to be softer, partly offset by gains in other divisions.
Licensing pressure and Apple transition
Licensing, a key profit driver for Qualcomm, continues to face challenges.
The company earns royalties on every device using its cellular radio chips, a practice that has drawn scrutiny from antitrust agencies and friction with customers, particularly Apple.
While Qualcomm has avoided major US regulation, it has previously paid fines and altered licensing terms in markets such as China and South Korea.
Apple, one of its largest clients, settled a high-profile antitrust case with Qualcomm in 2019 but has since worked to replace Qualcomm’s 5G chips with its own silicon.
That process has begun in limited fashion, with some low-volume iPhones and the upcoming 2025 iPad Pro expected to feature Apple-designed chips.
However, Apple has yet to master the complex 5G “millimeter-wave” frequencies that remain a technological hurdle.
Qualcomm has long warned investors about the gradual loss of Apple’s chip business, suggesting that much of the expected impact is already priced into its shares.
Long-term bets on AI and diversification
Looking ahead, Qualcomm is betting on diversification and artificial intelligence to drive its next growth cycle.
Chief Executive Cristiano Amon highlighted progress in automotive and IoT segments while reaffirming the company’s commitment to edge AI and connectivity technologies.
The company introduced new AI accelerator chips and servers, which it expects will contribute meaningfully to revenue starting in 2027.
However, analysts note that breaking into the AI hardware market will be a long-term effort.
Qualcomm must convince customers to adopt its products over industry leader Nvidia, while also expanding beyond large cloud providers such as Amazon Web Services, Microsoft Azure, and Google Cloud, all of which are increasingly developing their own chips.
Analysts view Qualcomm’s quarter as a sign of healthy operational momentum but caution that near-term volatility could persist.
Questions about sustainable licensing income and the cyclical nature of smartphone demand continue to weigh on investor sentiment, even as the company strengthens its footing in new growth areas.
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