Qualcomm Delivers Strong Q1 Results, but Stock Faces Post-Earnings Pressure

Qualcomm reported fiscal first-quarter results that surpassed Wall Street expectations, with adjusted earnings per share (EPS) of $3.41 compared to analyst estimates of $2.96. Revenue came in at $11.67 billion, exceeding consensus estimates of $10.93 billion and marking an 18% year-over-year increase. The robust results were driven by strong growth across Qualcomm’s key business segments, particularly in mobile handsets, automotive, and Internet of Things (IoT). Despite the strong numbers, shares of Qualcomm are slipping in after-hours trading, struggling to hold above key technical levels.

Key Business Metrics and Segment Performance

Qualcomm’s core chip division, QCT, which includes sales from physical chips, saw revenue rise 20% to $10.08 billion, ahead of the $9.34 billion estimate. Within QCT, the handset segment brought in $7.57 billion, marking a 13% year-over-year increase and surpassing expectations of $7.01 billion. This strength was fueled by strong demand for premium-tier smartphones, particularly in China, and Qualcomm’s continued dominance in Samsung’s latest Galaxy devices.

The IoT business saw a sharp 36% increase in revenue to $1.55 billion, exceeding expectations of $1.39 billion. This growth was attributed to strong demand for AI-enabled computing devices, industrial IoT applications, and Qualcomm’s Snapdragon Elite PC chips. Meanwhile, the automotive segment, a key growth driver in Qualcomm’s diversification strategy, surged 61% to $961 million, comfortably beating the $901.9 million estimate. This momentum is being fueled by increasing demand for Qualcomm’s digital cockpit solutions and assisted driving technologies.

On the licensing side, Qualcomm’s QTL division reported $1.54 billion in revenue, growing 5.1% year-over-year but slightly missing estimates of $1.55 billion. Qualcomm continues to secure long-term licensing agreements, particularly in China, where it finalized deals with major smartphone makers, further solidifying its IP-driven revenue model.

Guidance and Market Reaction

Qualcomm’s outlook for the second quarter was solid, with revenue guidance between $10.3 billion and $11.2 billion, exceeding the $10.35 billion analyst estimate at the midpoint. The company also guided for adjusted EPS of $2.70 to $2.90, again surpassing expectations of $2.69 at the midpoint. Additionally, QCT revenue is projected to be between $8.9 billion and $9.5 billion, ahead of the $8.92 billion estimate, while QTL revenue is expected to range from $1.25 billion to $1.45 billion.

Despite the upbeat earnings and guidance, Qualcomm shares initially rose in after-hours trading but have since moved lower, dropping toward the 20-day moving average at $166. The stock had rallied into earnings, testing resistance at the 200-day moving average around $175, which appears to be acting as a technical ceiling for now. Investors will be closely watching the company’s conference call for any additional commentary from CEO Cristiano Amon, particularly regarding its long-term diversification strategy, AI chip initiatives, and competitive positioning in the premium smartphone market.

Key Drivers and Long-Term Considerations

Qualcomm’s strong results highlight the company’s ability to maintain growth in the smartphone segment while accelerating expansion in automotive, IoT, and AI-driven computing. However, challenges remain, particularly with the expected loss of Apple’s 5G modem business in the coming years. Beginning this fall, Apple plans to replace Qualcomm’s chips with its own in-house designs, which could impact Qualcomm’s long-term revenue stream.

Additionally, Qualcomm continues to face risks related to its heavy exposure to China, which accounts for nearly half of its revenue. While demand from Chinese smartphone makers remains strong, geopolitical tensions and China’s push to develop its own semiconductor capabilities could present headwinds in the future.

On the positive side, Qualcomm’s push into AI-driven applications, including Snapdragon-powered AI PCs and advanced automotive chips, provides an important avenue for long-term growth. The company expects to generate $22 billion in non-handset revenue by fiscal 2029, underscoring its strategy to reduce dependence on smartphone chips.

Investor Takeaway

Qualcomm delivered a strong quarter, with robust earnings and revenue beats, along with an encouraging outlook. However, the stock’s initial post-earnings decline suggests that investors may be taking profits after the recent run-up or focusing on longer-term challenges. The 200-day moving average at $175 remains a key resistance level, while the 20-day moving average at $166 is now being tested as a potential support level. Investors should keep an eye on CEO Cristiano Amon’s commentary during the earnings call for insights into Qualcomm’s long-term strategy, particularly in AI, automotive, and licensing.