Qualcomm Earnings Preview: Can IoT, Auto, and AI Offset Smartphone Slowdown and Patent Risks?

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Qualcomm (QCOM) is set to release its fiscal third-quarter 2025 earnings after the market close on July 30, with Wall Street expecting another closely watched update from the chipmaker at the center of the global 5G and AI buildout. Analysts forecast adjusted EPS of $2.71, up 16.3% from a year ago, on revenue of $10.34 billion, reflecting a 10.1% increase year-over-year. Investors will be watching not only Qualcomm’s core smartphone business but also its progress in diversifying into automotive, IoT, and edge AI. The results come amid heightened scrutiny of intellectual property rules under the Trump administration and persistent macro headwinds tied to tariffs and slowing handset demand.

Last quarter, Qualcomm delivered revenue of $10.8 billion and non-GAAP EPS of $2.85, with strong showings from its automotive segment (+59% YoY) and IoT (+27% YoY). Handset revenues grew 12% year-over-year to $6.9 billion, showing resilience in a market many feared was stalling. Management guided Q3 revenues of $9.9 billion to $10.7 billion, and EPS of $2.60 to $2.80, while reiterating long-term ambitions to drive $22 billion in non-handset revenues by fiscal 2029.

The key metrics to watch tonight start with smartphone demand. Qualcomm remains the leading supplier of premium-tier Android chips, but competition is intensifying. Analysts expect modest handset revenue growth of around 10%, though Apple’s push to develop its own in-house modem chips and Huawei’s resurgence pose structural risks. Susquehanna recently flagged weaker-than-expected 5G and Wi-Fi 7 adoption as lower-end launches dominated. Still, Qualcomm’s premium-tier attach rates remain a critical driver for margins.

Beyond handsets, investors will focus on automotive and IoT, Qualcomm’s fastest-growing divisions. Automotive revenues approached $1 billion last quarter, driven by increased Snapdragon content in next-generation vehicles. IoT delivered $1.6 billion in Q2, powered by industrial and connectivity demand. Analysts are looking for 15–20% growth in these areas in Q3. Progress here is key to demonstrating Qualcomm’s diversification away from cyclical handset dependence.

AI integration is another major theme. Qualcomm’s acquisition of Alphawave Semi, a $2.4 billion deal announced earlier this month, bolsters its position in AI ASIC development, particularly for high-speed interconnects and chiplet-based designs. KeyBanc called the move a positive step toward widening Qualcomm’s reach in the data center and AI inference markets. The acquisition is expected to be mildly dilutive near term, but analysts argue it enhances long-term competitiveness against Nvidia and other custom silicon players.

Geopolitics remain a looming risk. Qualcomm derives a large share of revenue from China, where tariffs and trade tensions under the Trump administration could disrupt demand. Reports this week indicated the administration is reviewing patent rules that could impact Qualcomm’s licensing business, a core profit driver. While details remain sparse, the market has shown sensitivity to such headlines, with Qualcomm stock dipping briefly after news broke.

From a market perspective, sentiment heading into earnings is mixed. On one hand, Qualcomm has beaten EPS estimates 100% of the time and revenue estimates 88% of the time over the past two years. On the other, the stock has historically struggled post-earnings, finishing lower in its next-day session after all four quarterly reports in the past year, including an 8.9% drop in May. Options traders are pricing in a 9% move this time—above the 6.3% average two-year swing.

Analysts remain split. BofA notes near-term headwinds but reiterates a Buy with a $200 target, citing undervaluation at just 12x P/E versus the historical 15–18x range. Bernstein’s Stacy Rasgon also sees Qualcomm as “unfairly oversold,” pointing to strong business momentum and strategic M&A. Meanwhile, Seaport downgraded to Neutral, warning that smartphone maturity and Apple’s modem transition limit excitement in the near term.

Comparisons to last quarter provide useful context. Q2 showed sequential revenue of $10.8 billion, down from Q1’s $11.7 billion due to normal seasonality, but automotive and IoT remained bright spots. Management’s tone emphasized resilience, with CEO Cristiano Amon highlighting Qualcomm’s ability to consistently forecast and hit targets—what some call the new gatekeeper for IPO- and large-cap tech success. Tonight, investors will be gauging whether that consistency continues amid macro noise.

Technical traders note the stock has run into resistance at $162 since early June, with support around $153 and the 50-day moving average. Year-to-date, shares are up 5.7%, lagging Nvidia and other AI-driven peers. Calls have been unusually popular, with a 50-day call/put ratio of 2.26, reflecting elevated bullish speculation heading into earnings.

The stakes tonight are clear. Qualcomm must prove it can balance a maturing handset market with robust growth in automotive, IoT, and AI. Investors will also parse commentary on tariffs, China demand, and the patent probe for clues on macro exposure. With CME Fed funds futures showing a 68% chance of a September rate cut and 65% odds for another in December, Qualcomm’s report comes in a market where liquidity expectations are improving—but execution remains paramount.

Bottom line: If Qualcomm delivers on smartphone stability and double-digit growth in automotive and IoT, it could reinforce confidence in its diversification strategy. But any cracks in handset guidance or tariff commentary may test investor patience yet again.