Qualcomm's Q3 Earnings: Slowing Growth and Q4 Guidance Falls Short

Qualcomm's Q3 earnings report showed a 10% revenue growth slowdown, with the Handset segment growing 7%, IoT business excelling with a 24% rise, and Auto segment growing 21%. Despite strong performances in IoT and Auto, the stock price dropped due to concerns about maintaining momentum amidst increasing competition and macroeconomic pressures.

Qualcomm (NASDAQ:QCOM) reported its fiscal third quarter earnings on July 30, 2025, showcasing a 10% revenue growth, a slowdown from the previous quarter. The company's non-GAAP earnings per share (EPS) reached $2.77, surpassing estimates by 2.2% and up 19% year over year [1]. Despite the strong performance in the automotive and IoT segments, which saw 21% and 24% growth respectively, the stock price dropped due to investor concerns about maintaining momentum amidst increasing competition and macroeconomic pressures [2].

The QCT segment, which includes mobile chips, automotive chips, and IoT chips, posted revenue of $8.99 billion (GAAP), up 11% versus Q3 fiscal 2024. The automotive chips segment saw its highest quarterly GAAP revenue to date, marking a 21% increase year over year, driven by a surge in design wins and growing demand for digital vehicle platforms. IoT chips, which power industrial and consumer devices, saw revenue climb 24% [1]. Handset chips, while growing 7% year over year, remained the largest business within QCT but saw a slower growth rate compared to the automotive and IoT segments [1].

The licensing segment (QTL), which includes intellectual property and patent licensing revenue, delivered $1.32 billion in revenue, a 4% increase year over year. This area continues to supply high margins, but growth remains moderate compared to the chip business [1].

Profitability improved as well, with Non-GAAP net income reaching $3.0 billion, reflecting higher margins in the QCT segment. This was supported by a 3 percentage point increase in QCT’s earnings-before-tax margin, which rose from 27% to 30% year over year [1].

Qualcomm's stock price dropped 4.9% in after-hours trading, reflecting investor concerns about Apple's shift to in-house modem chips and broader smartphone market challenges. The iPhone 16e, launched earlier this year, became the first Apple smartphone to use an in-house modem instead of Qualcomm's technology, removing a major revenue source for the San Diego-based company [2].

Despite the strong earnings, Qualcomm's financial health score is "great performance" according to InvestingPro [2]. The company's stock price closed at $159.06, up 13.77% in the last 3 months and down -12.10% in the last 12 months [2]. Bernstein analyst Stacy Rasgon maintained his Outperform rating and $185 price target for Qualcomm shares, believing the stock offers value despite current headwinds [2].

Looking forward, Qualcomm expects GAAP revenue to be between $10.3 billion and $11.1 billion, and projects Non-GAAP diluted EPS in the range of $2.75 to $2.95 for the fiscal fourth quarter [1]. Investors should continue to monitor Qualcomm’s progress in diversifying its product mix and customer base, especially amid risks posed by U.S.–China trade dynamics and competitive pressures in the smartphone and automotive markets.

References:
[1] https://www.mitrade.com/au/insights/news/live-news/article-8-1002376-20250731
[2] https://www.ainvest.com/news/qualcomm-q3-earnings-exceed-expectations-19-eps-increase-2507/