Qualcomm Shares Slide 8% as Handset Concerns and Tepid Outlook Overshadow Strong IoT and Automotive Growth

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Qualcomm shares tumbled about 8% in the wake of its fiscal third-quarter report, slipping through key support levels as investors digested results that, while above Wall Street expectations on paper, fell short of loftier hopes after the stock’s recent rally. The San Diego-based chipmaker posted adjusted EPS of $2.77 on revenue of $10.37 billion, narrowly beating consensus estimates. Yet the guidance for the September quarter landed more in line than ahead of the Street, particularly in handsets, which remains Qualcomm’s primary revenue driver. The muted outlook and concerns over competitive pressures from Apple and China overshadowed strong growth in automotive and IoT, leaving investors cautious despite management’s upbeat tone.

By the numbers, Qualcomm delivered adjusted EPS of $2.77 versus consensus of $2.71, while revenue of $10.37 billion edged past the $10.35 billion expected. Net income was $2.67 billion, or $2.43 per share, up from $2.13 billion, or $1.88 per share, a year ago. The QCT segment, which houses handsets, IoT, and automotive, reported $8.99 billion in sales, up 11% year over year, with EBT margins at 30%. Within QCT, handset revenues rose 7% to $6.3 billion, IoT gained 24% to $1.7 billion, and automotive set a new record at $984 million. Meanwhile, Qualcomm’s QTL licensing arm brought in $1.32 billion, up 11% from last year. On capital returns, the company returned $3.8 billion to shareholders through $2.8 billion in repurchases and $967 million in dividends.

So why did the stock slide? Investors appear unimpressed by handset momentum, which came in just shy of expectations at $6.33 billion versus the Street’s $6.44 billion. Guidance also raised eyebrows. Management forecast Q4 adjusted EPS of $2.75–$2.95 (midpoint $2.85) and revenue of $10.3–$11.1 billion (midpoint $10.7B), roughly in line with consensus of $10.6 billion and $2.83 EPS. That range, while not a miss, suggests no meaningful acceleration in the near term. Analysts also pressed on the call about the sustainability of China demand and the looming loss of Apple as a modem customer, both overhangs for the stock.

CEO Cristiano Amon struck an upbeat tone, highlighting Qualcomm’s diversification strategy. “Our momentum in automotive and IoT is the result of strong execution of our growth and diversification strategy,” he said, pointing to a fiscal 2029 target of $22 billion in combined revenue from those two businesses. He also touted Qualcomm’s AI push, referencing Samsung Galaxy AI and Google Gemini AI adoption in smartphones, and noting progress with Snapdragon X platforms in PCs. Qualcomm now claims 9% share of Windows laptops above the $600 tier and expects more than 100 Snapdragon X designs to be commercialized through 2026.

Amon also spotlighted the planned acquisition of Alphawave IP Group, which he described as a “global leader in high-speed wire connectivity and compute technologies for data centers, AI, data networking and data storage.” He said Qualcomm is in “advanced discussions with a leading hyperscaler” to supply AI chips, a signal that the company intends to extend its relevance beyond the smartphone market. CFO Akash Palkhiwala reinforced the diversification message, pointing out that IoT revenues rose 24% year over year and automotive set records, while emphasizing that Q4 guidance implies revenue growth of 12% and EPS growth of 16% versus fiscal 2024.

The Q&A session, however, underscored investor unease. Analysts from TD Cowen, JPMorgan, Bernstein, and Deutsche Bank pressed on handset growth drivers given Qualcomm’s shrinking Apple share, the sustainability of China sales, and the execution risk around Alphawave integration. Palkhiwala dismissed concerns of Chinese demand “pull-ins,” attributing growth instead to new product launches. He also guided for “normal seasonality” into the December quarter, though margins may face pressure as handset mix shifts.

On patents, the QTL licensing segment—home to Qualcomm’s trove of 5G-related IP—remains a stable contributor at $1.3 billion in revenue, but questions around long-term licensing power linger. Qualcomm faces ongoing legal and regulatory scrutiny in multiple jurisdictions, a perennial risk given its role in setting wireless standards. Management did not flag any new patent disputes on the call but emphasized licensing as a steady revenue stream.

The risks facing Qualcomm are multifaceted. The near-term drag stems from a reliance on smartphones, with Apple’s plan to transition away from Qualcomm modems a looming headwind. Tariff policy also clouds visibility: the White House’s evolving stance on tech imports could complicate supply chains and demand. Meanwhile, while IoT and automotive growth remain robust, they are not yet large enough to offset potential handset declines. Execution risk on the Alphawave deal and hyperscaler ambitions also looms, with management careful not to overpromise on data center traction.

Despite those risks, Qualcomm reiterated confidence in its strategy. “Our leadership in AI processing, high-performance and low-power computing and advanced connectivity positions us to become the industry platform of choice as AI gains scale at the edge,” Amon said. The company is betting heavily that AI-enabled smartphones, PCs, and connected devices will drive its next wave of growth.

Bottom line: Qualcomm delivered a solid Q3 on paper, but the stock’s slide reflects skepticism that beats in IoT and automotive can offset looming handset headwinds and uncertainty around Apple and China. With shares breaking support, the burden is now on management to prove that diversification and AI initiatives can translate into sustained revenue growth. Investors may give Qualcomm credit for long-term positioning, but for now, the market remains unconvinced.