Qualcomm’s Strategic Shift: Non-Handset Growth Drives Future Potential

Qualcomm’s Q2 2025 earnings revealed a compelling narrative of diversification, with its non-handset businesses—Automotive and IoT—surging ahead to collectively deliver $2.54 billion in revenue. This growth underscores the company’s transition from reliance on smartphone chips to leadership in emerging tech markets like automotive computing and industrial IoT. Let’s dissect the numbers and assess the investment implications.

Ask Aime: What's next for Qualcomm's automotive and IoT business units after Q2 2025 earnings?

The Non-Handset Surge: Automotive Leads the Charge

Qualcomm’s Automotive segment reported $959 million in revenue, a 59% year-over-year (YoY) jump, driven by its Snapdragon Digital Chassis platform. This platform integrates advanced computing into vehicles, from digital cockpits to ADAS systems. Notably, qualcomm secured 30 new automotive designs in Q2, including five ADAS programs and partnerships with Chinese automakers like Nio and Great Wall.

The segment’s momentum is further evidenced by its long-term target: $8 billion in automotive revenue by 2029, up from $959 million today. This reflects a 790% growth ambition over five years, fueled by the global shift toward electric and software-defined vehicles.

IoT: The Quiet Giant of Growth

The IoT segment contributed $1.58 billion in revenue, a 27% YoY increase, with industrial IoT emerging as the fastest-growing sub-sector. Qualcomm is capitalizing on the shift from basic microcontrollers to AI-enabled microprocessors, a trend it’s accelerating through acquisitions like Focus AI and Edge Impulse. These moves bolster its edge in industrial automation, smart infrastructure, and enterprise networking.

The IoT expansion aligns with Qualcomm’s broader goal of reaching $22 billion in non-handset revenue by 2029, a target that hinges on continued strength in automotive, industrial IoT, and emerging markets like extended reality (XR).

Margins and Strategy: A Robust Foundation

The QCT (Qualcomm CDMA Technologies) division, which houses these segments, saw its EBIT margin rise to 30% in Q2, up from 29% a year earlier. This margin resilience, despite product mix shifts, signals operational efficiency and pricing power. Meanwhile, Qualcomm’s AI advancements—such as smaller, device-based GenAI models—are positioning it to capture value in compute-heavy applications like autonomous driving and smart factories.

Challenges and Risks

Qualcomm isn’t without headwinds. A major U.S. smartphone customer’s reduced reliance on Qualcomm chips could cut its market share to ~70%, potentially impacting handset revenue. Additionally, global trade tensions and tariff risks loom, though Qualcomm noted no material direct impacts in Q2.

However, the company’s focus on non-handset segments is strategically offsetting these risks. The $2.54 billion non-handset revenue now accounts for 24% of total QCT revenue, up from 18% two years ago. This diversification reduces reliance on volatile smartphone markets.

Investment Takeaways: A Forward-Looking Play

Qualcomm’s Q2 results highlight a clear path to long-term growth. The Automotive and IoT segments are not only meeting current targets but also expanding into high-margin, high-demand markets. With automotive revenue on track for an 8x increase by 2029 and IoT’s industrial applications scaling rapidly, investors can expect compounding revenue streams.

Conclusion: A Chip Leader in the Right Markets

Qualcomm’s Q2 results affirm its success in transitioning from a smartphone-centric model to a tech powerhouse in automotive, IoT, and AI. With 59% YoY automotive growth, 27% IoT expansion, and a 30% EBIT margin, the company is well-positioned to meet its $22 billion non-handset revenue target.

Investors should note that Qualcomm isn’t just riding a tech wave—it’s steering it. Its partnerships with automakers, edge AI capabilities, and leadership in automotive computing (e.g., Snapdragon Digital Chassis) create sustainable competitive advantages. While near-term handset headwinds exist, the $8 billion automotive revenue goal and $22 billion non-handset target provide a clear roadmap for future growth.

For long-term investors, Qualcomm’s strategic pivot to high-growth markets—backed by strong execution and margin discipline—makes it a compelling play on the future of connected intelligence. The data speaks for itself: Qualcomm is no longer just a chip supplier—it’s an ecosystem architect for the next era of tech.