Qualcomm Earnings Preview: Can the Chip Giant Maintain its Momentum?

Qualcomm Incorporated (QCOM), a linchpin of the mobile technology landscape, is set to release its next earnings report today, and analysts are keenly watching to see if the company can sustain its recent growth trajectory amidst a complex global environment.

The market anticipates a strong showing, with analysts projecting earnings per share (EPS) of $2.87 for the quarter, a 6.7% increase compared to the same quarter last year. Revenue is also expected to climb, reaching $10.76 billion, a 5.01% surge from the year-ago period. These expectations are fueled, in part, by Qualcomm's aggressive push into new markets, particularly the data center space.

Qualcomm's stock has experienced a wide range over the past 52 weeks, fluctuating between a low of $120.80 and a high of $205.55, highlighting the inherent volatility in the semiconductor sector. The stock's current trading price positions it closer to the higher end of this range, suggesting market optimism driven by recent strategic moves. Key among these is Qualcomm's ambitious foray into the data center market.

The recent unveiling of the AI200 and AI250 chips designed for data centers sent ripples through the market, causing a surge of over 10% in Qualcomm's stock price on the day of the announcement (October 27th). These chips, intended to compete directly with Nvidia and AMD's high-end GPU configurations, represent a significant diversification effort for Qualcomm, which has historically been heavily reliant on the mobile phone market. The AI200 is slated for release in 2026, with the AI250 following in 2027.

Further bolstering its data center ambitions, Qualcomm is in the process of acquiring Alphawave Semi for approximately $2.4 billion. This acquisition, expected to close in the first quarter of 2026, is aimed at accelerating Qualcomm's expansion into the data center market by providing access to low-power, high-performance chip technology crucial for AI workloads.

However, Qualcomm's path is not without its challenges. The company is currently facing an antitrust investigation by Chinese regulators regarding its acquisition of Israeli automotive chipmaker Autotalks.

This probe raises concerns about potential disruptions to Qualcomm's operations in China, a critical market for the company. The investigation focuses on whether Qualcomm violated China's antitrust laws by failing to properly inform regulators about the deal.

Adding another layer of complexity, reports have surfaced suggesting Qualcomm is considering acquiring Intel as part of its diversification strategy. Such a merger would create a semiconductor behemoth, impacting various sectors including smartphones, PCs, and servers.

However, analysts anticipate significant antitrust scrutiny due to the sheer scale of the combined entity. Apollo Global Management's proposed $5 billion investment in Intel further complicates this potential scenario.

Despite strong second-quarter fiscal 2025 results, which showcased a 15% year-over-year revenue increase to $10.84 billion and a 17% increase in non-GAAP EPS to $2.85, Qualcomm’s stock experienced a 6.1% decline during the week of the announcement. This decline may have reflected market concerns over future revenue streams and increasing competitive pressures.

On a positive note, Qualcomm's Board of Directors approved a dividend increase in March 2024, raising the quarterly cash dividend from $0.80 to $0.85 per share. This move underscores the company's commitment to returning capital to shareholders.

While the market is largely optimistic about Qualcomm's foray into the data center market, a contrarian perspective suggests that the challenges ahead may be underestimated. The data center market is dominated by established players like Nvidia and AMD, who possess significant technological advantages and established customer relationships. Qualcomm's AI200 and AI250 chips, while promising, are still unproven in real-world deployments.

Furthermore, the long lead times associated with data center chip development and deployment mean that it will be several years before Qualcomm can generate significant revenue from this market. The Alphawave Semi acquisition, while strategically sound, also carries integration risks. The potential acquisition of Intel, though transformative, could prove to be a distraction, diverting resources and management attention away from Qualcomm's core businesses.

Perhaps the market is too easily swayed by the shiny allure of AI and overlooking the fundamental challenges Qualcomm faces in disrupting a well-entrenched industry. This could lead to inflated expectations and potential disappointment down the line, making a cautious approach to QCOM stock advisable, particularly given its current high valuation relative to its historical averages.