Qualcomm Betting Big on Diversification as Earnings Loom Large

Qualcomm’s stock (NASDAQ: QCOM) has given holders precious little to smile about over the past year, with an 11.88% decline leaving plenty of questions leading into today’s earnings print.

Analysts are looking for $10.6 billion in revenue (up 13% YoY), and EPS of $2.81 today. Both numbers represent a decline on the previous quarter ($11.67 billion, $3.41 EPS), with key areas of focus likely to include:

• China Exposure: With 46% of FY2024 revenue derived from China, concerns remain regarding U.S.-China trade tensions and potential regulatory impacts.
• Inventory Adjustments: Investors will seek clarity on potential oversupply in smartphone chipsets, which could pressure margins in the QCT (Qualcomm CDMA Technologies) segment.
• QTL Health: Updates on licensing negotiations, particularly with Chinese OEMs, are crucial for the high-margin QTL division.

Significant risks remain despite promising developments. Qualcomm still derives a significant portion (around 52%) of its revenue from the mobile handset market, which saw global shipments decline 4.3% in Q1 2025 according to IDC. Competition in the lucrative AI chip space is fierce, particularly from NVIDIA and Broadcom in the data center market, reinforcing Qualcomm’s strategic focus on the edge.

Analyst expectations point towards modest growth in the period ahead, largely hinging on the continued success of Qualcomm’s diversification efforts beyond its core mobile base. Projections for the upcoming third quarter ending June 2025 stand at $10.35 billion in revenue and $2.68 earnings per share (EPS). Full-year fiscal 2025 estimates anticipate $43.61 billion in revenue (+8.57% YoY) and $11.21 EPS (+9.69% YoY).

The company grapples with persistent headwinds in its core mobile market while aggressively pursuing diversification into high-growth areas like automotive, industrial IoT, and edge artificial intelligence (AI).

Technically, the picture remains mixed, offering little clear direction for traders. A bearish “death cross” signal persists, with the 50-day moving average ($146.4) stubbornly remaining below the 200-day moving average ($158.5), often interpreted as a sign of a potential longer-term downtrend. However, shorter-term momentum indicators offer a glimmer of hope for bulls: the MACD line crossed above its signal line on April 24th, suggesting building positive momentum. The Relative Strength Index (RSI) sits at a neutral 58.4.

Automotive and IoT: Sustained Growth Engines

Qualcomm’s Q1 FY2025 results highlighted the strength of these diversification plays. The automotive segment logged a record $961 million in revenue (up 61% YoY) – its sixth consecutive quarter of record performance. The Snapdragon Digital Chassis continues to gain traction, dominating software-defined vehicle platforms with partnerships spanning major players like Hyundai Mobis and Amazon for AI-driven ADAS and in-cabin systems.

Meanwhile, the IoT segment surged 36% YoY to $1.5 billion, fueled by edge AI adoption in smart factories, logistics, and retail. The Snapdragon X Series processors for AI PCs, with over 80 designs reportedly in development, further aim to diversify revenue streams and challenge established CPU manufacturers in the burgeoning AI PC market.

Recent strategic moves highlight this diversification push. The collaboration with Finnish firm Epec represents a pivotal step in expanding its industrial IoT footprint. This alliance integrates Qualcomm’s Snapdragon Auto Connectivity Platform and Dragonwing processors with Epec’s expertise in non-road mobile machinery (NRMM) systems for sectors like mining, construction, and agriculture.

This partnership underscores Qualcomm’s focus on high-margin industrial applications, targeting a potential $900 billion total addressable market (TAM) by 2030, positioning the company as a critical enabler of Industry 4.0.

Edge AI Leadership

Qualcomm’s commitment to AI, particularly on-device or “edge” AI, was prominently featured at CES 2025. The Snapdragon X Elite platform for AI-powered PCs, tailored for Windows ecosystems, promises multi-day battery life and robust on-device AI inferencing capabilities. In automotive, the Snapdragon Ride Flex SoC integrates crucial ADAS (Advanced Driver-Assistance Systems) and infotainment functions onto a single chip. Collaborations, such as with Honeywell, are enhancing industrial AI sensors for applications like energy sector analytics.

Strengthening the Ecosystem and Consumer Trust

Beyond hardware, Qualcomm is reinforcing its ecosystem value. The commitment to provide 8 years of Android security updates for devices using its flagship Snapdragon 8 Gen series chips enhances consumer trust and device longevity. This move puts pressure on competitors and could increase the appeal of Snapdragon chipsets in mid-tier and premium markets.

Dividend Increase and R&D Focus

In a signal of financial confidence and commitment to shareholders amidst market volatility, Qualcomm recently raised its quarterly dividend by 4.7% to $0.89 per share. Concurrently, the company bolstered its long-term R&D focus by appointing Dr. Baaziz Achour, a key figure in 5G development, as its new Chief Technology Officer (CTO) to spearhead 6G and AI-driven connectivity research.

Analyst Perspectives and Valuation

Analysts hold mixed views. TD Cowen maintains a Buy rating with a $160 price target (approx. 15% upside from current levels), reflecting optimism about Qualcomm’s diversification success in IoT and automotive. Despite the stock’s 20% decline from February 2025 highs, it trades at a forward P/E ratio of approximately 13.1 (based on FY25 EPS estimate of $11.21), below the semiconductor sector average (around 18.4), potentially suggesting undervaluation if growth targets are met.

🟩 The Bull Case

• Successful Diversification: Strong growth in Automotive and IoT segments is reducing reliance on the volatile smartphone market.
• Edge AI Leadership: Snapdragon processors (X Elite for PC, Ride for Auto) position Qualcomm strongly in the growing on-device AI market.
• Strategic Partnerships: Collaborations like the one with Epec open up large new industrial markets.
• Shareholder Returns: Consistent dividend payments, recently increased, signal financial health and commitment to investors.
• Attractive Valuation: Forward P/E ratio below sector average suggests potential undervaluation if execution remains strong.
• Extended Android Support: Commitment to longer software updates could boost Snapdragon’s appeal in mobile.

🟥 The Bear Case

• Smartphone Market Dependency: Still significantly reliant (~52% revenue) on a slowing and competitive mobile handset market.
• Intense AI Competition: Faces formidable rivals (NVIDIA, Broadcom) in the broader AI chip landscape, particularly in data centers.
• Technical Weakness: The persistent “death cross” pattern raises concerns about the longer-term price trend.
• Geopolitical Risks: Significant revenue exposure to China (46% FY24) makes it vulnerable to trade tensions and regulations.
• Potential Inventory Issues: Lingering concerns about smartphone chip oversupply could pressure margins.
• QTL Royalty Risks: Potential disputes or renegotiations with major licensees (especially in China) could impact high-margin licensing revenue.
• Valuation Concerns: Some analysts (e.g., Morningstar) believe the stock might be overvalued relative to its fundamental fair value.

Qualcomm’s future trajectory depends heavily on its ability to successfully execute its diversification strategy, offsetting the cyclical weaknesses in the mobile sector with sustained growth in automotive, IoT, and the nascent AI PC market.