Qualcomm (QCOM), a leading semiconductor and telecommunications equipment company, released its fiscal Q1 2025 earnings report on Wednesday, February 5 with its numbers strongly beating market estimates.
The results highlight significant growth across various segments, driven by strong demand for smartphone components and strategic diversification into AI-powered products, but also faced trouble with the intellectual property licensing revenue and geopolitical tensions.
Source: TradingView
Financial Performance
Qualcomm reported revenues of $11.67 billion, well above expectations of $10.91 billion, and up 18% on the year. Earnings per share (EPS) stood at $3.41, surpassing analysts’ expectations of $2.97. Qualcomm said net income increased 15% to $3.18 billion. This surge in profitability indicates the company’s strong financial position and ability to capitalize on growing market demand. ⁽¹⁾
Source: Yahoo! Finance
The chart shows Qualcomm’s quarterly revenue, highlighting that revenue has been consistently rising since mid-2023.
Behind Qualcomm’s Surge and Future Guidance
Qualcomm’s fiscal Q1 2025 performance was driven by strong growth in its chip segment, with sales increasing by 20% year-over-year to $10.1 billion, surpassing expectations.
The smartphone chip business continued its success, growing 13% to $7.6 billion, exceeding analyst predictions. Qualcomm has also been focusing on diversification, with CEO Cristiano Amon highlighting the company’s fiscal 2029 target of $22 billion in non-handset revenues. ⁽²⁾
The company saw impressive growth in its automotive and Internet-of-Things (IoT) segments. Automotive chip revenue surged 61% to $961 million, beating forecasts, while IoT sales rose 36% to $1.55 billion, also surpassing expectations. The IoT segment continues to gain momentum following the launch of Qualcomm’s PC chips, which helped the company maintain growth in this area. ⁽³⁾
Looking forward, Qualcomm issued strong guidance for Q2 2025, projecting revenues between $10.3 billion and $11.2 billion, up 15% year-over-year. The company also expects EPS of $2.80, which would represent a 15% increase compared to the previous year. ⁽⁴⁾
Challenges and Risks
After the earnings release, Qualcomm declined 4.4% as intellectual property licensing revenue fell slightly short of Wall Street expectations.
Qualcomm faces challenges due to its heavy reliance on the smartphone market, which makes up 75% of its chip revenue. The smartphone market has shown slower growth, with mid-single-digit unit sales growth in recent years.
The company’s high-end chip sales have been growing, but analysts remain sceptical about maintaining this momentum, particularly with Apple set to replace Qualcomm’s 5G chips by 2026. ⁽⁵⁾
Qualcomm’s business also faces risks from its reliance on China, which accounted for 46% of its 2024 revenue. With the Chinese government pushing to reduce reliance on US chips, Qualcomm could lose market share in lower and mid-range smartphones. ⁽⁶⁾
However, Qualcomm’s automotive and IoT segments are growing rapidly, providing some diversification from the cyclical smartphone business. Additionally, the loss of Apple’s business and potential declines in licensing revenue pose future challenges.
