Qualcomm (QCOM) reported stronger-than-expected second-quarter earnings and revenue, driven by surging demand for AI-enabled chipsets across its core segments—handsets, automotive, and IoT.
Despite the solid results, shares tumbled more than 8% on Thursday as investors focused on the company’s cautious guidance for the current quarter, which pointed to a potential slowdown exacerbated by U.S.-China trade tensions.
Q2 Earnings Beat Buoyed by Broad-Based Growth
For the fiscal second quarter ended March 30, Qualcomm posted adjusted earnings per share of $2.85, topping Wall Street’s forecast of $2.82. Revenue came in at $10.98 billion, up 17% year-over-year and ahead of consensus estimates of $10.63 billion. The growth was broad-based: handset revenue climbed 12% to $6.93 billion, automotive surged 59% to $959 million, and IoT rose 27% to $1.58 billion.
The strong performance reflected sustained demand for Qualcomm’s premium-tier Snapdragon chipsets, which integrate generative AI capabilities. Handset sales were particularly supported by a recovering smartphone market in China and ongoing partnerships with OEMs such as Samsung and Xiaomi. Meanwhile, the automotive business continued to gain traction through the adoption of its Snapdragon Digital Cockpit and ADAS platforms, now integrated by 20 of the world’s top 25 carmakers.
The IoT segment also remained a bright spot, supported by industrial and consumer demand for edge AI and connectivity solutions. Devices powered by Qualcomm’s Snapdragon X Elite platform—including those from Microsoft (MSFT), Lenovo (IBM), and HP (HPE)—have gained momentum, with over 20 new PC models launched in the past year.
Muted Q3 Outlook Sparks Selloff
Despite the Q2 strength, Qualcomm’s third-quarter outlook fell short of investor expectations. The company forecast revenue between $9.9 billion and $10.7 billion, with the midpoint slightly below analysts’ consensus of $10.35 billion. EPS guidance of approximately $2.70 came in modestly above forecasts but failed to counter concerns over decelerating demand.
The muted guidance overshadowed CEO Cristiano Amon’s reassurances that Qualcomm remains focused on “technology leadership, strong customer relationships, and operational efficiency.” However, investors reacted swiftly, sending QCOM shares down more than 8% in Thursday’s trading session, extending year-to-date losses to over 10%.
Key concerns center around geopolitical risks and potential trade fallout. Roughly half of Qualcomm’s revenue is tied to China, exposing the company to significant downside if tariffs escalate. While there was no material impact from tariffs in Q2, CFO Akash Palkhiwala acknowledged the outlook is uncertain, citing possible indirect effects in the months ahead.
Dividend Strength and Long-Term Outlook Remain Positive
Amid near-term headwinds, Qualcomm remains on solid financial footing. The company announced a dividend increase to $0.89 per share, bringing its annual yield to 2.4%—well above the industry average. With a payout ratio around 33% and forecast EPS growth of 17.7% next year, Qualcomm’s dividend appears sustainable and primed for future increases.
Over the last decade, Qualcomm has consistently raised its dividend, growing it at a 7.8% annual clip. Combined with a 22% CAGR in EPS over the past five years, the stock continues to appeal to long-term income-focused investors. Its valuation—trading at a steep 40% discount to both the SOX and S&P 500—adds to its attractiveness amid market uncertainty.
Still, the company’s reliance on China and the volatile handset market keeps it vulnerable to macro shocks. Despite diversification efforts into automotive and IoT, handset sales still account for approximately 60% of total revenue. Qualcomm’s long-term strategy hinges on expanding AI chip adoption and capitalizing on design wins in autos and PCs—areas that showed strong momentum this quarter.
As Qualcomm navigates an increasingly complex global landscape, its ability to deliver on AI-driven growth while mitigating geopolitical and trade-related risks will be critical to sustaining investor confidence. For now, the company’s strong fundamentals are being tested by forces beyond its control.
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