Key Takeaways
Qualcomm Inc. (QCOM) reported fiscal second-quarter earnings that beat analyst estimates but offered a third-quarter forecast that fell short of expectations, reflecting persistent weakness in the smartphone market that overshadowed growth in its automotive business.
"The rise of AI agents is reshaping our roadmap across every platform we develop," Qualcomm CEO Cristiano Amon said, highlighting the company's strategic focus on artificial intelligence. However, JPMorgan analyst Samik Chatterjee warned that the smartphone industry "is hardly out of the woods," pointing to worsening memory shortages as a headwind.
The chipmaker reported non-GAAP earnings of $2.65 per share on revenue of $10.6 billion. While earnings per share topped the consensus estimate by 3.1 percent, revenue marked a 7 percent decline from the prior-year period, the fourth consecutive quarter of falling sales.
Shares of Qualcomm fell about 2 percent in after-hours trading. The company guided for fiscal third-quarter revenue of $9.2 billion to $10 billion, with the midpoint below the Wall Street consensus, driven primarily by continued softness in its core handset business.
Revenue from Qualcomm's handset segment, its largest, fell 13 percent year-over-year to $6.02 billion. The decline reflects a sluggish global smartphone market and increased competition. In contrast, the company's diversification efforts showed positive results. Automotive revenue surged 38 percent to a record $1.33 billion, and the Internet of Things (IoT) segment grew 9 percent to $1.6 billion.
Following the report, at least three Wall Street firms—Citi, JPMorgan, and Wells Fargo—raised their price targets on Qualcomm to $160. The move reflects optimism about the company's plan to ship an AI-focused chip to a major cloud computing provider in the fourth quarter of 2026. Despite the higher price targets, all three firms maintained their Neutral or Equal Weight ratings, signaling they want to see more proof of the AI strategy's execution before turning more bullish.
The mixed results highlight the crossroads for Qualcomm as it navigates a challenging handset market while pushing into higher-growth areas like automotive and data center AI. The guidance suggests the near-term pressure from smartphones will continue to weigh on results.
The report shows Qualcomm's critical pivot to automotive and AI is gaining traction, but it's not yet enough to offset the cyclical downturn in its largest market. Investors will now look to the company's Investor Day on June 24 for more concrete details on its data center and AI strategy.
This article is for informational purposes only and does not constitute investment advice.
