QCOM Q2 Deep Dive: Broad-Based Growth, AI Strategy, and Market Skepticism

Wireless chipmaker Qualcomm (NASDAQ:QCOM) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 10.3% year on year to $10.37 billion. The company expects next quarter’s revenue to be around $10.7 billion, coming in 0.8% above analysts’ estimates. Its non-GAAP profit of $2.77 per share was 2.1% above analysts’ consensus estimates.

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StockStory’s Take

Qualcomm’s second quarter performance aligned with Wall Street’s revenue expectations but was met with a notable negative market reaction. Management attributed growth to strong execution in its automotive and Internet of Things segments, with each posting over 20% year-on-year gains. The handset business benefited from premium-tier launches and expanded collaborations, though management acknowledged a slightly weaker product mix compared to expectations. CEO Cristiano Amon emphasized the momentum in AI-powered devices, citing increased adoption of Snapdragon platforms in both smartphones and PCs. Despite these operational achievements, investor concerns were evident in the market’s response, reflecting a cautious outlook amid shifting end-market dynamics.

Looking ahead, Qualcomm’s forward guidance is shaped by new product launches and ongoing diversification beyond smartphones. Management pointed to the upcoming release of its next-generation Snapdragon chip and deepening partnerships with major device makers as key drivers. CFO Akash Palkhiwala highlighted expectations for continued strength in automotive and IoT revenues, and noted that operating discipline will be maintained even as investment grows in emerging areas such as data center and AI inferencing. Amon stated, “We expect the range of own device and agentic AI use cases will continue to expand and reshape the mobile industry,” underlining the company’s commitment to leading the AI transition across personal devices.

Key Insights from Management’s Remarks

Management linked the quarter’s results to expansion in automotive and IoT, stronger AI adoption in mobile and PC devices, and the announcement of a strategic acquisition, all contributing to the ongoing diversification of the business.

• Automotive and IoT expansion: Both segments saw robust demand, with automotive revenue driven by new vehicle launches and IoT benefiting from increased uptake of AI-enabled devices such as smart glasses and industrial solutions. Management reported 21% and 24% year-over-year growth in these segments, underscoring diversification away from handsets.
• Handset business product launches: The Snapdragon 8 Series continued to power flagship launches, notably through a multiyear agreement with Xiaomi and increased presence in Samsung’s premium tiers. Management noted that while product mix was slightly weaker than forecast, premium demand and new device launches offset this trend.
• Growth in AI-powered devices: Qualcomm highlighted the rising adoption of AI features in both smartphones and PCs, with the Snapdragon X Series gaining traction among major original equipment manufacturers. Management emphasized that over 100 new PC designs are expected through 2026, reflecting early but growing momentum in this segment.
• Data center entry and Alphawave acquisition: The company announced an agreement to acquire Alphawave IP Group, aiming to strengthen its position in high-speed connectivity and data center compute markets. Management sees this as a foundational move for AI inference and custom solutions, targeting initial revenue contributions by 2028.
• Strategic partnerships and ecosystem growth: New collaborations with companies like IBM and HUMAIN were cited as expanding Qualcomm’s reach in enterprise AI and cloud-to-edge solutions. Management also highlighted progress in edge networking and industrial automation as key growth vectors.

Drivers of Future Performance

Qualcomm’s outlook is anchored in the expansion of AI capabilities across devices, ongoing diversification, and disciplined investment in strategic growth areas.

• AI integration in devices: Management expects continued adoption of AI-driven features in smartphones, PCs, and wearables to drive demand for Snapdragon platforms. The company believes that the transition to agentic AI—where devices can act autonomously based on user context—will expand its addressable market and accelerate upgrade cycles.
• Automotive and IoT as growth engines: Both segments are projected to sustain double-digit annual growth, supported by new product launches and global partnerships. Qualcomm is targeting a combined $22 billion in automotive and IoT revenues by 2029 and sees the BMW ADAS launch and expanded smart glasses portfolio as important milestones.
• Disciplined investment and margin management: While expanding into data center and AI inference, management committed to careful operating expense management. CFO Akash Palkhiwala indicated that OpEx growth will remain limited, with resources reallocated to high-potential areas, helping to maintain the company’s long-term operating margin targets despite fluctuations in legacy handset revenues.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the commercial impact of new Snapdragon-powered flagship device launches and their adoption rates, (2) progress on closing the Alphawave acquisition and early customer wins in data center and AI inference markets, and (3) sustained growth in automotive and IoT revenues as new products and partnerships come to market. Execution against operating expense discipline and expansion into personal AI devices will also be important indicators of future performance.

Qualcomm currently trades at $153.75, down from $158.96 just before the earnings. Is the company at an inflection point that warrants a buy or sell? See for yourself in our full research report (it’s free).

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