QCOM Shares Gain 28.2% in Three Months: How to Play the Stock?

Qualcomm Incorporated QCOM has gained 28.2% in three months compared with the Electronics – Semiconductors industry’s growth of 69.3%. The stock has underperformed the Zacks Computer & Technology sector but outperformed the S&P 500 during the same time frame.

The company has underperformed its competitor, Broadcom Inc. AVGO, but outperformed Intel Corporation INTC. Shares of AVGO have surged 86.8%, while INTC has gained 12.3%.

QCOM Rides on Healthy Demand Trends, Product Innovation

Qualcomm is benefiting from solid momentum in the premium smartphone segment.  Particularly, the Qualcomm Snapdragon 8 Elite has garnered strong market traction from several leading smartphone manufacturers across the world. The chipset includes one of the world’s fastest mobile CPUs with 4.32 GHz peak CPU speeds, and the Qualcomm Adreno GPU ensures remarkable graphics performance. All these, combined with the Qualcomm Hexagon NPU, set a new benchmark for AI. The chipset perfectly hit the sweet spot between top-tier performance and power efficiency. It also brings studio-quality audio and AI-powered photography features. Integrated Snapdragon X80 5G Modem-RF System supports multi-gigabit 5G connectivity and WiFi 7. 

Qualcomm is also closely collaborating with original equipment manufacturers to extend the capabilities of the Snapdragon 8 Elite chipset. Owing to these factors, the Snapdragon Elite is integrated in various flagship smartphones such as Samsung Galaxy S25 Ultra, Xiaomi 14 Ultra, HONOR Magic6 Pro, ASUS ROG Phone 8 Pro, OnePlus 12 and more. 

Apart from the premium segment, Qualcomm is steadily expanding its portfolio for the mid-range smartphone segment. Snapdragon 7 Gen 4 chipsets, its latest addition for this segment, is already adopted by HONOR and VIVO. Steady customer wins are driving growth in the handset business. The company reported revenues of $6.93 billion in the first quarter of 2025, up 12% year over year. Per our estimate, handset revenues are projected to reach $27.6 billion in 2025, implying 11.3% year-over-year growth.

The company is also placing a strong emphasis on developing advanced chipsets for the emerging market of AI PCs. Its Snapdragon X chip for mid-range AI desktops and laptops is also gaining strong popularity. The company’s efforts to diversify portfolio offerings increase resilience in the model.

Challenges for QCOM

However, competition in the mobile chipset market is intensifying for multiple factors. Qualcomm has been facing challenges from low-cost chip manufacturers like MediaTek and Rockchip in the mid-range smartphone segment. Long-term clients, such as Apple and Samsung, are increasingly moving towards in-house chip development. In the iPhone 16e, Apple has replaced Qualcomm’s cellular modem with its own C1 modem. Samsung’s Exynos chipsets are direct competitors to Qualcomm Snapdragon chips.
 
Despite recent setbacks, Intel has remained a strong player in the PC market. The Intel Core Ultra Processor series is witnessing healthy momentum in the AI PC market. Several manufacturers, such as HP, Dell and Lenovo, have opted to deploy Intel AI chips in their AI PC products. This can pose a significant challenge to Qualcomm’s AI PC chipset business. Broadcom is also a major supplier of wireless connectivity and RF technology.  Qualcomm is facing competition from Broadcom in 5G modems and RF component verticals. 

Qualcomm derives a significant portion of its revenues from the international market and is highly exposed to the demand environment in China. Despite recent positive developments in the U.S.-China trade agreement, heavy reliance on Chinese manufacturers remains a concern. Conflicting interests of the United States and China in several geopolitical and macroeconomic issues can impact trade relations.

Estimate Revision Trend of QCOM

Earnings estimates for 2025 have decreased 0.17% to $11.71 over the past 60 days, while the same for 2026 has decreased 2.23% to $11.82. This portrays bearish sentiments about the stock’s growth potential from investors.

Key Valuation Metric of QCOM

From a valuation standpoint, QCOM appears to be trading relatively cheaper compared to the industry. Going by the price/earnings ratio, the company’s shares currently trade at 13.77 forward earnings, lower than 32.87 for the industry and stock’s mean of 17.22.

End Note

The strength of its business model, revenue diversification and the ability to respond proactively to the evolving market scenario are major growth drivers for Qualcomm. Strong focus on innovation and close collaboration with OEMs are fostering growth in the handset and IoT markets.

However, intensifying competition and the trend of in-house chip development are hindering revenue growth. The downtrend in estimates underscores dwindling investors’ confidence. With a Zacks Rank #3 (Hold), Qualcomm appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research