Qualcomm’s Fiscal First Quarter Surge Fizzles: Shares Plummet Despite Strong Earnings

Qualcomm Smashes Earnings Expectations, But Shares Drop

Qualcomm’s fiscal first-quarter earnings results are in, and they’re a mixed bag. While the company exceeded analyst expectations, its shares took a hit in after-hours trading, plummeting $7.98 or 4.54%.

Record Revenue and Earnings

Qualcomm reported a stunning $3.41 per share in earnings, a 24% increase over last year’s fiscal Q1 results. This far exceeded the $2.96 earnings per share that analysts had predicted. Revenue also hit a new high, reaching $11.67 billion, a 18% increase over last year.

Snapdragon Demand Soars

The company’s chip business saw a significant bump, with its Snapdragon chip designs and sales soaring 13% year-over-year to $7.57 billion. This represents a major turnaround from last year, when Snapdragon sales were relatively flat. Wall Street analysts were expecting a 5% year-over-year increase, but Qualcomm more than doubled that estimate. Demand for Qualcomm’s Snapdragon chipsets used on premium, flagship smartphones was exceptionally strong, driven by the Samsung Galaxy S25 series.

Samsung’s Favor

Qualcomm’s success is also thanks in part to Samsung’s decision to equip its entire Galaxy S25 flagship series with Qualcomm’s latest Snapdragon 8 Elite for Galaxy application processor (AP). Typically, these high-end devices outside of the US, China, and Canada would have been powered by Samsung’s own Exynos 2500 AP. However, poor yields achieved by Samsung Foundry for 3nm chip production led Samsung to choose Qualcomm’s chips instead. This move added an estimated $2 billion to Qualcomm’s coffers this year.

Diversifying Revenue Streams

Qualcomm is diversifying its revenue streams beyond its core smartphone business. The company has seen significant growth in its automotive unit, which reported a whopping 61% gain in fiscal Q1 revenue to $961 million. Additionally, Qualcomm has benefited from its partnership with Meta to drive the popular Ray-Ban smart glasses, as well as the sales of its first Snapdragon Elite chips for laptops, which have achieved a 10% market share in chips for laptops priced above $800.

Why Did Shares Drop?

So why did Qualcomm’s shares drop after the earnings release? The primary reason is that the company missed expectations in its Intellectual Property (IP) licensing revenue, a high-margin business that generates $1.54 billion in revenue, compared to analysts’ predictions of $1.56 billion. This unexpected miss led to a sell-off in the stock. Furthermore, 2025 licensing revenue is expected to be 2% lower than estimates, adding to the decline.

Conclusion

Qualcomm’s fiscal Q1 earnings report showed strong growth across multiple segments, but the missed IP licensing revenue expectations and soft guidance for next year’s licensing revenue sent shockwaves through the market. The company’s decision to diversify its revenue streams and focus on high-end smartphones and automotive may help mitigate any potential losses as the market transitions to 5G and next-generation devices.

Image credit: Qualcomm

Sources: FactSet