Qualcomm Falls as Margin Pressure Offsets Revenue

Key Moments

Qualcomm Inc (NASDAQ:QCOM) reported third-quarter revenue of $9.95 billion, topping estimates but declining 4% year over year from $10.37 billion.
Fourth-quarter adjusted EPS guidance of $2.05 to $2.25, with a midpoint of $2.15, came in below the analyst consensus of $2.35 and pushed the stock down more than 5% in premarket trading.
Automotive revenue surged 61% year over year to $1.59 billion, contributing to 28% combined growth in automotive and IoT sales, while handset revenue fell 20% to $5.09 billion.

Earnings Beat on Revenue, Miss on Profitability

SAN DIEGO – Qualcomm Inc (NASDAQ:QCOM) released its third-quarter results, delivering revenue above market expectations but falling short on adjusted earnings, and issued an outlook for the current quarter that pressured the stock.

For the quarter ended June 28, the company reported adjusted earnings per share of $2.21, missing the analyst consensus of $2.23 by $0.02. Revenue reached $9.95 billion, surpassing the projected $9.67 billion but declining 4% year over year from $10.37 billion in the same period a year earlier.

Adjusted gross margin was approximately 54%, below the 55.6% level anticipated by analysts, highlighting profitability headwinds despite the top-line beat.

Guidance Disappoints on EPS Despite Solid Sales Outlook

Qualcomm’s outlook for the fourth quarter pointed to continued revenue strength but weaker-than-expected earnings.

Metric	Guidance / Result	Analyst Consensus	Commentary
Q3 Adjusted EPS	$2.21	$2.23	Missed by $0.02
Q3 Revenue	$9.95 billion	$9.67 billion	Beat; down from $10.37 billion YoY
Q3 Adjusted Gross Margin	~54%	55.6%	Came in below expectations
Q4 Adjusted EPS Guidance	$2.05 – $2.25 (midpoint $2.15)	$2.35	Midpoint well below consensus
Q4 Revenue Guidance	$9.7 billion – $10.5 billion (midpoint $10.1 billion)	$9.95 billion	Midpoint above consensus

The company projected fourth-quarter adjusted EPS of $2.05 to $2.25, with a midpoint of $2.15 that sits materially below the $2.35 analysts had expected. In contrast, revenue guidance for the period of $9.7 billion to $10.5 billion, with a midpoint of $10.1 billion, exceeded the consensus forecast of $9.95 billion.

Following the guidance release, Qualcomm shares dropped more than 5% in premarket trading Thursday.

Apple Exposure and Analyst Perspective

Qualcomm’s position in Apple’s iPhone 18 platform has been weaker than initially envisioned. Its share of Apple’s iPhone 18 came in below the roughly 20% originally forecast. Morgan Stanley analysts tied this to Apple no longer using its mmWave SKU, calling the development “a bit of an incremental headwind.”

Commenting on the broader strategic shift, Morgan Stanley analysts said, “Qualcomm’s diversification is occurring faster than expected as Apple exits, but the transition is not seamless: near-term margin dilution is meaningful and execution risk remains,” adding, “We stay EW, as we see a balanced risk/reward.”

Segment Performance: Handsets Under Pressure, Auto and IoT Accelerate

Within the QCT segment – which houses chips for handsets, automotive, and IoT devices – revenue came in at $8.5 billion, a 5% year-over-year decline.

Segment	Q3 Revenue	Year-over-Year Change	Notes
QCT Total	$8.5 billion	-5%	Includes handsets, automotive, IoT
Handsets	$5.09 billion	-20%	Significant decline
Automotive	$1.59 billion	+61%	23 consecutive quarters of double-digit YoY growth
IoT	$1.83 billion	+9%	Contributed to diversification
Automotive + IoT Combined	–	+28%	Combined growth across the two categories
QTL Licensing	$1.28 billion	-3%	Licensing revenue decline

Handset revenue within QCT fell 20% year over year to $5.09 billion, underscoring ongoing softness in the core smartphone market. Automotive revenue rose to $1.59 billion, a 61% year-over-year increase and the 23rd consecutive quarter of double-digit annual growth. IoT revenue climbed 9% to $1.83 billion. Combined, automotive and IoT revenues advanced 28% year over year.

The QTL licensing segment generated $1.28 billion in revenue, a 3% decline compared with the prior-year quarter.

Management Commentary and Cost Environment

Discussing the quarter, Cristiano Amon, President and CEO of Qualcomm Inc, stated, “Despite a challenging memory and supply environment, our third quarter results reflect solid execution of our growth strategy, with quarterly revenues at the high end of guidance.”

The company pointed to a broad-based rise in semiconductor input costs, spanning wafer fabrication, assembly, test, advanced packaging, memory, and other materials. In response, Qualcomm indicated it is taking steps to adjust product pricing to reflect these higher input costs.