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Can Solid Automotive Revenues Propel QCOM Stock Amid Tariff Woes?
QualcommQualcomm(US:QCOM) ZACKSยท2025-08-11 14:36

Core Insights - Qualcomm Incorporated (QCOM) reported strong third-quarter fiscal 2025 results, with adjusted earnings surpassing estimates, driven by demand in IoT and automotive sectors [1] - The company anticipates reaching $22 billion in combined revenues from automotive and IoT by fiscal 2029 [1] Automotive Sector - Automotive revenues increased by 21% to a record $984 million, fueled by the adoption of the Snapdragon Digital Chassis platform [2] - Qualcomm expects automotive revenues to grow approximately 35% in fiscal 2025 [2] IoT Sector - IoT revenues rose by 24% to $1.68 billion, supported by demand for the Snapdragon AR1 chipset for AI smart glasses [2] - The company projects IoT revenues to grow around 20% in fiscal 2025 [2] Mobile and AI Developments - Qualcomm is enhancing its mobile licensing program and is well-positioned for long-term revenue growth due to strong 5G traction and a diversified revenue stream [3] - The Snapdragon X chip, aimed at mid-range AI desktops and laptops, features an 8-core processor and a neural processing unit (NPU) capable of 45 TOPS [5] Challenges in China - Qualcomm faces operational difficulties in China due to ongoing U.S.-China trade tensions, impacting its revenue from local smartphone manufacturers [6] - The company has a significant presence in China, but trade restrictions and tariffs have adversely affected its growth prospects in the region [6] Financial Performance and Market Position - Qualcomm's margins have been pressured by high R&D costs and operating expenses, with expectations of continued softness in the handset market [9] - The company's stock has declined by 9.4% over the past year, underperforming compared to industry growth of 51.5% [11] Estimate Revisions - Earnings estimates for fiscal 2025 have increased by 7.9% to $11.85, while estimates for fiscal 2026 have decreased by 2.7% to $11.86, indicating mixed investor sentiment [12] Overall Outlook - Despite robust automotive and Snapdragon traction, Qualcomm faces stiff competition and high R&D costs that may pressure profitability [15] - The company is reportedly implementing job cuts to sustain its business in China amid escalating tariffs, raising concerns about its long-term viability in the region [15]