Qualcomm (QCOM, Financial) reported strong Q2 2025 results, surpassing EPS and revenue expectations. Growth was driven by robust demand in handsets (+12%), automotive (+59%), and IoT (+27%), showcasing the momentum of its AI-enabled chipsets. However, Q3 guidance was in line with expectations, reflecting tariff uncertainties and softer chip demand.
- Despite efforts to diversify, handsets remain crucial, accounting for 60% of revenue. Handset revenue increased by 12% year-over-year to $6.5 billion, spurred by demand for premium smartphones with Snapdragon 8 Gen series AI capabilities, especially in a recovering Chinese market.
- Partnerships with OEMs like Samsung and Xiaomi and AI features like GenAI processing boosted demand. However, reliance on China presents tariff risks.
- Automotive was a standout with a 59% revenue surge, continuing a trend of strong growth driven by Snapdragon Digital Cockpit and ADAS platforms. Design wins with 20 of the top 25 automakers and high-margin software and licensing deals enhance profitability.
- IoT revenue grew 27%, supported by demand for edge AI and connected devices. The Snapdragon X Elite platform for Windows PCs is gaining traction with OEMs like Microsoft (MSFT, Financial), Lenovo, and HP, with over 20 PC models launched in the past year.
- Despite positive results, Q3 guidance is overshadowed by U.S. tariffs on Chinese imports, potentially disrupting supply chains and increasing costs, impacting handset and IoT segments. China's contribution to half of QCOM's revenue is both a growth driver and a risk due to tariffs.
QCOM's Q1 results showed 17% revenue growth with double-digit increases in main segments. However, tariffs and a soft Q3 outlook are causing a stock selloff. While AI-driven diversification and automotive momentum support long-term growth, trade policy risks may weigh on the stock short-term.
