Qualcomm reported better-than-expected fiscal first-quarter earnings today although in after-hours trading shares of the fabless chip designer plunged. First-quarter earnings came in at $3.41 per share which was 24% above last year’s fiscal Q1 results and the earnings were far beyond the $2.96 earnings per share number that Wall Street expected. Revenue, at $11.67 billion, rose 18% on an annual basis.
The unit that designs and sells chips to mobile device manufacturers saw its revenue rise 13% year-over-year to $7.57 billion. Wall Street analysts speaking to FactSet were looking for Qualcomm to announce chip sales for mobile products of $7.04 billion which would have been an annual increase of only 5%; Qualcomm more than doubled that estimate. Demand was heavy for Qualcomm’s Snapdragon chipsets used on premium, flagship smartphones according to company CEO Cristiano Amon.
Qualcomm CEO Amon also pointed out that the company will benefit from the recent release of the DeepSeek R1 AI model out of China. That’s because its Snapdragon chips can run DeepSeek on device rather than in the cloud. Qualcomm also sells the chips used by Meta to drive its popular Ray-Ban smart glasses. In addition, the first Snapdragon Elite chips for laptops went on sale last year and already Qualcomm has a 10% market share in chips for laptops priced at $800 and above.
So if everything is going good, why did Qualcomm’s shares drop $7.98 or 4.54% in after hours trading when the numbers were released? The decline is being blamed on the company’s Intellectual Property licensing revenue which has a high profit margin of 75% compared to 32% for chips. A small miss in expectations in this segment ($1.54 billion in revenue versus analysts’ expectations of $1.56 billion) led to the sell-off in the stock.To make matters worse, 2025 licensing revenue is expected to be 2% lower than estimates.
Qualcomm’s fastest-growing business segment is its automotive unit which had a strong 61% gain in fiscal Q1 revenue to $961 million.
