Shares of Qualcomm and Arm Holdings fell yesterday even though both chipmakers delivered solid earnings and revenue beats and provided optimistic guidance for the current quarter.
Qualcomm delivered stellar results, with first-quarter earnings before certain costs, such as stock compensation, coming to $3.41 per share and revenue rising 18 per cent to $11.67 billion. Those results blew Wall Street’s forecasts away. Analysts had expected the company to report earnings of just $2.96 on sales of $10.93 billion.
Qualcomm’s net income rose 15 per cent from a year earlier to $3.18 billion.
For the current quarter, Qualcomm said it’s looking at earnings of between $2.70 and $2.90 per share while forecasting revenue in a range of $10.2 billion to $11 billion. Once again, those numbers were well ahead of expectations, with the Street looking for a profit of $2.69 per share on sales of $10.34 billion.
Qualcomm Chief Executive Cristiano Amon said the company’s revenue was a new quarterly record, driven by its strong technology, product roadmap and customer demand.
The results are nothing bad; it’s not apparent why investors were less than satisfied, as its stock fell more than 4 per cent in the after-hours session.
The company said its primary business, the QCT segment, delivered $10.1 billion in revenue, up 20 per cent from a year ago, thanks to growth in its major end markets.
Qualcomm’s most important market is smartphones, where sales rose 13 per cent to $7.57 billion in the quarter, above the Street’s target of $7.04 billion.
The company also sells chips to the automotive industry, and that business grew by an impressive 61 percent, raking in $961 million in sales. It’s a relatively new market for Qualcomm, which only began pivoting away from handsets a few years ago when Amon took over the top job.
“We are delivering growth across our diversification initiatives and remain committed to executing on our fiscal 2029 targets to achieve $22 billion of non-handset revenues,” Amon said .
Amon explained that the company’s handset business benefited from high demand for “premium-tier” smartphones in China and the launch of Samsung’s new flagship Galaxy smartphone, which is powered exclusively by Qualcomm processors.
He also praised the Chinese artificial intelligence startup DeepSeek as something that bodes well for his company. He pointed out that Qualcomm processors are more than capable of running the DeepSeek-R1 large language model locally on smartphones.
“AI models are developing faster, becoming smaller, more capable and efficient, and [they are] now able to run directly on device,” he said.
Qualcomm’s third major market is “Internet of Things” devices, including low-powered chips for industrial machines and the processors that go into Meta Platforms Inc.’s Quest headsets and Ray-Ban-branded “meta glasses,” which are augmented reality devices. The IoT segment also includes sales of Snapdragon Elite chips that power laptops.
The IoT segment delivered Qualcomm $1.55 billion in revenue, up 36 per cent from a year earlier, with Amon stating that the Ray-Ban meta glasses exceeded expectations.
“We remain optimistic that we are at the beginning of an inflexion point for smart glasses,” he said.
Besides selling chips, Qualcomm has a second business unit called QTL, which sells licenses for its thousands of wireless technology patents. Its patented tech is used in almost every smartphone worldwide, so the segment proves to be a nice little earner for the company. During the last quarter, it generated $1.54 billion in revenue.
Arm delivered similarly impressive results and guidance, only to see its stock plunge more than six per cent in extended trading, erasing gains it had made earlier in the day.
The company reported third-quarter earnings before certain costs of 39 cents per share, beating the Street’s guidance of 34 cents. Revenue for the period rose 19 percent to $983 million, easily beating the $949 million target.
For the current quarter, Arm said it expects sales between $1.175 billion and $1.275 billion, which perhaps doesn’t compare favourably with the Street’s forecast of $1.22 billion.
Arm CEO Rene Haas said the revenue was a new quarterly record for the company, driven by rapid adoption of its most advanced Armv9 chip architecture.
“With our high-performance, energy-efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience from the edge to the cloud,” he said.
The Armv9 design debuted last year and is the company’s most powerful and efficient yet. Compared to its previous-generation Armv8 technology, the company charges significantly higher royalties for that design.
The Armv9 architecture has seen rapid adoption among chip makers for high-end cloud servers, including Amazon and Microsoft. Those customers use Arm’s designs to make server chips powered by more than 100 cores.
Despite today’s after-hours decline, Arm’s stock is still up by an impressive 137 per cent in the last 12 months, vastly outperforming the iShares Semiconductor exchange-traded fund, which mirrors the broader semiconductor market.
