Qualcomm's performance exceeds expectations, but future prospects are worrying: AI layout is questioned by Wall Street, and Apple Inc.'s self-developed chips pose potential pressure.

Wall Street analysts say that Qualcomm's quarterly performance and guidance indicate that the company's diversification plan is making progress. However, concerns related to smartphones remain a major issue. Yesterday, Qualcomm posted revenue and profit guidance that exceeded expectations, benefiting from a rebound in demand in the smartphone terminal market. Qualcomm expects adjusted earnings per share for the first quarter of fiscal 2025 to be between $3.30 and $3.50. Revenue is expected to be between $11.8 billion and $12.6 billion, with Qualcomm Technology businesses (QCT) revenue at $10.3 billion to $10.9 billion. Analysts had previously expected adjusted earnings per share of $3.26 and revenue of $11.59 billion. At the time of writing, the stock was slightly up by 0.12% in after-hours trading. Citi analyst Christopher Danely stated that while Qualcomm's performance exceeded expectations, losing Apple Inc.'s business could "weigh on" its performance. Danely wrote in a report to clients, "We have raised profit expectations, but maintain a neutral rating as we believe Apple Inc.'s move to in-house modem development will pressure Qualcomm's earnings per share (EPS)." He slightly raised Qualcomm's target price from $175 to $180 while reiterating a hold rating. HSBC analyst Frank Lee shares a similar view, noting that while data center related announcements are helpful, Qualcomm's chips may not be as competitive as those of companies like NVIDIA Corporation and AMD. "We recognize that Qualcomm's AI narrative is improving after the acquisition of Alphawave, and the company recently announced plans to launch AI200 and AI250 rack-mounted AI inference solutions in fiscal 2026 and 2027," Lee said in the report. "However... the specifications of these chips seem to be inferior to competitors - Qualcomm will use low-power DDR memory (LPDDR), while competitors use high-bandwidth memory (HBM); before product specifications, roadmaps, and customer channels become clearer, revenue opportunities for fiscal 2026-2027 may be limited (estimated by us to be $675 million to $2 billion)." Additionally, factors such as rising contract prices from Taiwan Semiconductor Manufacturing Co., Ltd., BT substrate component shortages, and higher Arm v9 architecture patent fees in smartphone system-on-chip (SoC) products may put pressure on gross margins, which will persist until the first half of 2026. Lee reiterated a hold rating and a target price of $170, saying that if data center business revenue meets expectations, the negative impact of Apple Inc. may be offset. "However, we still need more details before incorporating these AI products into our expectations," he added. Several research firms raised their target price for Qualcomm after the earnings release, including Melius and Mizuho Securities, raising their target prices from $165 and $185 to $195 and $200 respectively.