Qualcomm (QCOM) Stock Drops Despite Beating Earnings Estimates and Strong Revenue Growth
Qualcomm Inc. (QCOM) shares took a hit, falling over 4% in pre-market trading on Thursday, despite reporting strong first-quarter earnings that exceeded Wall Street expectations. The drop in Qualcomm’s stock price followed the company’s cautious outlook for its patent licensing revenue, which is expected to remain flat in the near term.
Strong First-Quarter Performance
The chipmaker reported earnings per share (EPS) of $3.41, well above the $2.96 per share forecast from analysts. Revenue for the quarter reached $11.67 billion, surpassing expectations of $10.91 billion and reflecting an 18% year-over-year increase. Qualcomm’s net income also rose 15% from the previous year to $3.18 billion, up from $2.77 billion in Q1 2024.
Muted Outlook for Patent Licensing Revenue
Despite beating earnings estimates, investor sentiment was dampened by Qualcomm’s outlook for licensing revenue. Akash Palkhiwala, Qualcomm’s CFO, stated that the company expects flat or low-single-digit growth in the patent licensing segment year-over-year, a major revenue driver for the firm. Qualcomm’s licensing business had previously benefited from a lucrative Huawei agreement, which added between $0.10 and $0.15 per share to Qualcomm’s profits.
While Qualcomm is hopeful about opportunities in China and the growing AI market, the company acknowledged that the forecast does not factor in potential upside from a renewal with Huawei, which remains under discussion.
Promising Growth in Automotive and Other Segments
On a positive note, Qualcomm’s automotive division continues to thrive, with a 61% revenue surge to $961 million. The company also expressed optimism about its AI-driven products and custom CPUs as part of its future growth strategy, including its Oryon processors. Additionally, Qualcomm’s stock has risen 14% in 2025, outperforming the S&P 500, which gained around 3%.
Stock Sentiment and Market Reactions
Despite the market’s initial pessimism over the flat licensing revenue forecast, retail sentiment surrounding Qualcomm on Stocktwits is extremely bullish, with heightened levels of chatter reflecting confidence in a potential recovery. Qualcomm’s strong earnings beat, combined with its automotive growth and AI prospects, has provided some optimism for investors, who anticipate a comeback in the stock price by the end of the trading day.
Positive Developments with Arm Holdings
Adding to the positive news, Arm Holdings notified Qualcomm that it was withdrawing its October 2024 breach notice and would not pursue termination of their architecture licensing agreement. This news alleviates some uncertainty surrounding Qualcomm’s future plans and allows the company to continue its work on high-performance products.
As Qualcomm navigates through a challenging licensing landscape, its strong performance in other segments, especially automotive and AI, suggests that the company remains positioned for long-term growth.
