Qualcomm: Samsung's 'blood transfusion' struggles to sustain momentum, Apple's 'sabotage' hides potential pitfalls

Qualcomm (QCOM.O) released its Q2 FY2025 earnings report (as of March 2025) after the U.S. market close on May 1, 2025, Beijing time. Key highlights:

1. Overall Performance: Revenue growth continues, but gross margins remain sluggish. Qualcomm reported Q2 FY2025 (i.e., 25Q1) revenue of $10.98 billion, up 16.9% YoY, beating market expectations ($10.63 billion). The growth was primarily driven by its QCT (semiconductor chip business), including mobile, automotive, and IoT segments. $Qualcomm(QCOM.US) posted net profit of $2.81 billion, up 20.9% YoY, exceeding expectations ($2.72 billion), attributed to revenue growth and cost control.

2. Segment Breakdown: Core demand remains weak. Mobile remains the dominant segment, accounting for over 60% of revenue. Despite China’s subsidy policies, global Android smartphone shipments were flat YoY. Qualcomm’s mobile growth stemmed mainly from increased share in Samsung’s S25 series. Automotive and IoT outperformed due to smart cockpit, industrial products, and AI PC demand.

3. Guidance: Q3 FY2025 (25Q2) revenue is projected at $9.9–$10.7 billion (vs. consensus $10.33 billion), with adjusted EPS of $2.60–$2.80 (vs. $2.64 expected).

Dolphin Research’s take: Solid earnings but tepid guidance.

Qualcomm’s growth was led by QCT, with mobile, auto, and IoT all contributing. QTL (licensing) revenue was flat YoY due to emerging-market smartphone sales.

Mobile, the core segment, saw double-digit growth solely from gaining 100% share in Samsung’s S25 (vs. 70% in S24). Globally, smartphone shipments grew just 1.5%, with Android shipments stagnant. China’s subsidies failed to boost Xiaomi or OV’s shipments, reflecting weak demand.

Guidance for next quarter’s revenue ($9.9–$10.7B) suggests further sequential decline. Seasonal factors aside, China’s subsidies didn’t lift outlook.

Market concerns persist:

1) Apple’s in-house 5G modem: The iPhone 16e debuted with Apple’s first self-developed modem, risking Qualcomm’s stable Apple revenue.

2) HW licensing renewal: Qualcomm’s QTL agreement with HW expired; renewal talks are ongoing amid U.S.-China tensions.

3) Smartphone demand: Despite Samsung share gains, the overall market remains weak. Without growth, outperformance is unlikely.

Bottom line: Qualcomm’s report fails to ease concerns. With sluggish phones, nascent AI PC adoption, and client risks, pressure persists. Next quarter, mobile growth may slow to ~10%. Auto growth is decelerating sequentially. Without AI PC traction, revenue growth could dip to single digits.

At a $164.2B market cap, Qualcomm’s 15x FY2025 P/E isn’t cheap if growth stalls. Long-term, recovery hinges on mobile rebound and AI PC scale—neither guaranteed.

Dolphin Research’s detailed analysis:

I. Overall Performance: Growth continues, margins lag

1.1 Revenue

Q2 FY2025 revenue rose 16.9% YoY to $10.98B, beating consensus ($10.63B). Growth was driven by QCT (mobile, auto, IoT), while QTL was flat.

Next quarter’s $9.9–$10.7B guidance hinges on Android growth. Even with China subsidies, sequential decline signals soft demand.

1.2 Gross Margin

Gross profit grew 14.4% YoY to $6.048B, with margin at 55% (-1.3ppt YoY), below consensus (55.5%). Weak phone demand keeps margins depressed.

Inventory stood at $6.2B (+1.8% YoY). H2 typically sees stocking, but current levels appear stable.

1.3 Opex

Opex fell 0.7% YoY to $2.92B, with opex ratio at 26.6%. Breakdown:

R&D: $2.22B (-0.9% YoY), ~20% of revenue.

SG&A: $710M (-0.1% YoY), controlled alongside sales.

1.4 Net Profit

Net income rose 20.9% YoY to $2.81B, beating consensus ($2.72B), with net margin at 25.6%. Ex-items, operating profit grew 33% on revenue gains and cost control.

II. Segments: Core demand stays weak

QCT (86.2% of revenue) drove growth, while QTL (12%) was flat.

2.1 Mobile

Revenue grew 12.1% YoY to $6.93B, slightly above consensus ($6.83B), on Samsung S25 share gains (100% vs. 70% in S24).

Global smartphone shipments rose 1.5% in Q1, with Android flat. Samsung/Xiaomi grew slightly, but overall demand is weak.

2.2 Auto

Revenue surged 59% YoY to $960M, beating consensus ($910M), on smart cockpit adoption. 30 new design wins included ADAS and Chinese OEMs (Nio, ZEEKR, etc.). Next-quarter growth guided at 20%.

2.3 IoT

Revenue rose 27.2% YoY to $1.58B, above consensus ($1.46B), led by industrial/AI PC demand. Over 85 Snapdragon X PC designs are in development, targeting 9% share in premium Windows laptops. Next-quarter growth guided at 15%.