Qualcomm shares bounced back Monday after shedding 12.6% over five straight days. Stock gained 1% to $149.10 in early trading as investors digested the chip maker's shift away from smartphones toward faster-growing segments. The recovery signals that Wall Street is buying the company's pivot, even as handset demand crumbles.
The numbers tell the story. Smartphone revenue dropped $1.24 billion year over year to $5.09 billion, a painful hit. But automotive climbed 61% to $1.59 billion, adding $604 million, while IoT revenue rose to $1.83 billion, up $149 million. Together those two segments cushioned nearly 61% of the phone business collapse, turning what could have been a bloodbath into something investors could stomach.
Qualcomm reported $9.95 billion in total revenue for the quarter, down 4% annually but beating Wall Street's $9.67 billion forecast. The beat matters because it shows demand isn't evaporating across the board. Newer markets are actually pulling weight. Cars need more chips than ever as automakers stuff vehicles with sensors, infotainment systems, and autonomous driving hardware. Connected devices in factories and cities are doing the same.
The catch is margins. The QCT segment housing chip operations saw pretax margins compress from 30% to 26%. Qualcomm is making more revenue from cars and IoT, but not at the fat margins it enjoyed in phones. That's the investor worry right now. The diversification is real and it's working tactically, but the profit picture remains cloudy.
Data centers loom as the next bet. If Qualcomm can crack serious traction in server chips and AI accelerators, that could become the engine that phones never will be again. For now the company is threading a needle: growing away from smartphones fast enough to offset their decline, but not so fast that Wall Street gives up on the margin story.
This is informational material only and not financial advice. Do your own research before making investment decisions.
