Qualcomm is under a bit of a cloud at the moment. It’s in a war with the company it licenses its processor from, ARM, and its AI PC effort has lost a lot of momentum and appears all but dead. However, it continues to execute strongly in the smartphone and automotive space with market-leading products and very strong execution.
Let’s look at the numbers.
Qualcomm’s Q1 2025 Results
The smartphone market is weakening largely because we appear to be reaching feature saturation. Rather than face competition from other similar goods from competing vendors, smartphone vendors’ biggest problem is convincing buyers they need to buy a new phone. However, smartphones have nearly reached a saturation point in features, which makes growth increasingly difficult.
Against this headwind, Qualcomm did impressively well, showing a 17% GAP (18% Non-GAP) increase in Earnings Before Taxes (EBT) and a whopping 23% (GAP and non-GAP) increase in profits. When the profit increases at a greater rate than revenues, it means the company has significantly improved efficiency, which is one of the key things that can excite analysts. Net income showed a 15% increase, but this appears to be a tax impact instead of anything to do with operational performance.
But looking under the covers, an even more interesting story emerges.
Automotive and IoT Are Growing Like Crazy
Handsets grew an impressive 13% in a hard market, but that is well below the 17% overall growth number. Where did the extra bump come from? It came from Automotive, which grew a whopping 61% and was likely tightly tied to EV growth and IoT, which grew an impressive 36%.
Vehicles are increasingly becoming rolling computers. The massive cost reductions on Chinese EVs have put the automotive industry on notice that if they don’t get their costs down, China will own the automotive market as they ride EVs to dominance.
Qualcomm has been one of the firms, along with companies like BlackBerry, NVIDIA, AMD, and even Intel, to jump into this market to help the legacy car makers understand the need for simplification, fewer and more capable networks, fewer and more capable processors, and strong connectivity.
Qualcomm and its peers have made inroads into helping China get to its leadership position, and Western car companies wanting to learn from this success are clearly going to Qualcomm for help. This may stave off their eventual failure, but the problem with legacy car companies is a history of doing much of this the wrong way, which forces companies like Qualcomm to learn obsolete processes so they can help these firms overcome them.
Qualcomm’s numbers would indicate that it is becoming as successful at this as it was in helping to launch the smartphone with Apple.
IoT is another growth area. Qualcomm’s efforts to put AI at the edge to lower network traffic and datacenter load are also proving to be a huge success. Datacenter power usage is at all-time highs, and networks are becoming saturated with AI activities that make it increasingly important to push this load to the edge. Qualcomm’s ability to deal with both problems due to its AI, processor, and modem leadership has been impressive to date. The financials showcase this excellence.
Wrapping Up
While the AI PC effort didn’t do well largely because of Microsoft execution problems and that problematic litigation from ARM, Qualcomm is knocking it out of the park on everything else. This has been a very good quarter for Qualcomm despite the market headwinds in smartphones and its relative newness to Automotive and IoT.
Anyone can do well in a fast-growing market, but smartphones are at saturation, and IoT and Automotive are still new, which makes these results all the more impressive. It is great to see a good company like Qualcomm knock it out of the park like it did this quarter. Impressive work!
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