On the evening of July 30 local time, Qualcomm, a major U.S. chip design company, released its financial results for the third fiscal quarter ending June 29 this year. The results showed that revenue for the quarter rose 10% year-over-year to $10.365 billion, slightly below analysts' average expectation of $10.62 billion; adjusted net profit increased 25% year-over-year to $2.67 billion, with adjusted earnings per share of $2.77, marginally exceeding the expected $2.72.
Qualcomm forecasts that revenue for the fourth fiscal quarter ending September will be between $10.3 billion and $11.1 billion, higher than analysts' average expectation of $10.6 billion.
While the overall Q3 performance met expectations and Qualcomm provided a better-than-expected outlook for Q4, concerns that Apple's future full shift to self-developed 5G modems could impact Qualcomm's mobile business revenue led to a 4.7% drop in Qualcomm's after-hours stock price.
Apple to Fully Adopt Self-Developed 5G Modems: How Will Qualcomm Respond?
Currently, Apple remains a key customer for Qualcomm's mobile chip business, with Qualcomm primarily supplying 5G modem chips to Apple. Under a new agreement signed between Apple and Qualcomm in September 2023, Qualcomm will continue to supply 5G modem chips and radio frequency systems for Apple's iPhones launched in 2024, 2025, and 2026.
However, on February 20 this year, Apple officially released its new budget model, the iPhone 16e, which made its debut with Apple's self-developed 5G modem, the C1. This marks Apple's first achievement in self-developed 5G modems after nearly six years of challenges following its acquisition of Intel's mobile modem business in July 2019.
Furthermore, according to subsequent reports, some models of the iPhone 17 series, set to be released this fall, may adopt Apple's second-generation self-developed 5G modem, the C2. It is expected that by 2026, Apple may fully transition to self-developed 5G modems, which will undoubtedly have a negative impact on Qualcomm's performance.
In response, Cristiano Amon, President and CEO of Qualcomm, stated that the company is prepared for Apple's complete shift to self-developed 5G modems in the coming years, and future growth will rely more on the Android ecosystem and other emerging sectors.
Akash Palkhiwala, Qualcomm's CFO, noted that the company is mitigating the risk of potential order reductions from Apple by expanding into non-mobile markets (such as automotive and IoT) and deepening partnerships with other Android mobile clients. According to Qualcomm, revenue from the chip division serving non-Apple clients grew by over 15% in the current fiscal quarter.
In addition, Qualcomm continues to expand its collaboration with Samsung Electronics, the world's largest smartphone manufacturer. This year, Samsung's flagship Galaxy S25 series all adopted Qualcomm's Snapdragon processors and modem chips. Latest reports suggest that Samsung's next-generation flagship Galaxy S25 series may also fully utilize Qualcomm's Snapdragon mobile platform, though the version used by Samsung is likely to be manufactured by Samsung using its 2nm process.
However, other Samsung flagships may adopt the company's own Exynos chips. Samsung announced on Thursday that it will focus on enhancing the competitiveness of its Exynos system-on-chips (SoCs) "to secure adoption in key clients' flagship mobile product lines by 2026." The company also stated that its foundry business "will mass-produce new mobile SoCs using 2nm GAA process in the second half of 2025."
Strong Growth in Automotive and IoT Businesses
In terms of business structure, Qualcomm's main operations are divided into two segments: the semiconductor business (QCT), which focuses on chip products, and the technology licensing business (QTL), which handles intellectual property licensing.
In Q3, QTL delivered steady performance with revenue of $1.318 billion, up 4% year-over-year.
The QCT division (Devices & Services, primarily chip business) is Qualcomm's main revenue source, generating $8.993 billion in Q3, a 11% year-over-year increase. This division comprises three key segments: mobile terminal chips, automotive, and connected devices (IoT).
Specifically, mobile terminal chip revenue reached $6.328 billion, up 7% year-over-year; automotive chip revenue hit $984 million, up 21%; and IoT revenue stood at $1.681 billion, up 24%.
While Snapdragon smartphone chips still account for a significant portion of revenue, Qualcomm's mobile chip business only saw modest growth, whereas automotive chips and IoT-related businesses maintained strong growth momentum.
Overall, Qualcomm's diversification strategy in recent years has shown initial results. The combined revenue from automotive and IoT reached $2.665 billion, accounting for approximately 30% of QCT revenue. Growth in these segments helps reduce Qualcomm's reliance on the smartphone business.
Cristiano Amon, President and CEO of Qualcomm, stated: "The growth in QCT's automotive and IoT revenue further validates our confidence in our diversification strategy and long-term revenue goals."
Stable Performance in PC Business; Server Business Secures One Prospective Client
Regarding Qualcomm's efforts to expand into the PC market, Cristiano Amon revealed that the company's newly developed PC business is performing "stably," with over 100 laptop models expected to use Qualcomm Snapdragon PC processors by 2026. Additionally, the company has captured approximately 9% of the market for Windows laptops priced at $600 or higher in U.S. retailers.
Furthermore, Qualcomm is actively expanding into the data center market. At this year's Computex 2025, Amon stated, "By connecting our custom data center processors to NVIDIA's rack-scale architecture (using NVIDIA's technology to link to NVIDIA's AI chips), we are advancing a shared vision of high-performance, energy-efficient computing in data centers."
In the latest earnings call, Amon further noted: "As inference demand scales, cloud service providers are building dedicated inference clusters, focusing not only on performance but also efficiency—particularly cost per token and watt per token. These factors, combined with the shift from commercial x86 CPUs to custom Arm-compatible CPUs for cloud and AI nodes, create an entry point for Qualcomm."
Amon stated that Qualcomm is developing "a general-purpose data center CPU" and is "very focused on hyperscale enterprises" because "they have workloads compatible with Arm-based CPUs." Meanwhile, Qualcomm is also developing another data center product described as "a host for inference clusters." "We've been building acceleration cards, and we'll also build a rack," Amon added.
From Amon's remarks, it appears that in addition to data center CPUs, Qualcomm is developing AI inference chips for data centers.
"While we are in the early stages of this expansion, we are engaging with multiple potential clients," Amon revealed. "We are currently in advanced discussions with a leading hyperscale enterprise. If successful, we expect revenue (from the data center market) to begin in fiscal year 2028."
Although Qualcomm did not explicitly name the client, on May 13 this year, Qualcomm announced the signing of a Memorandum of Understanding (MOU) with Saudi Arabian AI company HUMAIN to establish a strategic partnership. The collaboration aims to develop next-generation AI data centers, infrastructure, and cloud-to-edge services to meet the global surge in demand for AI. This includes developing and supplying Qualcomm's most advanced data center CPUs and AI solutions to support data centers in HUMAIN's AI cloud infrastructure.
It is also worth noting that on June 9 this year, Qualcomm announced the acquisition of London-based semiconductor IP giant Alphawave Semi for $2.4 billion. Alphawave Semi is a key supplier of SerDes (serializer/deserializer) products required for data centers.
Qualcomm stated at the time that Alphawave Semi has developed leading high-speed wired connectivity and computing technologies that complement Qualcomm's efficient CPU and NPU cores. The combined team shares the goal of building advanced technology solutions and achieving higher levels of interconnected computing performance in numerous high-growth areas, including data center infrastructure.
(Reprinted from China Grid https://news.eccn.com)