Looking to Pick Up More of This Chip Holding After Pullback

Before we tackle our price target increases for Meta META and Microsoft MSFT, let’s dig further into Qualcomm’s QCOM quarterly results and guidance, which is leading to some modest price target cuts to $175 to $185, bookending our $180 price target.

We are reiterating that price target as well as our One rating as Qualcomm continues to diversify its revenue stream with more strides being made in 2026 and beyond. Amid that transformation, we continue to think Wall Street will revisit how it values the shares, which are currently trading at 12.6-times expected 2026 EPS of $11.95.

The pullback we are seeing in the shares puts the Portfolio’s QCOM position at around 3.45% of its assets. We see that giving us some room to scoop up more QCOM shares as they settle down in the coming days, and the company makes further strides on its diversification. In our opening comments on Thursday morning, we shared that we will be watching QCOM shares against their 100-day moving average at $150.58, looking for a positive test of that support. If we get that, it would bring us one step closer to scooping up more QCOM shares in the coming days.

Now for the Details…

On Wednesday night, Qualcomm reported June quarter EPS of $2.77, nicely ahead of the $2.71 consensus on revenue that climbed more than 10% year over year to $10.37 billion, modestly ahead of the $10.34 billion market forecast. As we touched on earlier, the company’s chip business, better known as the QCT segment, posted revenue that grew 11% year over year to $9.0 billion. Given the company’s focus on diversifying its end market exposure, the Automotive and IoT chip end markets grew at a much quicker clip of 23% than the 7% figure achieved for the handset business.

To us, that confirms Qualcomm’s diversification efforts are making strides, but we can also see it in the higher operating margins at QCT compared to the year-ago quarter. Based on design wins, management confirmed Qualcomm remains on track to deliver $22 billion in combined automotive and IoT revenue by fiscal 2029. Part of that effort includes more than 100 AI PC designs being commercialized over the next 18 months.

In terms of Qualcomm’s outlook, it forecasted September quarter revenue between $10.3 billion and $11.1 billion with EPS of $2.75 to $2.95. Measured against the market consensus for EPS of $2.82 and $10.61 billion in revenue, Qualcomm delivered a beat-and-raise June quarter. As we’ve seen in recent weeks, those types of earnings reports tend to leave the market underwhelmed, even though the innards are quite positive.

Going one layer deeper into that September quarter guidance, QCT is expected to deliver September quarter revenue between $9.0 billion to $9.6 billion, with IoT around $1.7 billion and Automotive topping $1 billion. Working the math backwards implies a handset business being flat to up 9% on a quarter-over-quarter basis.

Comments early on Thursday morning from Samsung SSNLF point to moderate growth in the smartphone market in 2H 2025 as tariff-related inventory builds are worked off. That meshes with the 5% midpoint of Qualcomm’s guidance, which also reflects expected lower revenue from Apple APPL. And during the earnings call, Qualcomm reiterated its strong relationship with Samsung and shared that it inked a multi-year agreement with Chinese smartphone vendor Xiaomi, which has a roughly 15% share of the smartphone market. Those wins and others should help mitigate the declining exposure to Apple over the next several quarters.

The one end market that we didn’t hear much on was data center, a market that Qualcomm will be entering following its pending acquisition of AlphaWave, which should close in Q1 2026. We see that being another leg to the Qualcomm revenue diversification stool, and one that could require some incremental investment next year.

During the June quarter, Qualcomm repurchased 19 million shares for $2.8 billion, which implies an average purchase price near $147. With 9.7 billion remaining under its current authorization and the stock only a few dollars away from that average June quarter repurchase price, we would not be surprised to learn Qualcomm continues to shrink its outstanding share count when it reports its September quarter results.

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At the time of publication, TheStreet Pro Portfolio was long META, MSFT, QCOM and APPL.