05 Futurum – Blanchard on QCOM Q3F25 earnings
Analyst(s): Olivier Blanchard, Daniel Newman
Publication Date: August 1, 2025
Qualcomm Q3 FY 2025 Earnings Driven by Auto and IoT Gains - The Futurum Group
Qualcomm’s diversification strategy showed momentum this quarter, with automotive and IoT platforms leading growth. Snapdragon design traction in wearables and smart glasses signals broader platform adoption.
What is Covered in this Article:
- Qualcomm Q3 FY 2025 financial results
- Record automotive revenue driven by Snapdragon Digital Chassis design wins
- IoT momentum supported by smart glasses and industrial AI platforms
- Early traction in AI PCs with Snapdragon X series platforms
- Strategic expansion into AI data center infrastructure and Alphawave acquisition
- Q4 FY 2025 guidance and FY 2025 revenue and EPS growth outlook
The News: Qualcomm Incorporated (NASDAQ: QCOM) announced financial results for Q3 FY 2025, reporting revenue of $10.37 billion (at par with consensus), up 10% year-on-year (YoY). QCT revenue grew 11% YoY to $9 billion, with segment EBT up 22% YoY to $2.7 billion and EBT margin expanding to 30% from 27% in the prior year. Within QCT, handset revenue rose 7% YoY to $6.33 billion, while IoT and automotive revenue climbed 24% and 21% YoY, respectively. QTL delivered $1.3 billion in revenue, up 4% YoY, with EBT growing by 5% YoY and the corresponding margin coming to 71% (+100 basis points or bps YoY). Non-GAAP diluted earnings per share (EPS) reached $2.8, rising 19% YoY and was 2.1% above street estimates.
“Another quarter of strong growth in QCT Automotive and IoT revenues further validates our diversification strategy and confidence in achieving our long-term revenue targets,” said Cristiano Amon, President and CEO of Qualcomm Incorporated. “Our leadership in AI processing, high-performance and low-power computing, and advanced connectivity positions us to become the industry platform of choice as AI gains scale at the edge.”
Qualcomm Q3 FY 2025 Earnings Beats Estimates, Driven by Auto and IoT Gains
Analyst Take: Qualcomm’s Q3 FY 2025 results reinforce the company’s disciplined execution across its diversification roadmap, with automotive and IoT segments serving as key offsets to slowing handset momentum. Strength in XR wearables, AI PCs, and connected edge devices helped lift IoT performance, while Snapdragon Digital Chassis drove another record quarter for automotive. Despite near-term volatility in the handset segment, Qualcomm’s strategy to broaden platform relevance across verticals remains intact.
While current softness in handset revenues is worthy of note, it is not purely a Qualcomm problem: We believe that it reflects a broader macroeconomic current driven by economic uncertainty, asymmetrical tariff impact inputs, and larger geostrategic shifts.
The company’s execution across its full portfolio tells a more cohesive story. The three primary through lines we find critical to understanding Qualcomm’s trajectory are its diversification strategy, its operational discipline across all product segments, and its IP (innovation) leadership. On all three fronts, we see consistent progress:
- Qualcomm’s diversification strategy continues to work both as a multi-runway growth strategy and a hedge against the predictable slowdown in the handset segment’s growth. Additionally, it is clearly serving as a hedge against the steady decoupling of Apple’s supply chain from Qualcomm’s components. Furthermore, while the mobile handset segment continues to be a critical source of revenue for Qualcomm, we caution against overindexing the company’s reliance on that segment revenue in the long term.
- Qualcomm’s disciplined execution in every segment, part of which can be expressed through the breadth and scale of its strategic partnerships, continues to impress. Paying particular attention to the Automotive and XR segments, but increasingly on the IOT, IIOT, and data center segments as well. Qualcomm consistently scales well.
- Qualcomm’s IP continues to drive bleeding-edge compute capabilities, with Qualcomm consistently leading in both performance-per-watt (power efficiency) and on-device enablement of premium AI features. This performance profile helps create meaningful differentiation for devices and systems powered by Qualcomm’s Snapdragon and Dragonwing product families. It also brings quantifiable advantages to the top-of-funnel use cases and features that Qualcomm and its partners are developing for flagship and premium markets first, before expanding into lower price tiers.
Softness in demand for some device categories aside, our only caveat regarding Qualcomm encouraging performance has more to do with device vendors failing to articulate the value of their products’ most cutting-edge features to their market than in the IP itself. Case in point: Vendors of Smart Glasses (and to a lesser extent, of AI PCs) continue to struggle to adequately articulate the full breadth of their AI-enabled on-device utility (and specific value) to mainstream end-users.
Qualcomm’s investment in brand communications (for Snapdragon and Dragonwing) is helping fill some of those critical end-user-facing messaging gaps, but ultimately, device vendors need to get better at effectively articulating the value of the experiences enabled by the Qualcomm IP they choose to implement on their devices, then scale this messaging to a broader set of technology users.
Snapdragon-Led Edge AI Gains Momentum Across Devices
IoT revenue rose 24% YoY, beating consensus, driven by increased demand for Snapdragon AR1 chipsets, which continued to lead the emerging AI smart glasses category. Design traction remained strong across key OEMs such as Meta and Xiaomi, with strong contribution from XR wearables such as smart glasses and other AI-enabled devices. Qualcomm also showcased a 1 billion parameter AI model running locally on next-gen AR glasses at the Augmented World Expo, reinforcing its roadmap credibility. The company highlighted expanded enterprise use cases through collaborations with IBM (Maximo), DigiWin, and Aetina. As Gen AI adoption at the edge accelerates, Qualcomm’s low-power inference platforms are well-positioned across devices and verticals.
We believe that IOT device categories, particularly the industrial/commercial IOT (IIOT) are positioned to experience a new growth cycle beginning this year. The underlying hypothesis behind our prediction is that AI-enabled devices like smart glasses, smart cameras, smart sensors, and drones will appeal to both consumers and enterprises looking to move as much of their AI-enabled processing from the data center to the edge. On-device AI capabilities have the potential to lower compute costs, improve data security, reduce lag, improve both user experiences and outcomes, and generate more ROI. Moreover, Qualcomm’s Dragonwing family of products, the “Qualcomm Aware” platform, and the developer-friendly ecosystem built to support Qualcomm-enabled IOT and IIOT solutions look very promising.
In the XR category in particular, we note that, while a lack of articulable differentiation and value from device vendors continues to hold the category back, XR – and particularly the smart glasses segment – is poised to serve as the next natural interface for assistant and agentic AI services. Its ability to provide hands-free, frictionless access to voice, image, and context-enabled sensing positions it better than PCs, handheld devices, and other wearables to deliver cutting-edge assistant and agentic features to users. Qualcomm’s market leadership in this device segment sets the company up nicely for both revenue growth and profitability across its full spectrum of price points and form factors.
Automotive Revenue Sets Record on Snapdragon Digital Chassis Strength
Automotive delivered 21% YoY revenue growth in Q3 FY 2025, achieving another record quarter at $984 million. The uplift was attributed to content expansion in new vehicle launches powered by Snapdragon Digital Chassis. Qualcomm secured 12 new design wins in the quarter, contributing to 50 vehicle launches in FY 2025. Notably, BMW’s upcoming Neue Klasse vehicles will debut globally with Qualcomm’s ISO safety-certified ADAS stack later this year, integrating both the Snapdragon Ride platforms and a jointly developed driving stack. Broader traction continues with 20 original equipment manufacturers (OEM) programs spanning highway and urban autopilot solutions, most of which are set to launch over the next 18 months. Qualcomm remains confident in achieving its combined Automotive and IoT revenue target of $22 billion by FY 2029, supported by expanding use cases and rising silicon content per vehicle.
AI PCs and XR Form New Pillars of Diversification
AI PC expansion remains in the early stages, but Qualcomm saw progress in the Snapdragon X series’ traction against an x86-dominated segment. Multiple new devices from Acer, Dell, HP, Lenovo, and Microsoft launched during the quarter, with more than 100 designs expected through 2026. Snapdragon-based Windows laptops comprise roughly 9% of sales in the $600+ price tier across the U.S. and top-five European countries.
Qualcomm continues positioning its platforms to lead in power-efficient, on-device AI compute. Qualcomm’s Arm-based architecture offers a differentiated performance-per-watt advantage in the Windows ecosystem as AI workloads become a defining characteristic of future PCs. Additionally, it serves as a competitive hedge against Apple’s Arm-based PC systems.
Early Steps into Data Center Reinforce Long-Term AI Bet
Qualcomm has also been extending its diversification playbook with multiple strategic moves aimed at the data center market:
Qualcomm is developing NPU-based inference accelerator cards and custom SoCs that leverage its Oryon CPU. Engagements are underway with multiple potential customers, including a leading hyperscaler. While no revenue is expected before FY 2028, the initiative aligns with shifting industry demand toward efficiency metrics like tokens-per-dollar, tokens-per-watt, and tokens-per-second-per-watt.
The pending acquisition of Alphawave is also a key enabler of Qualcomm’s data center strategy, bringing complementary high-speed connectivity IP for compute and storage.
Additionally, Qualcomm announced integrating its Oryon CPUs with NVIDIA’s NVLink Fusion architecture and signed an MoU with HUMAIN to develop AI data centers in Saudi Arabia.
The main takeaway is that Qualcomm’s renewed focus on the AI infrastructure opportunity signals not just an ambition to play across the full spectrum of edge-to-cloud inference, but its relatively new ability to do so.
Guidance and Final Thoughts
Qualcomm guided Q4 FY 2025 revenue between $10.3 billion and $11.1 billion (consensus: $10.6 billion), with non-GAAP EPS of $2.75 to $2.95 (consensus: $2.84). OCT revenues are expected to range between $9 billion and $9.6 billion, and OTL revenues are expected to be between $1.3 billion and $1.5 billion. Despite sequential Apple share loss, the company expects seasonal handset growth to hold, supported by upcoming Snapdragon 8 Elite launches and strength in China OEMs. Automotive revenue is expected to reach $1 billion, and IoT is expected to remain flat QoQ. Management expects to deliver FY 2025 revenue and non-GAAP EPS growth of 12% and 16%, respectively, with total QCT non-Apple revenue growing over 15% YoY for the second consecutive year. Qualcomm’s mostly in-line Q4 FY 2025 outlook suggests the prospect of tariffs likely pulled handset demand forward. The company’s broad-based diversification strategy, anchored in automotive and IoT, continues to provide multiple durable levers for long-term growth.
See the complete press release on Qualcomm’s Q3 FY 2025 Earnings on the company’s Investor Relations Page. |
