Qualcomm’s Earnings Awaited: A Crucial Test Amidst Tariff Concerns

As we edge closer to Qualcomm Inc.’s earnings report, investors hold their breath, aware that this will be an eye-opener in the current financial landscape. After all, Qualcomm’s stock has shown surprising resilience, outperforming the chip sector thus far this year. With earnings scheduled to be revealed on Wednesday afternoon, all eyes will focus on the implications of the Trump administration’s tariffs and the potential loss of business from tech giant Apple Inc.

Examining Tariff Impacts

For investors, the outcomes of Qualcomm’s latest earnings will extend far beyond the numbers themselves; they will delve into the company’s narrative and forecast. Analysts from Cantor have expressed optimism about Qualcomm’s potential to deliver an earnings beat, with adjusted earnings estimated at $2.82 a share for the last quarter, ending in March. They predict revenues could reach approximately $10.6 billion.

However, they caution that the conversation around Qualcomm’s loss of Apple’s business—particularly the possibility that Apple may phase out Qualcomm’s modem technology later this year—could signal a shift. Analysts argue that current consensus estimates for Qualcomm’s revenues in 2025 and 2026—forecasting 7% and 3% growth, respectively—might need revisions downward. This noted “increasing likelihood” of changes with Apple will be pivotal to listen for in Qualcomm’s commentary.

Shifting Focus: Automotive and IoT Growth

On a more optimistic note, Cantor analysts highlight the burgeoning potential within the automotive sector. They foresee substantial momentum driven by new vehicle launches, predicting that this could be the first quarter where revenue exceeds $1 billion in that specific market. This points to an astute diversification strategy that Qualcomm has been enacting, which may very well pay off in the long run.

Moreover, the growth of Qualcomm’s Internet of Things (IoT) business will be under scrutiny. Analysts emphasize the significance of revenue generation from critical segments such as PCs, XR/AR glasses, and industrial applications. They admit that while the diversification plan is poised for success, it may take time for those initiatives to materialize fully.

Conservative Outlook on Future Growth

Bernstein analysts take a slightly more conservative stance, estimating Qualcomm’s revenue for the March quarter to remain flat at $10.6 billion, with adjusted earnings forecasted at $2.80 a share. For the June quarter, their projections drop slightly to $10.4 billion in revenue and $2.62 in earnings per share.

This conservative outlook is, in part, attributed to the uncertainty surrounding the current tariffs imposed by the Trump administration. Bernstein analysts urge caution, stating, “how much visibility the company has” into upcoming quarters, especially into the latter half of the year, remains doubtful. However, they also suggest that Qualcomm has shown a tendency to adopt a conservative stance when needed, which might imply that some softer commentary should be anticipated in the upcoming report.

Qualcomm’s Stock Performance Amidst Challenges

Despite the substantial challenges and pressures from tariffs—especially given the heavy smartphone exposure—Qualcomm’s stock has found a way to hold its ground. Bernstein has noted that Qualcomm shares are down around 4% year-to-date, which is paltry compared to the S&P 500’s 5% drop and the glaring 15% decline in the PHLX Semiconductor Index. This illustrates Qualcomm’s resilience as it navigates a complex market landscape.

Furthermore, it is worth noting that U.S. smartphone shipments, which constitute about 10% of total revenues, are heavily dominated by iPhones. With the potential loss of this segment looming, investors must closely watch Qualcomm’s strategic response. Nevertheless, as pointed out by Bernstein, the company’s fabless nature may provide a degree of protection against potential retaliatory tariffs from China, should they come into play.

Conclusion: The Road Ahead

As Qualcomm prepares to unveil its earnings report and guidance, investors are keenly aware that the coming weeks will be critical. The intertwining challenges of potential tariff implications and dependence on Apple highlight just how precarious the tech landscape can be. Yet the advancements in other sectors, notably automotive and IoT, may offer a glimmer of hope. The question remains: will Qualcomm continue its upward trajectory or succumb to the pressures brewing on the horizon?

Only time will tell, as we brace ourselves for what could be a defining moment for Qualcomm and its shareholders.