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Qualcomm (QCOM) delivered solid 2Q25 results, exceeding EPS and revenue expectations, driven by robust demand across each of its core markets -- handsets (+12%), automotive (+59%), and IoT (+27%) -- highlighting the momentum behind its AI-enabled chipsets. However, the upside Q2 results are being overshadowed by QCOM's disappointing in-line Q3 revenue and EPS guidance, which reflect tariff-related uncertainties and softer chip demand.

• Over the past several years, QCOM has focused on diversifying its revenue streams away from the volatile and highly seasonal handset market, but handsets still account for approximately 60% of its total revenue. Driven by healthy demand for premium-tier smartphones incorporating QCOM's Snapdragon 8 Gen series with on-device AI capabilities, handset revenue grew by 12% yr/yr to $6.5 bln. The segment benefited from a recovering smartphone market, particularly in China, where sales are rebounding.
• Strong partnerships with smartphone OEMs, such as Samsung and Xiaomi, coupled with new AI-powered features like GenAI processing, boosted demand. The healthy handset growth highlights QCOM's dominance in premium chipsets, but its reliance on China exposes it to significant tariff risks.
• The standout performer in Q2 was Automotive with the 59% surge in revenue continuing a multi-quarter trend of near-triple-digit growth, fueled by the Snapdragon Digital Cockpit and ADAS platforms. Rising adoption of connected and autonomous vehicle technologies, with design wins across 20 of the top 25 global automakers, is driving the robust growth. Furthermore, high-margin software and licensing deals, alongside multi-year contracts, are enhancing QCOM's profitability.
• Although down a bit from last quarter's 36% surge, revenue growth was still very strong for IoT at 27%, driven by demand for edge AI and connected devices in industrial and consumer applications. The company's Snapdragon X Elite platform, designed for Windows-based PCs, continues to gain traction due to its AI capabilities, power efficiency, and 5G connectivity. Major OEMs like Microsoft (MSFT), Lenovo, and HP have launched Snapdragon-powered devices (Surface Pro 11, Lenovo Yoga Slim 7x), with over 20 PC models released in the past year.
• This good news, though, is clouded over by QCOM's disappointing Q3 guidance. U.S. tariffs on Chinese imports are expected to disrupt QCOM's supply chain and increase costs, with management noting potential impacts on the handset and IoT segments. QCOM's exposure to China, which accounts for roughly half of its revenue, is a double-edged sword, driving significant revenue growth, but also amplifying tariff-related risks.

QCOM's Q1 results showcased robust 17% revenue growth, buoyed by double-digit increases in each of its main segments, but tariffs and a soft Q3 outlook are triggering a steep selloff in the stock. The company's AI-driven diversification and momentum in the automotive market are key positives that should support solid long-term growth. However, near-term risks associated with trade policies may keep a lid on the stock for the foreseeable future.