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QCOM’s Q3 earnings report delivered a modest beat on EPS, yet the stock is experiencing a sharp sell-off as revenue growth decelerated to 10%, a notable slowdown from the high-teen growth rates observed in recent quarters, signaling potential headwinds in key markets. Furthermore, the company’s in-line Q4 guidance failed to inspire confidence, falling short of investor expectations for a stronger forward outlook amid a competitive semiconductor landscape. 

• The Handset business posted a 7% revenue increase to $6.3 bln, a step down from the 12% growth in Q2, reflecting a cooling demand environment. Despite the Snapdragon 8 Elite platform securing 124 designs shipped or announced for AI-enabled smartphones, this traction did not translate into robust top-line growth, likely due to market saturation in premium tiers and softening demand from major clients amid global trade uncertainties. The muted impact of these design wins suggests that execution challenges or delayed rollouts may have capped the upside.
• In contrast, the IoT business delivered standout performance with a 24% revenue jump to $1.68 bln, marking it as QCOM’s strongest-growing segment. This surge is largely driven by the company’s strategic expansion into the PC and laptop markets through Snapdragon chips, which are gaining significant traction, particularly against Intel (INTC). Snapdragon-based PCs now account for approximately 9% of Windows laptops sold above the $600 price tier in the U.S., reflecting a meaningful market share gain as the platform’s efficiency and AI capabilities resonate with consumers and OEMs alike.
• The Auto business recorded solid 21% growth to $984 mln, though this represents a sharp deceleration from the 59% surge in Q2. Growth continues to be fueled by the Snapdragon Digital Chassis, which is securing design wins in connected and autonomous vehicles, particularly with European and Asian OEMs. However, the slowdown may be attributed to a high comparison base from Q2, supply chain constraints affecting production ramps, and a potential softening in global automotive demand, suggesting that while the segment remains a growth engine, its trajectory may face near-term hurdles.
• QCOM’s revenue diversification efforts have proven largely effective, with strong growth in IoT and Auto segments reducing reliance on its traditional Handset business, yet Handsets still constitute a substantial 60% of total revenue, dragging down Q3 results amid slowing demand. This heavy exposure to the handset market poses considerable risk, particularly as Apple (AAPL) is expected to transition away from QCOM chips in the next couple of years with its in-house modem development, potentially eroding a key revenue stream.

QCOM’s slowing revenue growth and underwhelming Q4 guidance have triggered a significant stock price decline, reflecting investor concerns over the company’s ability to sustain its prior momentum. While pockets of strength in IoT and Auto provide some optimism, the lack of a robust forward outlook underscores the need for vigilance as competitive and macroeconomic pressures mount.