Qualcomm's Earnings: 2 Reasons to Buy, 1 to Stay Away

Key Points

• Qualcomm beat expectations on revenue, EPS, and forward guidance for Q2
• A PE ratio of just 15 also makes this one of the cheapest chip stocks on the market
• However, shares remain weak versus peers, with confidence in a true turnaround apparently lacking

Qualcomm Inc. NASDAQ: QCOM added more than 1% in Wednesday’s session, continuing its rebound from multi-year lows earlier this month. The stock has now rallied more than 20% in just three weeks, as optimism built heading into the company’s Q2 earnings report last night.

Thursday morning brought a fresh dose of reality. Despite topping analyst expectations on both revenue and earnings and issuing forward guidance that was solid by most measures, shares dropped more than 5% in the pre-market session. It’s a frustrating reaction for bulls and another sign that the turnaround story may not fully convince Wall Street. 

Still, it’s not all doom and gloom; here’s a closer look at two reasons to be bullish on Qualcomm and one reason to stay cautious.

Reason #1 to Love It: Strong Earnings and Guidance

Qualcomm’s earnings for the quarter ending March 30 came in well ahead of expectations. The company reported non-GAAP EPS of $2.85, beating consensus by $0.04 and revenue of $10.98 billion, which topped expectations by $330 million and was up nearly 17% year over year.

Segment strength was visible across the board. QCT revenue rose 18% to $9.5 billion, driven by a 12% jump in handset revenue and a 59% spike in automotive sales. Qualcomm’s IoT unit also posted a 27% increase to $1.58 billion, while licensing revenue remained flat year over year at $1.32 billion.

Looking ahead, the company forecasts Q3 revenue to be between $9.9 billion and $10.7 billion, with EPS expected to land in the $2.60 to $2.80 range. Both metrics were essentially at the upper end of previous mid-point expectations, which is impressive considering the current macro backdrop.

Qualcomm also returned $2.7 billion to shareholders this quarter, including $1.7 billion in buybacks, evidence of management’s confidence, and a supportive move for the stock.

Reason #2 to Love It: It’s Still One of the Cheapest Chips Around

Qualcomm’s valuation continues to look compelling relative to the rest of the semiconductor sector. The stock currently trades at a price-to-earnings ratio of just 15 - less than half of NVIDIA Corp’s (NASDAQ NVDA) PE of 37 and far below Advanced Micro Devices Inc’s NASDAQ: AMD 97.

For investors hunting value in a sector that’s seen extreme multiple expansion in recent years, Qualcomm stands out. The company is executing well, producing consistent earnings and generating strong free cash flow, yet its valuation remains stubbornly low.

This was one of the reasons the team at JP Morgan Chase reiterated its Overweight rating this week, along with a $185 price target. That implies a nearly 30% upside from current levels and suggests that institutions still see this as a high-quality name trading at an unfair discount.

1 Reason to Run: The Market Just Isn’t Buying It (Yet)

Despite all the positives, the stock’s post-earnings action tells its own story. A 5% selloff in response to a beat-and-raise quarter is not a great signal, especially in a market that’s otherwise been receptive to solid results.

It’s also worth noting that Qualcomm never really recovered from last summer’s drop, unlike most of its tech peers. While NVIDIA and others have gone on to set new highs, Qualcomm is still down significantly from its 2024 peak and hasn’t been generating the kind of excitement that typically precedes a recovery rally.

Even with strong numbers and a low valuation, institutional conviction still appears lacking. That suggests Wall Street hasn’t yet fully bought into the idea that Qualcomm can lead again - at least not yet. Until that sentiment shifts, the stock may remain undervalued for a reason.

Final Thoughts

Qualcomm’s Q2 results were solid across the board, plus the company’s forward guidance easily cleared the bar. Its valuation remains extremely attractive, especially compared to peers trading at far loftier multiples.

But the market reaction raises valid questions. If a well-rounded quarter and a 20% rally off the lows still end in a selloff, it may be that investors are waiting for something bigger - a true shift in perception, not just performance. For now, Qualcomm remains one of the most intriguing value plays in tech. But it may take another few months, or a major catalyst, to turn that value into sustained momentum.