How to Play QCOM Stock After Missing Earnings Estimates

Qualcomm’s recent earnings report may have been a disappointment for investors, but it also marked a crucial moment of reckoning for the tech industry. The company navigated a challenging quarter, and its leadership made it clear that they believe the worst is behind them.

The numbers tell a story of woe: adjusted EPS of $2.21 fell short of estimates by a penny, while revenue slipped 4% year-over-year to $9.95 billion. Handset sales took a hit, dropping 20%, as memory supply shortages continued to plague the industry. However, beneath this surface lies a more nuanced reality – one that speaks to Qualcomm’s enduring strength and its potential for growth.

One of the most encouraging aspects of the report was the growth outside of smartphones. Combined automotive and IoT revenue surged 28% year-over-year, marking the 23rd consecutive quarter of double-digit growth in this sector. This trend underscores Qualcomm’s strategic shift towards emerging markets and technologies – a move that has long been touted as key to the company’s future success.

As the world grapples with climate change and sustainable energy, automotive revenue is likely to continue its ascent. With companies like Tesla and Volkswagen leading the charge in electric vehicle production, Qualcomm’s automotive business is poised for significant growth. Non-handset revenue is expected to reach $40 billion by fiscal 2029, up from a previous target of $22 billion.

While there are still risks and challenges on the horizon – including elevated memory prices, cautious smartphone manufacturers, and declining revenue from Apple products – these concerns should not overshadow the bigger picture. Qualcomm’s earnings report was always going to be a mixed bag, given the company’s transparent communication about its challenges and growth expectations.

Qualcomm is committed to executing on its plan, with emerging data-center business and expanding presence in the automotive sector poised to capitalize on the changing tech landscape. The real question now is whether investors will take the bait – or wait for more concrete proof of a turnaround. As Qualcomm navigates this critical period, one thing is certain: the stakes are high, but the potential rewards are greater still.