Qualcomm Surges on AI and Smartphone Recovery Outlook Despite Earnings Miss

Qualcomm saw its shares jump sharply in extended trading despite issuing a weaker-than-expected forecast for the third quarter. Investor sentiment was lifted by optimistic remarks from CEO Cristiano Amon, who signaled a potential turnaround in the global smartphone market and highlighted growing opportunities in the fast-expanding data center chip segment.

Stock Gains Driven by Optimism Despite Weak Forecast

Qualcomm’s Shares Rise 15% After Earnings Outlook

Qualcomm’s stock surged 15% in extended trading, even as the company projected revenue and profit figures below Wall Street expectations. The upbeat tone from leadership overshadowed concerns about near-term financial performance.

Qualcomm CEO Signals Bottoming Out of Smartphone Market

In an interview with a news agency, Qualcomm CEO Cristiano Amon expressed confidence in a recovery trend. “We can now call the bottom,” Amon said, adding that the company’s licensing business, which beat estimates, gives it insights into smartphone makers' plans for later in the year.

Smartphone Market Challenges and Recovery Signals

Industry Faces Demand Slowdown

The global smartphone market has been under pressure due to rising component costs, particularly memory chips, which have increased the overall price of devices. This has led to cautious consumer spending and reduced demand for smartphones and PCs.

Qualcomm’s Strategic Position

As one of the world’s largest mobile chipmakers, Qualcomm supplies processors to leading brands such as Apple and Samsung, along with several Chinese smartphone manufacturers. Its performance is often seen as a key indicator of broader trends in the consumer electronics industry.

Financial Outlook Falls Short of Expectations

Revenue Guidance Below Estimates

The company expects revenue in the range of $9.2 billion to $10 billion for the current quarter, which is entirely below analysts’ estimates of $10.27 billion, according to data compiled by LSEG.

Profit Forecast Also Misses Targets

Qualcomm projected third-quarter adjusted earnings between $2.10 and $2.30 per share, compared to expectations of $2.45 per share. Additionally, chip segment revenue is expected to be between $7.9 billion and $8.5 billion, falling short of the $8.93 billion estimate.

Expanding Into Data Center Chip Market

New Growth Avenue Beyond Smartphones

To diversify its revenue streams, Qualcomm is aggressively entering the data center chip market—a sector experiencing rapid growth due to the rise of artificial intelligence and cloud computing.

Amon revealed that the company plans to begin shipping data center products before the end of the year, signaling a strategic shift toward enterprise and cloud infrastructure solutions.

Focus on CPUs, AI Accelerators, and ASICs

The company is currently collaborating with customers on three categories of chips:

• Central Processing Units (CPUs)
• AI inference accelerators
• Custom Application-Specific Integrated Circuits (ASICs)

“We have engagement on a custom ASIC, which is what we wanted to do when we bought AlphaWave,” Amon said, “and now we have a lot of connectivity (intellectual property) that enables us to do that. We're executing on all three categories of chips.”

Qualcomm acquired AlphaWave last year in a $2.4 billion deal, strengthening its capabilities in high-speed connectivity and chip design.

AI Boom Driving Data Center Demand

Shift Toward AI Inference Workloads

Cloud providers are increasingly investing in chips optimized for inference—the phase where trained AI models are deployed to process real-world data. This shift is driving demand for high-performance and energy-efficient processors.

Analyst Perspective on Qualcomm’s Strategy

Bob O'Donnell, president and chief analyst at TECHnalysis Research, noted: “They're building from a small base, but they're already increasing the range of options they're bringing to data center, which suggests a maturation of their strategy and offerings.”

Competitive Pressure From In-House Chip Development

Apple and Samsung Move Toward Self-Reliance

A key challenge for Qualcomm is the growing trend of major clients like Apple and Samsung developing their own chips, reducing reliance on external suppliers.

Impact on Future Revenue Streams

“In terms of Apple product revenue for fiscal 27, we've seen sell-side models in the range of a little over $2 billion in terms of QCT product revenue in the year. And we think that's a reasonable place to model the business,” CFO Akash Palkhiwala said on a post-earnings conference call, referring to the company's chip segment.

Conclusion

Qualcomm’s latest performance highlights a transitional phase for the company as it navigates short-term challenges in the smartphone market while positioning itself for long-term growth in data center and AI-driven technologies. Although its near-term financial outlook remains under pressure, strong leadership confidence and strategic investments in emerging markets have boosted investor sentiment. If the anticipated smartphone recovery materializes and its data center initiatives gain traction, Qualcomm could strengthen its position as a diversified semiconductor leader in the evolving global tech landscape.