Qualcomm (QCOM) Q3 2025: Automotive and IoT Revenue Climb 21% and 24%, Extending Diversification Runway
Qualcomm’s Q3 marked a decisive acceleration in its diversification strategy, with automotive and IoT outpacing legacy handset growth and providing a clear path to its 2029 targets. The company’s execution in premium Android, expansion in AI PCs, and early moves in data center set the stage for a broader addressable market. Management’s confidence in hitting long-term revenue goals is underpinned by multi-year OEM deals and strong margin discipline despite Apple headwinds.
Summary
- Automotive and IoT Outperformance: Non-handset segments are now the growth engine, supporting long-term targets.
- AI and PC Expansion: Snapdragon traction in AI PCs and wearables signals a broader ecosystem play.
- Margin Stability Amid Mix Shifts: Operating discipline offsets Apple revenue loss, keeping profitability in line with targets.
Performance Analysis
Qualcomm’s Q3 revenue mix highlights a deliberate shift from handset reliance toward higher-growth segments, with automotive and IoT revenues rising 21% and 24% year over year, respectively. Handset sales, driven by Snapdragon 8 Elite adoption and a multi-year Xiaomi partnership, showed resilience even as Apple-related headwinds persisted. The company’s licensing segment maintained steady contribution, but the real momentum came from QCT (Qualcomm CDMA Technologies), the chipset business, which posted double-digit growth in both revenue and operating profit.
QCT’s IoT surge was underpinned by increased demand for Snapdragon AR1 in the AI smart glasses space, reinforcing Qualcomm’s early lead in emerging personal AI devices. Automotive set another record, fueled by content growth in new vehicle launches and the Snapdragon Digital Chassis platform. Operational leverage was evident in the 30% QCT EBT margin, achieved despite a seasonally weaker handset mix and lower Apple volumes. The company’s capital return policy remained robust, with $3.8 billion returned to shareholders through buybacks and dividends.
- Handset Premiumization: Android flagship content and ASPs continue to rise, offsetting weaker Apple share.
- Automotive Pipeline Strength: 50 vehicle launches and upcoming BMW ADAS rollout bolster visibility.
- IoT Ecosystem Build-Out: Industrial partnerships and AI-enabled platforms drive outsized growth in edge and enterprise.
Qualcomm’s segment mix is now structurally more diversified, with non-Apple QCT revenue growing at a 15%+ annual pace for the second year, providing a buffer against cyclical handset swings and positioning the company for multi-year expansion.
Executive Commentary
"Our momentum in automotive and IoT is the result of strong execution of our growth and diversification strategy. We remain on track to meet our fiscal 29 target for combined automotive and IoT revenues of $22 billion."
Cristiano Omon, President and Chief Executive Officer
"We returned $3.8 billion to stockholders, including $2.8 billion in stock repurchases and $967 million in dividends, aligned with our commitment to return 100% of our free cash flow in the fiscal year."
Akash Palkawala, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Automotive and IoT as Growth Anchors
Qualcomm’s long-range plan centers on automotive and IoT as structural growth platforms, with both segments now outpacing handset growth and comprising a rising share of total QCT revenue. The Snapdragon Digital Chassis, automotive connectivity and compute suite, is seeing rapid adoption, with 12 new design wins and 50 vehicle launches this fiscal year. IoT’s industrial and enterprise traction, especially through DragonWing platforms and AI-enabled edge solutions, signals durable, multi-vertical demand.
2. Handset Resilience and Premium Android Leadership
Despite Apple share erosion, Qualcomm’s premium Android business continues to deliver, supported by multi-year agreements with Xiaomi and Samsung. The Snapdragon 8 Elite platform, mobile flagship chipset, is powering volume growth in China and globally. Management expects flagship ASPs and content per device to rise with the rollout of new AI capabilities, sustaining high-margin handset economics.
3. AI PC and Wearable Ecosystem Expansion
Snapdragon X series, Qualcomm’s AI PC platform, is gaining traction with over 100 designs in the pipeline and a 9% share of high-end Windows laptops across key markets. The company’s technology roadmap is validated by launches from major OEMs and growing design wins in smart glasses and wearables, positioning Qualcomm as the backbone of emerging personal AI devices.
4. Data Center Entry and AlphaWave Acquisition
Qualcomm is making a calculated push into the data center market, leveraging its Orion CPU and Hexagon NPU IP, and acquiring AlphaWave for high-speed connectivity. Engagements with hyperscalers and a focus on inference efficiency (tokens per watt, tokens per dollar) aim to carve out a niche in AI inference accelerators and custom ARM-compatible solutions. Management is disciplined, with revenue contribution expected from fiscal 2028 onward.
5. Margin and Capital Allocation Discipline
Operating margin stability remains a core focus, with management reallocating spend toward growth vectors while absorbing wage inflation. The company’s pledge to return 100% of free cash flow underscores shareholder alignment, and margin targets remain intact despite mix shifts and Apple volume declines.
Key Considerations
This quarter’s results reinforce Qualcomm’s transformation into a diversified platform company, but the transition brings new execution and competitive risks that investors must monitor.
Key Considerations:
- China OEM Exposure: Deeper Xiaomi partnership and rising China mix increase both opportunity and competitive risk.
- Samsung Share Baseline: Multi-year agreement sets a 75% baseline share for Galaxy S, with upside potential but inherent volatility.
- Data Center Ramp Timeline: AlphaWave integration and hyperscaler wins are multi-year bets, with revenue impact not until fiscal 2028.
- AI Adoption in Android: Rapid AI feature uptake in Galaxy S25 and broader Android ecosystem supports premiumization thesis.
- Capital Discipline Amid Diversification: OPEX growth remains muted, but new initiatives may require selective investment in talent and R&D.
Risks
Rising China exposure and ongoing Apple volume declines heighten both top-line and geopolitical risk, while the data center initiative’s payoff is several years out and subject to execution and customer concentration risk. Competitive threats from in-house silicon at OEMs (notably Samsung) and new entrants in AI inference could pressure both share and margins. Management’s ability to maintain operating discipline as it ramps new growth vectors will be tested.
Forward Outlook
For Q4 2025, Qualcomm guided to:
- Revenue of $10.3 to $11.1 billion
- Non-GAAP EPS of $2.75 to $2.95
For full-year 2025, management maintained guidance:
- Revenue and EPS growth of 12% and 16% over fiscal 2024 at the midpoint
Management highlighted several factors that will shape results:
- Normal seasonal trends expected, adjusted for lower Apple share
- Automotive and IoT projected to grow 20% and 35%, supporting 2029 targets
Takeaways
Qualcomm’s Q3 underscores a successful pivot toward diversified, higher-growth businesses, with automotive and IoT now firmly established as key engines. The company’s proactive moves in AI PCs, wearables, and data center position it for multi-year expansion, but bring new execution hurdles and competitive dynamics.
- Growth Engine Shift: Automotive and IoT are now foundational to Qualcomm’s future, with premium Android and AI PCs adding incremental upside.
- Margin and Cash Flow Resilience: Operating leverage and capital returns remain intact, even as the business mix evolves away from Apple.
- Execution Watchpoints: Data center timeline, China exposure, and Samsung share are critical levers to monitor as the diversification strategy matures.
Conclusion
Qualcomm’s quarter demonstrates the company’s ability to deliver on its diversification roadmap, with non-handset segments now driving growth and margin stability. Execution in new markets and careful capital allocation will determine whether the company can sustain this trajectory as competitive and geopolitical pressures mount.
Industry Read-Through
Qualcomm’s performance signals an accelerating shift in the semiconductor industry toward automotive, IoT, and AI-enabled devices as primary growth vectors, with legacy handset reliance receding. The company’s early traction in AI PCs and wearables suggests a broader ecosystem opportunity for chipmakers able to deliver on-device intelligence and power efficiency. Data center ambitions reflect a wider industry trend as traditional mobile silicon leaders seek to capture a share of AI infrastructure spend, but barriers to entry remain high and timelines long. OEM vertical integration and regional dynamics, especially in China, will continue to reshape competitive positioning across the sector.