Qualcomm (QCOM) reported its fourth quarter earnings after the bell on Wednesday, beating expectations on the top and bottom lines. The company also issued better-than-anticipated guidance of between $11.8 billion and $12.6 billion versus an anticipated $11.59 billion.
But the company said it also took a one-time non-cash tax-related charge of $5.7 billion related to President Trump’s One Big Beautiful Bill Act. The charge was excluded from Qualcomm’s non-GAAP numbers but impacted its GAAP results. The company said the fee will allow for lower cash tax payments in the future.
Qualcomm stock was down more than 3% following the report.
For the quarter, Qualcomm saw adjusted earnings per share (EPS) of $3.00 on revenue $11.27 billion. Analysts were expecting EPS of $2.88 on revenue of $10.77 billion, according to Bloomberg consensus estimates. The company saw EPS of $2.69 on revenue of $10.2 billion during the same quarter in 2024.
Qualcomm’s business is divided into its QCT segment, which includes smartphone, internet of things, and automotive revenue, and its QTL segment, which includes revenue from technology licensing.
In the quarter, QCT brought in $9.8 billion in revenue versus expectations of $9.3 billion. QTL generated $1.4 billion, in line with expectations.
Qualcomm generates the bulk of its revenue via the sale of its smartphone chips and licensing agreements for smartphone technologies. But the market has slowed over the years as smartphones have become more ubiquitous around the globe.
Qualcomm is also dealing with the prospect of losing Apple (AAPL) as a major customer for its wireless chips as the iPhone maker looks to use its own custom chips across its iPhone line. The company already uses the chips in its iPhone 16e and iPhone Air.
To deal with that, Qualcomm is diversifying its business offerings to expand into the AI data center and PC chip markets.
Last week, Qualcomm debuted its AI200 and AI250 data center chips and rack-scale server products. The AI200 will be available in 2026, while the AI250 will land in 2027. A third chip is scheduled for 2028.
A rack-scale server is a server system that can pool computing resources from multiple chips to increase performance capabilities. Nvidia (NVDA) already offers its own rack-scale system, and Advanced Micro Devices (AMD) recently announced its own Helios rack-scale offering.
Qualcomm already sells an AI chip, but this is the first time it’s making a push to compete directly with Nvidia and AMD on their turf.
The move sent Qualcomm stock soaring 11% the day of the announcement. Still, Qualcomm shares are lagging behind Nvidia, AMD, and even Intel (INTC) on the year.
Shares are up just 9% over the past 12 months, while Nvidia stock is up 44% and AMD is up 82%. Shares of Intel have climbed 64%, and the S&P 500 (^GSPC) rose 18%.
Moving into the data center space gives Qualcomm access to a fast-growing market, albeit one dominated by Nvidia and AMD.
On the PC side, Qualcomm sells processors for Windows computers that compete with both Intel and AMD.
