QCOM: Premium Android Demand And AI Expansion Will Balance Competitive Risks Ahead

The fair value estimate for QUALCOMM has been raised from $179.67 to $187.71. Analysts cite recent healthy results, robust demand for premium Android devices, success in new product launches, and expanding opportunities in AI and diversified end markets as reasons for this increase.

Analyst Commentary

Analyst reactions to QUALCOMM’s latest results reflect a mix of optimism about the company’s growth trajectory and caution regarding the competitive landscape and valuation. The following summarizes key points raised by research teams and street analysts.

Bullish Takeaways

Bullish analysts have raised price targets following strong quarterly results, pointing to broad-based growth across handsets, automotive, and IoT segments.
Expansion in premium-tier Android, especially with key customers, as well as successful product launches, are cited as drivers for healthier revenue and a richer product mix.
Momentum is expected to build over the next several years due to emerging opportunities in datacenter, artificial intelligence, and industrial automation. This supports the view that current fundamentals remain strong.
Diversification is under way, and new end markets such as automotive and AI infrastructure are seen as important factors for future multiple expansion and ongoing top-line growth.

Bearish Takeaways

Some bearish analysts express caution regarding increased competition in the AI and datacenter accelerator space. They highlight announcements from industry rivals that may pressure Qualcomm to execute flawlessly to maintain share.
There are concerns about elevated expectations already being reflected in the stock price, particularly with investor enthusiasm for AI plays and cyclical growth themes.
The long-term potential of AI-related deals remains a "wild card," and execution risks in scaling new partnerships or winning market share in new segments could impact future upside.
Certain analysts have trimmed price targets on the basis of valuation or uncertainty around the pace and sustainability of diversification, especially as the company pushes into less proven revenue streams.

What's in the News

Apple is expected to remove Qualcomm modems from its upcoming iPhone 18 Pro models and transition to in-house C2 components, signaling a potential loss of a major customer for Qualcomm (Bloomberg).
The Chinese government has mandated that new state-funded data centers use only domestically made AI chips, requiring removal and cancellation of foreign chip purchases. This action could impact Qualcomm's business in China (Reuters).
China has suspended export restrictions for a year on five key minerals, including gallium and germanium, which are essential materials for semiconductors and relevant to Qualcomm's supply chain (NY Times).
Qualcomm has acknowledged it acquired Autotalks without notifying Chinese authorities, following the launch of an antitrust investigation by China's regulators (Reuters).
Qualcomm secured a complete legal victory against Arm Ltd. in a U.S. District Court, reinforcing its right to use technology obtained through the Nuvia acquisition and upholding prior jury verdicts in its favor (Key Developments).

Valuation Changes

Fair Value Estimate has risen from $179.67 to $187.71, reflecting a modest increase in projected worth.
Discount Rate increased slightly from 10.41% to 10.87%. This indicates heightened perceived risk or cost of capital.
Revenue Growth forecast has edged up from 2.64% to 2.86%. This points to slightly stronger expected top-line expansion.
Net Profit Margin has decreased from 26.18% to 25.16%, suggesting expectations for slightly lower profitability.
Future P/E Ratio has risen from 19.51x to 20.23x. This implies a higher valuation multiple for expected earnings.

Diversification into AI devices, automotive, and industrial IoT is set to drive higher margins and reduce dependence on individual customers.
Strategic expansion in data centers and next-gen connectivity broadens Qualcomm's addressable market and supports long-term sustainable growth.
Rising competition, geopolitical risks, unproven diversification, regulatory pressures, and reliance on volatile smartphone markets threaten QUALCOMM's revenue, margins, and long-term earnings stability.

Catalysts

About QUALCOMM

Engages in the development and commercialization of foundational technologies for the wireless industry worldwide.What are the underlying business or industry changes driving this perspective?

Expanding adoption of AI-powered devices-including smartphones, XR wearables, smart glasses, and emerging personal AI products-should fuel higher average selling prices, increased unit demand, and ongoing upgrade cycles, positively impacting Qualcomm's future revenue and supporting gross margin expansion.
Rapid growth in automotive and industrial IoT segments, supported by strong design win momentum and a robust multi-year pipeline (with a combined $22 billion revenue target by 2029), is set to diversify Qualcomm's revenue base and drive margin-accretive growth as these businesses become a larger share of total earnings.
Successful execution of multi-year agreements with global OEMs (e.g., expanded Xiaomi partnership, strong Samsung baseline share), along with deepening relationships in key international markets, increases revenue visibility and reduces customer concentration risk, supporting steadier long-term top-line growth.
Strategic entry into the data center accelerated by the Alphawave acquisition positions Qualcomm to capture new high-growth markets as AI inference and edge workloads scale, with potential material revenue contribution starting FY28; this catalyst can drive both revenue and high-margin licensing streams.
Proliferation of 5G, Wi-Fi 7, and next-gen connectivity across devices and industries continues to grow device complexity and connectivity requirements, bolstering Qualcomm's addressable market and providing a structural tailwind to revenue-per-device and ecosystem-wide earnings.

QUALCOMM Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming QUALCOMM's revenue will grow by 2.7% annually over the next 3 years.
Analysts assume that profit margins will shrink from 26.8% today to 26.1% in 3 years time.
Analysts expect earnings to reach $12.2 billion (and earnings per share of $11.24) by about September 2028, up from $11.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $10.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.2x on those 2028 earnings, up from 14.7x today. This future PE is lower than the current PE for the US Semiconductor industry at 33.5x.
Analysts expect the number of shares outstanding to decline by 2.88% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 10.33%, as per the Simply Wall St company report.

QUALCOMM Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Escalating competition from major OEMs such as Apple and Samsung developing in-house chips, as well as local players in China, threatens QUALCOMM's mobile chipset market share, risking lower revenues and margin compression.
Ongoing global trade volatility and geopolitical tensions, especially U.S.-China dynamics and tech sovereignty initiatives, may disrupt supply chains and shrink QUALCOMM's addressable market in key international regions, negatively impacting long-term revenue growth.
The company's ambitious diversification initiatives into data centers and AI acceleration are in early, unproven phases and depend heavily on successful customer engagements and large design wins; delays, integration challenges (including Alphawave acquisition), or failure to capture significant share could result in higher R&D expenses without corresponding revenue growth, hurting net earnings and margins.
Heavy legal and regulatory scrutiny remains a persistent risk, especially regarding QUALCOMM's patent licensing business model, which could result in lower royalty revenues and a structurally lower operating margin if adverse rulings or settlements occur.
The reduction of Apple-related revenues and QUALCOMM's continued reliance on cyclical segments like smartphones expose the company to secular stagnation in handset sales, increasing volatility and threatening the sustainability of both revenue and net income over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $177.715 for QUALCOMM based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $225.0, and the most bearish reporting a price target of just $140.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $46.9 billion, earnings will come to $12.2 billion, and it would be trading on a PE ratio of 19.2x, assuming you use a discount rate of 10.3%.
Given the current share price of $158.66, the analyst price target of $177.71 is 10.7% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.