Qualcomm's Q4 Earnings Beat Overshadowed by Cautious Guidance and Transition Uncertainty

What happened

Qualcomm reported Q4 2025 earnings that exceeded consensus forecasts on both revenue and adjusted EPS, but management's forward guidance revealed underlying challenges. The company projected Q2 2026 revenue of $10.2B-$11.0B, citing industry-wide DRAM constraints from capacity shifts to HBM for AI data centers as a key limiter on handset production. This aligns with the DeepValue report's view that Qualcomm is in a critical transition phase, diversifying away from Apple modem dependency amid plans for the iPhone modem share to drop to ~20% in 2026. Management set measurable diversification targets, including QCT Automotive growth exceeding 35% YoY next quarter and Snapdragon X2 PC chip availability by June 2026. However, at a 29.5x P/E multiple, the stock's valuation remains premium and vulnerable until these offsets prove sustainable before Apple's modem rollout accelerates.

Implication

Qualcomm's earnings beat offers temporary positive sentiment but fails to address the structural headwinds highlighted in the DeepValue report. Near-term, investors must scrutinize Q2 2026 results to confirm that handset softness is supply-driven and not indicative of deeper demand issues. The guided automotive growth above 35% YoY is a critical checkpoint; failure here would undermine diversification credibility and increase downside risk. Snapdragon X2 shipments must proceed on schedule in mid-2026 to validate AI-PC ambitions and provide a tangible offset to handset pressures. With a high P/E multiple, any delay in these execution milestones could trigger significant multiple compression, reinforcing the need for patience until evidence of sustainable growth emerges.

Thesis delta

No shift in the investment thesis; this news confirms the existing 'WAIT' rating by highlighting Qualcomm's earnings beat as a surface-level positive that masks ongoing transition risks. The cautious guidance underscores the urgency for diversification proof points, such as automotive growth and PC shipments, before Apple's modem loss becomes more pronounced. Thus, the delta is neutral, reinforcing the report's call for monitoring key checkpoints over the next 6-9 months without altering the fundamental cautious outlook.