TipRanks Smart Value #37: Chip Bargain
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Dear Investors,
Dear Investors,
Welcome to the 37th edition of our recently launched TipRanks Smart Value Newsletter!
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This Week’s Top Value Pick: Qualcomm (QCOM)
Qualcomm (QCOM) is a leading global semiconductor and telecommunications company specializing in wireless technologies and mobile connectivity solutions. Its operations include the design and supply of advanced chipsets, system software, and modem technologies that power smartphones, connected vehicles, and Internet of Things (IoT) devices. Headquartered in San Diego, California, Qualcomm is a pioneer in 3G, 4G, and 5G technologies and remains a key enabler of the global mobile ecosystem.
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Edge Evolution
Qualcomm, incorporated in California in 1985, has evolved into a global technology leader specializing in the development and commercialization of foundational technologies across mobile devices, automotive systems, and connected industries. Its innovations span on-device artificial intelligence (AI), high-performance and low-power computing, and advanced wireless connectivity. Its technologies that power billions of intelligent devices worldwide.
In recent years, Qualcomm has diversified beyond smartphones and broadened its product portfolio to include cellular modems, processors, RF front-end components, and advanced system-on-chip (SoC) designs that serve a growing range of intelligent and connected devices.
Over the past decade, the company has executed a disciplined acquisition strategy to accelerate this transformation. Its expansion began with the 2014 acquisition of CSR, which enhanced Qualcomm’s capabilities in Bluetooth, GPS, and other short-range wireless technologies – assets that remain integral to its connected ecosystem today. In 2021, Qualcomm acquired Nuvia, marking its entry into high-performance CPU design for mobile and server markets, and added augmented reality specialists Clay AIR and Wikitude to strengthen its AR and computer vision expertise.
Acquisition momentum continued in 2022 with the purchases of Cellwize, advancing 5G network automation, and Arriver, expanding its autonomous driving and ADAS software portfolio. In 2023, Qualcomm acquired Autotalks, a leader in vehicle-to-everything (V2X) communication technologies that enhance automotive safety and connectivity. The company deepened its IoT presence in 2024 by acquiring Foundries.io, which specializes in secure lifecycle management for IoT and edge devices.
In 2025, it added Alphawave IP Group, expanding into high-speed wired connectivity and AI infrastructure for data centers that directly complements Qualcomm’s Oryon CPUs and Hexagon Neural Processing Unit (NPUs) – strengthening Qualcomm’s push into power-efficient AI compute and data-center infrastructure. It also acquired Arduino, an Italian firm known for single-board microcontrollers and edge AI development platforms. .
Alongside these strategic additions, Qualcomm has made selective divestitures and withdrawals to refine its focus. The collapse of the 2018 NXP acquisition, which was intended to strengthen its position in automotive semiconductors and industrial IoT, prompted Qualcomm to redirect capital toward share repurchases and accelerate investment in AI, 5G, and automotive technologies. That same year, Broadcom’s failed $117 billion hostile takeover attempt underscored Qualcomm’s strategic importance to U.S. national interests and reinforced its independence, motivating management to double down on innovation-led growth and targeted acquisitions across emerging technology markets.
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Chip Empire
Qualcomm operates primarily through two segments: Qualcomm CDMA Technologies (QCT) and Qualcomm Technology Licensing (QTL), with a smaller Qualcomm Strategic Initiatives (QSI) segment that manages strategic investments.
The QCT segment generates about 86% of its revenue, generating income from the design and supply of integrated circuits and system software used across mobile, automotive, and IoT devices. Within QCT, the company’s Snapdragon platforms integrate processors, modems, and AI engines that power smartphones, vehicles, and connected devices. The segment’s diversification into automotive and IoT has been particularly strong, with double-digit growth in both areas as connected vehicles, digital cockpits, industrial automation, and smart devices gain traction. Qualcomm’s continuous investment in R&D fuels innovation in on-device AI, 5G modem-to-antenna solutions, and low-power computing – key factors sustaining its competitive edge and supporting long-term revenue growth.
The QTL complements this hardware breadth by licensing Qualcomm’s extensive portfolio of standard-essential patents that underpin global cellular technologies from 3G to 5G and beyond. This model ensures stable cash flow and profitability, even during cyclical downturns in handset demand, as royalties are earned on virtually all 5G-capable devices worldwide.
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Tech Trajectory
Qualcomm is repositioning itself as a diversified intelligent edge company, building momentum across premium handsets, PCs, IoT, automotive, and data center inference. The launch of the Snapdragon 8 Elite Gen 5 highlights how the company is strengthening its leadership in the premium smartphone market – a segment that consistently delivers higher margins and stable demand.
The new Oryon Central Processing Unit (CPU), now the fastest mobile CPU with expanded AI capabilities, places Qualcomm at the center of accelerating on-device AI adoption, while strong demand from major Chinese OEMs such as Xiaomi, Honor, Vivo, and OnePlus confirms a broad upgrade cycle already underway. This momentum directly benefits Qualcomm’s financial profile, as premium Android demand fueled an 18% year-over-year increase in non-Apple QCT revenue. Management reiterated that premium-tier Android demand – not Apple-related shifts – remains the core driver of handset growth. Non-Apple QCT revenues have compounded at 15% annually over the past five years, demonstrating the strength of Qualcomm’s franchise.
The company is building a second engine of growth in AI-capable PCs, a market expected to expand sharply as consumers and enterprises adopt AI-first workflows. The Snapdragon X2 Elite platform, along with the next-generation Oryon Gen 3 CPU, positions the company to gain share from incumbents such as AMD as the market transitions from x86 to ARM-based architectures. With approximately 150 device designs expected through 2026, Qualcomm now has a visible pipeline that extends well into FY27.
Its IoT and Extended Reality (XR) businesses further widen the company’s footprint. IoT revenues climbed 22% year over year in FY25, helped by rising demand for AI-enabled devices across smart home, industrial, and robotics markets. Meanwhile, XR continues to outperform, with about 30 designs in development – a sign that AI smart glasses may become a more meaningful contributor as the category matures.
In automotive, Qualcomm delivered another record quarter as adoption of its Snapdragon digital cockpit, connectivity, and ADAS platforms continued to expand across global OEMs. Snapdragon Ride Pilot, the company’s ADAS solution, is currently being tested and approved for use in 60 countries, with plans to expand to 100 by 2026. This gives Qualcomm a multi-year runway for content growth per vehicle (increasing the dollar value of Qualcomm technology embedded in each car). These design wins typically span five- to ten-year cycles, providing exceptional revenue visibility.
Qualcomm is now extending its reach into data-center AI inference, the stage where AI models generate outputs in real time, a market with a long monetization runway. The company’s high-performance AI chips, AI200 and AI250, target the growing need for power-efficient inference – as opposed to training – offering a differentiated architecture focused on compute density and with lower power consumption, allowing them to deliver more results per watt of energy used. Its first customer, the Saudi government-owned AI company HUMAIN, expects a 200 MW deployment beginning in 2026, and management now anticipates material revenue contributions starting in FY27, earlier than previously projected. As hyperscalers broaden their inference strategies, this segment could become a meaningful incremental driver with structurally higher margins.
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Earnings Signal
Over the past three years, Qualcomm’s revenue has remained essentially flat with a CAGR of 0.1%, reflecting a transitional period in which growth in automotive, IoT, and AI-driven connected devices began offsetting the effects of the maturing of its handset business. Adjusted EPS contracted by 1.4% during this period, a decline driven largely by near-term cost pressures rather than any weakening in Qualcomm’s core operating strength.
The company delivered a solid fiscal fourth quarter of FY25, reporting $11.3 billion in revenue, up 10% year over year and ahead of consensus expectations. This momentum was led by the QCT segment, which benefited from broad strength across handsets, automotive, and IoT as Qualcomm continued to diversify beyond its traditional smartphone base. Adjusted EPS rose 12% to $3, also above Street estimates, underscoring improving profitability. QCT revenue reached $9.8 billion, supported by 14% growth in handsets, 17% in automotive, and 7% in IoT.
Both licensing and chipset operations delivered another strong quarter. QTL generated $1.4 billion in revenue with a 72% Earnings Before Tax (EBT) margin, beating guidance on stronger handset unit shipments. QCT revenue increased 9% sequentially and 13% year over year, generating $2.9 billion in EBT and a 29% margin – which came in at the upper end of expectations. Within QCT, handset revenue rose to $7 billion, up 14% year over year as premium Android demand gained traction. IoT revenue advanced 7% to $1.8 billion on industrial strength, networking demand, and early adoption of AI-enabled smart glasses. Automotive revenue reached a record $1.1 billion, up 17% year over year, reflecting continued adoption of Qualcomm’s digital cockpit, telematics, and ADAS platforms.
For FY25, Qualcomm reported $44.3 billion in revenue, a 14% increase, while adjusted EPS climbed 18% to $12.03. Operating income rose to $12.4 billion on a GAAP basis and $15.5 billion on an adjusted basis. The balance sheet remained strong, with $7.8 billion in cash and $14.8 billion in long-term debt, resulting in a debt-to-EBITDA ratio of 0.99 – below the sector median of 1.54 – and supported by an “A” credit rating from S&P Global.
Operating cash flow grew to $14 billion from $12.2 billion in FY24, while capital expenditure remained modest at $1.2 billion. The company reported $12.8 billion in free cash flow. Qualcomm returned nearly 100% of this to shareholders through buybacks and dividends.
Looking ahead to Q1 FY26, management expects another record quarter. Revenue is projected at $12.2 billion at the midpoint, with adjusted EPS of $3.4. QTL is expected to deliver $1.4 billion to $1.6 billion in revenue with EBT margins between 74% and 78%. QCT is forecast to reach $10.3 billion to $10.9 billion in revenue and generate EBT margins of 30% to 32%. Within QCT, handset revenue is expected to climb to new highs as next-generation Android flagships launch with Snapdragon chips. IoT revenue, after outperforming in Q4, is projected to decline sequentially due to normal seasonality, while automotive revenue is expected to remain stable or rise slightly following its record performance.
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Value Bandwidth
Qualcomm has built a steady and predictable shareholder-return profile over the long term, supported by its strong cash-generation capacity. The company has raised its dividend for 22 consecutive years, and over the past decade, its dividend has grown at an annual rate of 6.17%. Based on adjusted earnings, Qualcomm distributes about 29% to shareholders. The current quarterly dividend stands at $0.89 per share, which translates to roughly $3.56 annually and yields about 2% at the current share price.
Alongside dividends, Qualcomm continues to prioritize shareholder value through aggressive share repurchases. In FY25, the company bought back $8.8 billion worth of shares, reflecting its robust free-cash-flow profile. During the first quarter of fiscal 2025, Qualcomm completed the remaining authorization under its $10 billion repurchase program launched in October 2021 and seamlessly transitioned into a new $15 billion program introduced in November 2024. Unlike the earlier authorization, the new program carries no expiration date, giving management greater flexibility to scale repurchases in response to market conditions and internal capital requirements. At the end of its fiscal year on September 28, 2025, the company still had $7.2 billion available for future buybacks.
Qualcomm’s valuation metrics paint a picture of a mature technology business trading below what its fundamentals might justify. The stock is priced at a discount to its historical averages on both non-GAAP trailing and forward P/E ratios, suggesting the market is assigning a lower earnings multiple than in past cycles despite improving profitability and record design wins. At the same time, Qualcomm’s forward EV/EBITDA is in line with its historical averages. Its valuation becomes even more compelling when viewed through free cash flow: the stock trades at a more than 7% discount to its historical averages based on trailing and forward price-to-cash-flow multiples, underscoring its strong cash-generation profile.
Relative to peers such as Broadcom and Nvidia, Qualcomm screens as one of the less expensive names. Its non-GAAP trailing and forward P/E ratios, forward EV/EBITDA, and trailing price-to-book and price-to-cash-flow ratios all fall into the low end of the peer-valuation range. The only exception is its non-GAAP forward PEG ratio, which sits at the high end, reflecting more modest expected earnings growth – but that might mean that the recent pivot to high-growth data-center AI solutions has yet to be fully grasped by the market. The broader valuation picture suggests that Qualcomm offers a potentially attractive entry point for value-focused investors looking for stable cash flows, disciplined capital returns, and exposure to long-term trends in connectivity, AI-enabled devices, and automotive technology.
Analysts remain broadly optimistic about QCOM as the company’s strong momentum in automotive and IoT highlights the effectiveness of its diversification strategy and its progress in expanding beyond traditional mobile markets. Its deeper push into AI and data-center technologies further broadens its portfolio, while disciplined cash-flow management provides the resources to invest in innovation, support ongoing operations, and maintain consistent shareholder returns.
Wall Street consensus estimates point to roughly 14% upside from current levels, with some analysts projecting gains of more than 29%. A discounted cash flow analysis reinforces this view, indicating that Qualcomm’s shares may be trading at about a 14% discount to intrinsic value – suggesting meaningful long-term upside potential for investors.
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Investing Takeaway
Qualcomm offers an appealing setup for value-focused investors as the market continues to underestimate the strength and durability of its business model. The company generates consistent cash flow from both its chipset operations and its licensing arm, creating a stable foundation that supports dependable shareholder returns. Management’s disciplined approach to capital allocation –balancing investment in emerging technologies with ongoing buybacks and dividends – reinforces this stability. Despite expanding into higher-growth areas such as automotive, IoT, and AI-driven computing, the stock still trades at levels that suggest investor skepticism toward its long-term earnings power. For those seeking a mature technology company with strong competitive positioning, resilient profitability, and a clear commitment to returning capital, Qualcomm presents a compelling value opportunity within the broader semiconductor landscape.
