Qualcomm struggles to keep pace in the AI boom as it reports loss in Q4 FY2025

Despite the boom in artificial intelligence that has powered a new wave of semiconductor giants, Qualcomm continues to struggle for footing in a market that has rapidly redefined the chip industry. While Nvidia and AMD have ridden the AI frenzy to dizzying market valuations and surging demand, Qualcomm is still searching for its breakthrough moment.

On Wednesday, the San Diego-based company reported fiscal fourth-quarter results that beat Wall Street’s estimates on both revenue and earnings. Revenue climbed 10% from a year earlier to $11.27 billion, while adjusted earnings came in at $3 per share, topping analysts’ forecasts. For the full fiscal year, Qualcomm reported revenue of $44.3 billion, up 14% from the prior year.

But even with the beat, the company reported a GAAP net loss of $3.12 billion, a sharp reversal from last year’s $2.92 billion profit. The loss stemmed from a hefty $5.7 billion non-cash tax charge tied to the newly enacted One Big Beautiful Bill Act, which forced Qualcomm to establish a valuation allowance against future tax assets.

The numbers paint a complicated picture: Qualcomm’s operations are steady, even improving in places, but not fast enough to keep up with the AI-driven acceleration transforming the broader semiconductor landscape.

Investors noticed. Shares fell 1.7% in after-hours trading following the report, underscoring Wall Street’s skepticism about whether Qualcomm can carve out a meaningful position in the AI era.

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Smartphones, Automotive, and IoT Units Deliver Steady Growth

For decades, Qualcomm’s strength has come from the smartphone market, where its Snapdragon chips power Samsung’s flagship devices and its modems connect millions of Apple iPhones to the world’s networks. That dominance, however, has become a liability. With Apple expected to phase out Qualcomm’s modems in favor of its own, the company has spent the past several years trying to broaden its reach.

That strategy has started to yield modest gains. Revenue from its handset division rose 14% to $6.96 billion in the fourth quarter, while its automotive unit grew 17% to $1.05 billion and its Internet of Things (IoT) segment increased 7% to $1.81 billion. All three divisions surpassed analyst expectations, evidence that Qualcomm’s diversification efforts are taking hold.

Even so, those gains haven’t meaningfully changed the company’s overall trajectory. Total revenue remains largely flat year over year, and net income is deep in the red. The company’s once-dominant licensing division, which collects royalties from smartphone makers using its technology, slipped another 7% to $1.41 billion. While that decline was milder than anticipated, it underscores how Qualcomm’s traditional profit engines are losing steam just as new markets demand heavy investment.

In contrast, Nvidia has built an almost unassailable moat around the AI chip sector, capturing the lion’s share of data center and machine learning workloads that are now reshaping industries from cloud computing to healthcare. AMD has followed close behind, expanding its own line of AI-focused GPUs and gaining ground with cloud providers. By comparison, Qualcomm’s push into AI still feels like a catch-up play rather than a defining pivot.

Taking Aim at AI

Qualcomm is betting that this will change. The company is moving aggressively into AI data center chips, a domain it long avoided, with plans to challenge Nvidia’s dominance head-on. Last week, it announced two new AI accelerator chips, the AI200 and AI250, designed to power data center systems and compete directly with Nvidia’s high-performance GPUs. Both are expected to launch in 2026 and 2027 and can be deployed in full liquid-cooled server racks, a design feature meant to match the scale and efficiency of Nvidia’s offerings.

This move follows Qualcomm’s $2.4 billion acquisition of Alphawave Semi earlier this year, which gave it key intellectual property and technical expertise in AI inferencing and data center architectures. The acquisition was widely seen as Qualcomm’s declaration that it intends to be a player in the infrastructure side of AI, not just the edge devices where it already dominates.

Still, the company faces a steep climb. Nvidia’s head start in software, developer ecosystems, and deep learning frameworks has created a powerful competitive barrier. AMD, too, has leveraged its GPU technology to gain share with major cloud providers. Qualcomm, meanwhile, must prove it can deliver not only hardware but also the end-to-end solutions data center operators require.

Shaky Optimism in the Outlook

Despite returning $3.4 billion to shareholders through buybacks and dividends in the latest quarter, Qualcomm’s financial momentum pales next to peers riding the AI wave.

Looking ahead, the company expects first-quarter revenue between $11.8 billion and $12.6 billion, slightly ahead of Wall Street estimates, and adjusted earnings between $3.30 and $3.50 per share. CEO Cristiano Amon struck an optimistic tone, emphasizing continued progress in automotive, IoT, and the expansion into AI and robotics. “We’re building a more diversified Qualcomm,” he said.

Yet investors remain unconvinced. Qualcomm shares are up 17% for the year, lagging the Nasdaq’s 22% gain, and nowhere near Nvidia’s 45% surge or AMD’s eye-popping 112% rally. For all its progress, Qualcomm’s transformation into an AI-driven growth story is still incomplete.

In a world now defined by machine intelligence, Qualcomm finds itself in an awkward middle ground, no longer just a smartphone chipmaker, but not yet an AI powerhouse. The company has made clear it intends to bridge that gap. The question is whether the market will give it time to catch up.