Shares of Qualcomm Inc. and Arm Holdings Plc headed south in late-trading today, even though both chipmakers delivered solid quarterly earnings and revenue beats and provided optimistic guidance for the current quarter.

In the case of Qualcomm, it delivered stellar results, with fiscal first-quarter earnings before certain costs such as stock compensation coming to $3.41 per share and revenue rising 18%, to $11.67 billion. Those results blew Wall Street’s forecasts away. Analysts had expected the company to report earnings of just $2.96 on sales of $10.93 billion. Qualcomm’s net income rose 15% from a year earlier to $3.18 billion.

For the current quarter, Qualcomm said it’s looking at earnings of between $2.70 and $2.90 per share, while forecasting revenue in a range of $10.2 billion to $11 billion. Once again, those numbers were well ahead of expectations, with the Street looking for a profit of $2.69 per share on sales of $10.34 billion.

Qualcomm Chief Executive Cristiano Amon (pictured) said the company’s revenue was a new quarterly record, driven by a combination of its strong technology, its product roadmap and customer demand.

Looking at the company’s results, it’s not apparent where it went wrong, but for some reason investors appeared less than satisfied, as its stock fell more than 4% in the after-hours session.

The company said its main business, the QCT segment, delivered $10.1 billion in revenue, up 20% from a year ago, thanks to growth in each of its major end markets.

By far the most important market for Qualcomm is smartphones, where sales rose 13%, to $7.57 billion in the quarter, above the Street’s target of $7.04 billion.

The company also sells chips to the automotive industry, and that business grew by an impressive 61%, raking in $961 million in sales. It’s a relatively new market for Qualcomm, which only began to pivot away from handsets a few years ago when Amon took over the top job.

“We are delivering growth across our diversification initiatives and remain committed to executing on our fiscal 2029 targets to achieve $22 billion of non-handset revenues,” Amon said in a statement.

Taking questions from analysts on a conference call, Amon explained the company’s handset business benefited from high demand for “premium-tier” smartphones in China, as well as the launch of Samsung Electronics Co. Ltd.’s new flagship Galaxy smartphone, which is powered exclusively by Qualcomm processors.

In a wide-ranging discussion on the call, Amon also hailed the emergence of the Chinese artificial intelligence startup DeepSeek Ltd. as something that bodes well for his company. He pointed out that Qualcomm processors are more than capable of running the DeepSeek-R1 large language model locally on smartphones, given how efficient it is.

“AI models are developing faster, becoming smaller, more capable and efficient, and [they are] now able to run directly on device,” he said.

Qualcomm’s third major market is internet of things devices, including low-powered chips for industrial machines and also the processors that go into Meta Platforms Inc.’s Quest headsets and Ray-Ban-branded “meta glasses,” which are an augmented reality device. The IoT segment also includes sales of Snapdragon Elite chips that power laptops.

All told, the IoT segment delivered $1.55 billion in revenue, up 36% from a year earlier, as Ray-Ban meta glasses exceeded expectations. “We remain optimistic that we are at the beginning of an inflection point for smart glasses,” he said.

Besides selling chips, Qualcomm has a second business unit called QTL which sells licenses for the thousands of wireless technology patents it owns. Its patented tech is used in almost every smartphone in the world, and so the segment proves to be a nice little earner for the company. During the last quarter, it generated $1.54 billion in revenue.

Holger Mueller of Constellation Research Inc. said it’s a rare occasion when all three of Qualcomm’s major chip segments show such positive growth, but he warned that the company will need to keep this performance up because investors are likely to be worried about the QTL business, which is barely growing at all.

“Investors care about this licensing revenue stream because it’s extremely profitable for the company, with virtually zero operational expenses,” the analyst said. “QTL once provided the bulk of the company’s revenue, and it’s still a key profit driver. In any case, Cristiano Amon and team deserve credit for transforming the company into a high-tech manufacturer.”

Armv9 gives Arm a shot in the arm

Arm executives also delivered similarly impressive results and guidance, only to see its stock plunge more than 6% in extended trading, erasing gains it had made earlier in the day.

The company reported third quarter earnings before certain costs of 39 cents per share, beating the Street’s guidance of 34 cents. Revenue for the period rose 19%, to $983 million, easily beating the $949 million target.

For the current quarter, Arm said it’s looking for sales of between $1.175 billion and $1.275 billion, which perhaps doesn’t compare so favorably with the Street’s forecast of $1.22 billion.

Arm CEO Rene Haas (pictured, adjacent) said in a letter to shareholders that the revenue was a new quarterly record for the company, driven by rapid adoption of its most advanced Armv9 chip architecture. “With our high-performance, energy efficient, flexible technology, Arm is a key enabler in advancing AI innovation and transforming the user experience, from the edge to the cloud,” he said.

Arm doesn’t make computer chips itself, but instead licenses designs to other semiconductor manufacturers and smartphone brands. The Armv9 design debuted last year, and is the company’s most powerful and efficient yet. The company charges significantly higher royalties for that design, compared to its previous-generation Armv8 technology.

Though Arm has long been focused primarily on smartphone chip makers, the Armv9 architecture has seen rapid adoption among makers of chips for high-end cloud servers, where its customers include Amazon Web Services Inc. and Microsoft Corp. Those customers are using Arm’s designs to make server chips powered by more than 100 cores.

Mueller said Arm is making good progress, and is on the verge of breaking the $1 billion quarterly revenue barrier at last, thanks to strong organic growth in its royalty-based revenues. “A back of the napkin calculation shows that Arm’s licensing business is making approximately 15% to 17% on each chip sale, which is a very healthy margin,” the analyst said.

On the other hand, Mueller said some investors may be concerned that licensing revenue from the more profitable Armv9 platform was largely flat year-over-year, though he believes that’s likely the result of  long-term contracts it has signed with its customers.

“It’s good to see that Arm’s R&D investment is increasing to match the pace of revenue growth, at 20%,” the analyst added. “It needs to keep innovating, and at the same time it needs to score more Armv9 design wins.”

Despite today’s after-hours decline, Arm’s stock is still up by an impressive 137% in the last 12 months, vastly outperforming the iShares Semiconductor exchange-traded fund, which mirrors the broader semiconductor market.

Photos: Qualcomm, Arm/YouTube