Qualcomm Earnings Beat Forecasts. Why the Stock Is Falling.

Bernstein has a $185 price target on Qualcomm shares. (JOSEP LAGO/AFP via Getty Images)

Qualcomm reported better-than-expected earnings results for the June quarter, but its shares fell in early trading Thursday. Investors likely had higher expectations after the stock’s big rally since early April.

For the June quarter, the technology company reported earnings per share of $2.77, compared to Wall Street’s consensus estimate for $2.71, according to FactSet. Revenue came in at $10.4 billion, which was ahead of analysts’ expectations for $10.3 billion.

The outlook was roughly in line. For the current quarter, Qualcomm gave revenue guidance in a range of $10.3 billion to $11.1 billion, versus the average analyst estimate for $10.6 billion.

“Our leadership in [artificial-intelligence] processing, high-performance and low-power computing and advanced connectivity positions us to become the industry platform of choice as AI gains scale at the edge,” Qualcomm CEO Cristiano Amon said in a release.

Qualcomm shares were down 4.6% in early trading. The company is a maker of mobile processors and 5G wireless chipsets.

In an interview with Barron’s after the results, Chief Financial Officer Akash Palkhiwala said there are large technology companies that have expressed interest in Qualcomm’s upcoming AI chip solutions. The company is also excited about the opportunities to make chips for future personal AI hardware devices, drones, robotics and for industrial applications.

On Monday, Bernstein analyst Stacy Rasgon reaffirmed his Outperform rating on Qualcomm stock, and reiterated his $185 price target.

“Qualcomm remains heavily out of favor amid general distaste of smartphones, tariff concerns, near-term muted numbers,” he wrote. “We still believe there is value to be had under the surface, with an objectively strong product portfolio.”

The Trump administration has exempted some imported tech hardware products—including smartphones, computers, and other items—from tariffs on China imports. However, chips are expected to be covered under a different sector tariff that could be announced in the coming weeks.

Qualcomm stock is up 5% this year, compared with the 15% rise for the iShares Semiconductor exchange-traded fund as of Wednesday’s close.

Write to Tae Kim at tae.kim@barrons.com