The AI-driven recovery in the smartphone market could significantly boost the growth outlook of chipmaker Qualcomm (NASDAQ: QCOM) over the next three years. Despite lagging behind the broader semiconductor sector in recent years, Qualcomm is now positioning itself to ride the next wave of innovation: on-device artificial intelligence.
Over the past three years, Qualcomm stock has delivered a modest 8% return, far below the 36% gain of the PHLX Semiconductor Index. This underperformance was closely tied to the global smartphone downturn.
Smartphone shipments dropped from 1.54 billion units in 2019 to 1.36 billion in 2020 and remained stagnant through 2023 (1.34 billion units). Given that smartphone chips accounted for 62% of Qualcomm’s revenue in the most recent quarter, it's no surprise that the stock struggled during this period.
The tide may be turning. Qualcomm’s Q3 FY2024 results (ended June 23) show a clear rebound:
Revenue: $9.4 billion (+11% YoY)
Adjusted EPS: $2.33 (+25% YoY), beating Wall Street’s forecast of $2.25
Even better, the company’s Q4 guidance is more optimistic than analyst estimates:
Expected revenue: $9.9 billion
Expected EPS: $2.55 (vs. consensus of $2.45)
If achieved, this would mark 14% revenue growth and 26% net income growth year-over-year — a meaningful improvement in business momentum.
While CEO Cristiano Amon tempered expectations for overall smartphone growth, calling it "low single-digit," he also emphasized that:
Premium smartphones with AI features are growing at a faster rate and are central to future demand.
According to Counterpoint Research, shipments of generative AI smartphones are projected to quadruple between 2024 and 2027, climbing from 11% to 43% of total smartphone shipments globally.
This shift places Qualcomm — with its leading-edge Snapdragon chipsets — in a prime position to capitalize on the next generation of AI-powered devices.
Assuming Qualcomm finishes FY2024 with $38.6 billion in revenue (based on YTD results and current guidance), this would represent an 8% YoY increase.
Looking ahead, FY2025 revenue is expected to grow by 10% or more, driven by rising AI chip demand.
If Qualcomm sustains an annual EPS growth rate of 15%, its earnings could reach $15 per share in three years (up from $9.90 in FY2024). Applying its current P/E ratio of 23, the stock could trade at $345 per share by 2027 — more than double today’s price.
Compared to the Nasdaq-100’s current P/E of ~31, QCOM still looks like a value play with growth upside.
Despite rising competition, Qualcomm remains the undisputed leader in smartphone chipsets — similar to how Nvidia dominates the AI GPU market.
With a proven ability to innovate, defend market share, and tap into secular trends like AI on mobile, Qualcomm may be entering its most lucrative growth cycle in years.
👉 For long-term investors seeking undervalued tech with real catalysts, QCOM deserves a closer look — before the market catches up.
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