Qualcomm

Qualcomm has two businesses that grew from the same research.

QCT sells chips. Snapdragon, its system-on-chip for phones, combines the CPU (Qualcomm's own Oryon cores since 2024), the Adreno GPU, the Hexagon NPU for on-device AI, the camera processor and a 5G modem. Most premium Android phones use it. Qualcomm also sells standalone modems (Apple has been the largest buyer), RF front-end parts, Snapdragon X chips for Windows laptops, Snapdragon Digital Chassis platforms for cars, and Dragonwing chips for industrial and networking devices. It designs the chips and pays foundries to make them, keeping its own fabs only for some RF filters and modules.

QTL licenses patents. Qualcomm invented much of the technology behind 3G, contributed it to the standards, and kept contributing to 4G and 5G. Almost every company that sells a cellular device pays a royalty on each one.

The two reinforce each other: the research that produces the patents also keeps Qualcomm's modems first to each new standard, and the modem is what phone makers buy Snapdragon for.

The company is moving beyond phones because phones are a flat market and its largest customers are designing their own chips. Apple, Samsung and Xiaomi each made up 10% or more of revenue in fiscal 2025, and Apple has started replacing Qualcomm's modems with its own. The new markets are PCs, cars, industrial devices and, from 2026, AI inference chips for data centers. Across all of them, Qualcomm supplies software as well as silicon: its chips support Android, Windows and Linux, and its AI Stack and AI Hub give developers tools and ready-optimised models for running AI on Snapdragon devices.

For phone makers, Snapdragon is hard to replace because so much is built around it. A flagship's software, camera tuning, thermal design and carrier certifications in dozens of countries are done on one chip platform; switching to MediaTek or an in-house chip means repeating that work, and a weaker modem shows up as dropped calls in reviews. What they would move to: MediaTek's Dimensity, or their own chips, as Apple, Samsung, Google and Xiaomi have done for some or all models.

Carmakers stay for the life of a car program, often five to seven years of production after three to five of design, and the software in their cockpits is written for Snapdragon.

Licensing is the stickiest. A company selling 4G or 5G devices needs rights to Qualcomm's standard-essential patents whatever chips it buys; there is no alternative supplier for them, only disputes over the price. Even Apple, after years of litigation, signed a licence. That holds as long as Qualcomm keeps contributing patents to each new standard.

What is not sticky is the standalone modem in someone else's phone: Apple has shown it can design its own.

Revenue was $44.3B in fiscal 2025, up 13.7%, back to the level of fiscal 2022 ($44.2B) after a 19.0% fall in fiscal 2023 when phone makers cut orders. Over the five years from fiscal 2020 it grew about 13.5% a year. The swings follow the phone market: Qualcomm's chip revenue rises and falls with how many premium Android phones are sold, while royalties move more slowly.

Operating margin was 27.9% in fiscal 2025, $12.4B of operating income, and has ranged between 21.7% and 35.9% over the last four years. Licensing carries a large part of that profit relative to its revenue, because it has no chips to make.

As a mostly fabless designer, Qualcomm spends modestly on equipment: capital spending was $1.2B, 2.7% of revenue. Operating cash flow was $14.0B and free cash flow $12.8B, 28.9% of revenue. Equity pay was $2.8B, 6.3% of revenue, leaving $10.0B, 22.7%, after it. Net income fell to $5.5B because of a one-time tax charge the 10-K describes, not a change in the business. Debt was $14.8B at the end of fiscal 2025, about $4.7B more than cash and short-term investments.

The direction is away from depending on phones. Qualcomm is taking the same building blocks, Oryon CPU cores, Hexagon NPUs, Adreno graphics and its connectivity, into markets where they are new.

PCs: Snapdragon X2 Elite laptops arrive in 2026, aiming to widen Arm Windows beyond its first wave. Cars: Snapdragon cockpits are spreading across brands, and Snapdragon Ride's first driver-assistance programs, such as BMW's iX3, are reaching the road. Industrial and edge devices: Dragonwing chips for robots, retail systems, drones and networking gear. Personal AI devices: chips for smart glasses and wearables, where Qualcomm already supplies Meta's Ray-Ban glasses. Data centers: Qualcomm has announced AI200 and AI250 inference accelerators and racks for 2026 and 2027, and agreed to buy Alphawave for high-speed connectivity technology.

In phones, premium Android stays the base, Oryon cores and on-device AI are the selling points, and the modem revenue from Apple winds down. In licensing, Qualcomm is contributing to 5G Advanced and 6G so its patents keep renewing.

• Customers building their own chips. Apple is replacing Qualcomm's modems, and Samsung, Google and Xiaomi use in-house chips in some phones. The 10-K expects Apple's move to cut QCT revenue significantly.
• MediaTek. Its flagship Dimensity chips now match Snapdragon closely at a lower price, and many Chinese phone makers use them.
• A flat phone market. Smartphone demand was about flat in 2025, so growth has to come from taking a larger part of each phone or from new markets.
• New markets are crowded. In PCs, Intel and AMD, plus Windows' x86 software base; in cars, NVIDIA and Mobileye; in data centers, NVIDIA, AMD and every cloud's own chips.
• Licensing disputes. Licences expire and get renegotiated, regulators investigate the terms, and Huawei's royalties have stopped.
• China. A large part of revenue comes from Chinese phone makers, exposed to US export rules and trade tensions.
• Rising wafer costs. The 10-K expects the newest processes at its foundries to keep raising what each chip costs to make.