Chip Titans Stumble: Were ARM and Qualcomm’s Earnings a Letdown?

The Q2 2025 earnings season has been a wild ride, and semiconductor giants ARM Holdings (ARM) and Qualcomm ( $Qualcomm(QCOM)$ ) have added fuel to the fire with results that sparked sharp market reactions. ARM’s shares slid over 8% after disappointing smartphone royalties overshadowed an otherwise solid earnings report, while Qualcomm, despite beating Wall Street expectations, saw its stock dip in extended trading due to a cautious Q4 outlook. With the S&P 500 at 6,297.36 and Nasdaq at 20,884.27, both at record highs, the market’s high expectations and a VIX at 15.94 signal volatility. Were ARM and Qualcomm’s earnings “not good enough” to sustain their momentum, or is this a buying opportunity in disguise? This deep dive explores their financials, market dynamics, and strategic investment approaches to navigate this pivotal moment.

ARM’s Q2 2025 Earnings: Smartphone Woes Weigh Heavy

ARM Holdings reported its Q2 2025 earnings on July 30, 2025, delivering revenue of $1.05 billion, slightly below the $1.06 billion consensus estimate, per SiliconANGLE. Adjusted EPS met expectations at $0.35, but the company’s smartphone royalty revenue, a cornerstone of its business, underperformed due to a 5% decline in global smartphone shipments in Q2, per IDC. This weakness triggered an 8% stock drop in after-hours trading, bringing shares to $156.74. ARM’s guidance for Q3 FY2026, projecting revenue between $1.01 billion and $1.11 billion, aligned with consensus but failed to inspire confidence.

CEO Rene Haas emphasized the company’s pivot to AI and cloud computing, highlighting partnerships like the Stargate Project with Microsoft, Nvidia, and OpenAI, and a collaboration with Meta to optimize the Llama 3.2 model for Arm-based chips. Despite these efforts, the market fixated on the smartphone royalty shortfall, reflecting ARM’s reliance on a cyclical market. The company’s Compute Subsystems (CSS) and Armv9 adoption are gaining traction, but analysts note execution risks in ARM’s move to design its own processors, which could strain customer relationships.

Key Metrics for ARM

• Revenue: $1.05 billion (vs. $1.06 billion expected, -11.2% QoQ from $1.18 billion)

• Adjusted EPS: $0.35 (in line with expectations)

• Smartphone Royalties: Declined, reflecting a 5% drop in global shipments

• Q3 Guidance: $1.01-$1.11 billion (in line with $1.05 billion consensus)

• Stock Reaction: -8% to $156.74 in after-hours trading

• Forward P/E: 85.2x

• RSI: 31.187, indicating oversold conditions

Qualcomm’s Q3 2025 Earnings: Beat Overshadowed by Guidance

Qualcomm reported its fiscal Q3 2025 earnings on July 30, 2025, surpassing Wall Street expectations with revenue of $10.4 billion against a $10.35 billion consensus and adjusted EPS of $2.77, beating the $2.71 forecast, per CNBC. The company’s chipset business showed strength, with automotive revenue soaring 59% to $811 million and IoT up 27% to $1.7 billion. However, handset chip revenue of $6.33 billion fell short of the $6.44 billion expected, reflecting smartphone market challenges. Qualcomm’s Q4 guidance projected revenue of $10.3-$11.1 billion (midpoint $10.7 billion, slightly below $10.8 billion consensus) and EPS of $2.85, above the $2.82 forecast.

Despite the beat, Qualcomm’s shares slid 4% in extended trading to $162.08, likely due to the lighter-than-expected revenue guidance and ongoing concerns about its licensing dispute with ARM, which could impact billions in revenue, per Tastylive. CEO Cristiano Amon highlighted diversification efforts, including a $2.4 billion acquisition of Alphawave Semi for AI data center connectivity and partnerships for Meta’s Ray-Ban smart glasses and Windows PCs. Qualcomm’s 11% year-over-year revenue growth and 15% chip business growth without Apple underscore its resilience, but the market’s reaction suggests investors wanted more.

Key Metrics for Qualcomm

• Revenue: $10.4 billion (vs. $10.35 billion expected, +10.3% YoY)

• Adjusted EPS: $2.77 (vs. $2.71 expected)

• Handset Chip Revenue: $6.33 billion (vs. $6.44 billion expected)

• Q4 Guidance: $10.3-$11.1 billion revenue, $2.85 EPS (vs. $10.8 billion, $2.82 expected)

• Stock Reaction: -4% to $162.08 in after-hours trading

• Forward P/E: 15x

• RSI: 31.187, indicating oversold conditions

Why “Not Good Enough”?

The market’s negative reaction to both ARM and Qualcomm’s earnings suggests that investor expectations were sky-high, driven by the tech sector’s record rally (Nasdaq up 18.06% YTD). Key factors behind the disappointment:

• ARM’s Smartphone Weakness: The 5% decline in global smartphone shipments in Q2 2025, per IDC, hit ARM’s royalty revenue hard, overshadowing its EPS beat and AI/cloud progress. The in-line Q3 guidance failed to signal a breakout, raising concerns about cyclical exposure.

• Qualcomm’s Guidance Concerns: Despite a strong beat, Qualcomm’s Q4 revenue guidance of $10.7 billion (midpoint) fell slightly below the $10.8 billion consensus, per Yahoo Finance. The ongoing ARM licensing dispute, with a December trial looming, added uncertainty, as did Apple’s push to develop its own modems, per Mobile World Live.

• Market Dynamics: The S&P 500’s RSI at 65 and VIX at 15.94 signal potential volatility, with tariffs (30% on EU/Mexico, 35% on Canada, effective August 1) and geopolitical tensions (Israel-Iran conflict, oil at $75/barrel) adding pressure, per Reuters. Investors are punishing any perceived weakness in a stretched market.

Social media sentiment on X reflects the divide: some users see ARM’s drop as a “buying opportunity” for its AI pivot, while others view Qualcomm’s slide as “overdone” given its fundamentals, but caution persists around smartphone market risks and the ARM dispute.

Broader Market Context

Both ARM and Qualcomm are critical players in the semiconductor space, and their earnings reflect broader industry trends:

• Smartphone Market Challenges: Global smartphone shipments fell 5% in Q2 2025, impacting ARM’s royalties and Qualcomm’s handset revenue, per IDC. Competition from MediaTek and Apple’s modem development adds pressure, per Benzinga.

• AI and Diversification: ARM’s AI accelerators and Qualcomm’s automotive/IoT growth (59% and 27% YoY, respectively) signal a shift to high-growth areas, but these segments are still maturing, per SiliconANGLE.

• Licensing Dispute: The ARM-Qualcomm legal battle over Nuvia’s technology could disrupt Qualcomm’s chip designs and ARM’s licensing revenue, with a trial set for December, per Yahoo Finance.

• Market Volatility: The S&P 500’s overbought conditions (RSI 65) and August’s historical volatility (7-10% pullback risk) could exacerbate stock declines, per Morgan Stanley.

Should You Buy the Dip?

Both ARM and Qualcomm are oversold (RSI 31.187), suggesting potential for a rebound if market sentiment stabilizes:

• ARM: Its long-term AI and cloud potential, bolstered by partnerships with Microsoft, Nvidia, and Meta, makes it a compelling buy on dips. Support at $150-$155 (50-day moving average) offers an entry point, with upside to $180-$200 if AI momentum builds.

• Qualcomm: Its diversified growth in automotive and IoT, plus a lower forward P/E of 15x, supports a buy at $155-$160, targeting $180-$190. The ARM dispute and smartphone weakness are risks, but its fundamentals are robust.

Trading and Investment Strategies

Short-Term Plays

• Buy ARM on Dip: Enter at $150-$155, target $180-$200, stop at $145. A 15-30% gain if AI momentum drives a rebound.

• Buy QCOM on Dip: Grab at $155-$160, target $180-$190, stop at $150. A 12-19% gain if automotive and AI strength shine.

• Options Straddle: Use $155 calls/puts on ARM or $160 calls/puts on QCOM (September expiry) for post-earnings volatility, targeting 200-300% gains on a 10%+ move.

• Sector Hedge: Buy XLK ETF at $200, target $220, stop at $190, for tech exposure.

Long-Term Investments

• Hold ARM: Buy at $150-$155, target $200-$250 by 2026, for 30-60% upside with AI and cloud growth.

• Hold QCOM: Buy at $155-$160, target $200-$220 by 2026, for 25-38% upside with 5G and automotive expansion.

• Hold Microsoft (MSFT): Buy at $430-$435, target $500-$550 by 2026, for 15-26% upside with cloud/AI strength.

• Diversify with Tech ETF (XLK): Buy at $200, target $220, stop at $190, for broad tech exposure.

Hedge Strategies

• VIXY ETF: Buy at $15, target $18, stop at $13, to hedge against tariff or market volatility.

• SPY ETF Puts: Use puts at $614 to protect against a 5-10% S&P 500 pullback.

• Gold ETF ( $SPDR Gold Shares(GLD)$ ): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously optimistic about both ARM and Qualcomm, favoring QCOM for its stronger fundamentals and lower valuation, buying at $155-$160, targeting $180-$190, with a $150 stop, and using a $160 call/put straddle for volatility. For ARM, I’ll buy at $150-$155, targeting $180-$200, with a $145 stop, given its smartphone risks but AI potential. I’ll diversify with XLK at $200, targeting $220, with a $190 stop. I’m hedging with VIXY at $15, targeting $18, and keeping 20% cash for dips if tariffs, geopolitical tensions, or market volatility escalate. I’ll monitor ARM’s AI progress, Qualcomm’s licensing dispute updates, and broader market trends for cues.

Key Metrics

The Bigger Picture

ARM and Qualcomm’s Q2/Q3 2025 earnings reveal a tech sector under scrutiny. ARM’s smartphone royalty weakness and Qualcomm’s cautious guidance triggered sell-offs, suggesting their results fell short of investor expectations in a high-valuation market. Despite this, both companies show long-term promise—ARM in AI and cloud, Qualcomm in automotive and 5G. The broader market’s overbought conditions (S&P 500 RSI 65) and external risks like tariffs and geopolitical tensions add volatility, but oversold conditions (RSI 31.187) signal potential rebounds. Investors should buy on dips for long-term growth, use options for volatility, and hedge with VIXY or GLD to manage risks. The semiconductor rally isn’t over, but it’s hitting speed bumps—play it smart to seize the upside.

Are ARM and Qualcomm’s dips a buying opportunity, or a sign of bigger trouble? Share your strategy below! 🎁

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