Qualcomm's tax bill is rising. Why does the company remain optimistic?
Qualcomm, the largest maker of chips for mobile devices, reported a loss in the past quarter due to a one-time tax write-off after the One Big Fine Law went into effect. Revenue and forecast exceeded analysts' expectations, but failed to impress investors: Qualcomm shares fell in extended trading in New York.
How the company reported
Qualcomm said it posted a loss of $3.12 billion (or $2.89 per share) in the fourth quarter of fiscal 2025, which ended Sept. 29. The loss was driven by a one-time tax write-off related to the enactment of Donald Trump's One Big Beautiful Bill Act. The company was forced to recognize a non-cash loss of $5.7 billion (or $5.29 per share). This write-down is related to the formation of a valuation allowance for deferred tax assets in the U.S. due to the fact that beginning in fiscal 2026 Qualcomm expects to pay corporate alternative minimum tax (corporate alternative minimum tax), explains The Wall Street Journal.
By comparison, Qualcomm posted adjusted earnings of $2.92 billion (or $2.59 per share) a year earlier.
Qualcomm expects its effective tax rate to be in the range of 13-14% in the future. The company also expects a decrease in the amount of taxes actually paid in cash.
Excluding one-time items, the chipmaker's adjusted earnings totaled $3 per share, compared with the FactSet analysts' consensus forecast of $2.87, the WSJ notes.
Qualcomm's revenue grew by 10% to $11.3 billion, exceeding analysts' expectations ($10.77 billion). The company noted sales growth of 18% in the mobile QCT processor segment (excluding Apple). For the full year, sales in the automotive and IoT segments grew by 27%.
For the current, first quarter of the new fiscal year, Qualcomm expects revenue in the range of $11.8 billion to $12.6 billion, while analysts had forecast $11.59 billion. The forecast for adjusted earnings per share is $3.3 to $3.5, with the Wall Street consensus at $3.32, the WSJ writes. The forecast assumes that demand in the premium Android smartphone market, which provides a significant portion of Qualcomm's revenue, will remain strong, Bloomberg writes.
How investors reacted
Qualcomm shares fell 2.6 percent to $175 in extended trading after the report was released on the evening of Nov. 5.
"People were expecting more impressive growth," Seaport Global Securities analyst Jay Goldberg explained the stock drop on Bloomberg Television.
This article was AI-translated and verified by a human editor
