To The Moon

The Q2 2025 earnings season is heating up, and two semiconductor titans, ARM Holdings ( $ARM Holdings(ARM)$ ) and Qualcomm ( $Qualcomm(QCOM)$ ), have just unveiled their latest financials, sparking sharp market reactions. ARM’s stock plummeted over 8% in extended trading after a revenue miss and disappointing smartphone royalties, while Qualcomm, despite beating expectations, saw its shares slip, raising questions about whether their performances were “not good enough.” With the S&P 500 at 6,297.36 and Nasdaq at 20,884.27, the market’s high expectations and volatility (VIX at 15.94) set a tough stage. Are these chip giants faltering, or is this a buying opportunity? This report dives into their earnings, market reactions, and strategic investment approaches to navigate this pivotal moment.

ARM’s Earnings: A Smartphone Stumble

ARM Holdings reported its Q1 FY2026 earnings, delivering revenue of $1.05 billion, slightly below the $1.06 billion consensus estimate, per SiliconANGLE. Net income took a significant hit, dropping 42% year-over-year to $130 million, reflecting challenges in its core smartphone royalty business. The company’s guidance for Q2 FY2026 projected revenue between $1.01 billion and $1.11 billion, aligning with analyst expectations of $1.05 billion but failing to inspire confidence.

The market’s reaction was swift: ARM’s stock fell over 8% in extended trading, driven by disappointing smartphone royalties, a critical revenue stream as ARM’s architecture powers chips in most smartphones, tablets, and wearables. CEO Rene Haas emphasized a strategic shift toward AI accelerators and cloud computing, noting partnerships like the Stargate Project with Microsoft, Nvidia, and OpenAI, per Arm Newsroom. However, analysts flagged “execution risk” in ARM’s move to design its own processors, which could turn customers into competitors, per CNBC.

Key Metrics for ARM

• Revenue: $1.05 billion vs. $1.06 billion expected

• Net Income: $130 million, down 42% YoY

• EPS: 35 cents, matching expectations

• Guidance: $1.01-$1.11 billion for Q2

• Stock Reaction: -8% in extended trading

• RSI: 31.187, indicating oversold conditions

Qualcomm’s Earnings: A Beat Marred by a Slide

Qualcomm reported fiscal Q3 earnings that surpassed expectations, with revenue of $10.24 billion against a $9.9 billion consensus and net profit soaring to $2.92 billion from $1.49 billion a year ago, per SiliconANGLE. The company’s EPS of $2.69 beat Wall Street’s $2.56 target, driven by a 68% surge in automotive revenue and strong 5G chip demand. Qualcomm’s guidance for the current quarter was also robust, forecasting sales of $10.5-$11.3 billion, above the $10.6 billion expected.

Despite these strong results, Qualcomm’s shares slipped in extended trading, a puzzling reaction given the beat. Analysts suggest the decline may stem from broader market concerns, such as a potential 7-10% S&P 500 pullback, or specific issues like the ongoing licensing dispute with ARM, which threatens billions in revenue, per Tastylive. Qualcomm’s CEO Cristiano Amon highlighted the success of its Snapdragon 8 Elite platform, adopted by brands like Xiaomi and Samsung, but investor focus may have shifted to risks in the smartphone market, per Mobile World Live.

Key Metrics for Qualcomm

• Revenue: $10.24 billion vs. $9.9 billion expected

• Net Profit: $2.92 billion, up significantly YoY

• EPS: $2.69 vs. $2.56 expected

• Guidance: $10.5-$11.3 billion for current quarter

• Stock Reaction: Slipped in extended trading

• RSI: 31.187, indicating oversold conditions

Why “Not Good Enough”?

The market’s reaction suggests both companies’ earnings fell short of lofty investor expectations:

• ARM: The slight revenue miss and 42% net income drop, coupled with weak smartphone royalties, overshadowed its EPS beat. Investors appear skeptical about ARM’s near-term growth, especially as smartphone demand slows, with global shipments down 5% in Q2 2025, per IDC. The in-line guidance didn’t help, failing to signal a breakout in AI or cloud segments.

• Qualcomm: Despite a strong beat and guidance, the stock’s slide points to external pressures. The ARM licensing dispute, ongoing since Qualcomm’s 2022 Nuvia acquisition, remains a concern, with a December trial looming, per Yahoo Finance. Broader market dynamics, including tariff fears (30% on EU/Mexico, 35% on Canada, effective August 1) and geopolitical tensions (Israel-Iran conflict, oil at $75/barrel), may also have dampened sentiment, per Reuters.

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

Broader Market Context

Both companies operate in a challenging environment:

• Smartphone Market: Global smartphone shipments fell 5% in Q2 2025, impacting ARM’s royalty revenue and Qualcomm’s mobile chip sales, per IDC. Competition from Apple’s modem push and other fabless players adds pressure, per Benzinga.

• AI and Automotive Growth: ARM’s pivot to AI accelerators and Qualcomm’s 68% automotive revenue surge signal diversification, 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, per Yahoo Finance.

• Market Volatility: The S&P 500’s RSI at 65 and VIX at 15.94 suggest a potential 7-10% pullback, driven by tariff uncertainties and geopolitical risks, per Morgan Stanley.

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 post-earnings.

• Buy QCOM on Dip: Grab at $155-$160, target $180-$190, stop at $150. A 12-19% gain if automotive and 5G strength shine.

• Options Straddle: Use $155 calls/puts on ARM or $160 calls/puts on QCOM 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: 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 (GLD): Buy at $200, target $220, stop at $190, as a safe-haven hedge.

My Trading Plan

I’m cautiously optimistic about Qualcomm’s stronger fundamentals, buying at $155-$160, targeting $180-$190, with a $150 stop, and using a $160 call/put straddle for volatility. For ARM, I’ll wait for a deeper dip to $150-$155, targeting $180-$200, with a $145 stop, given its smartphone risks. I’ll diversify with XLK at $200, targeting $220, and hedge with VIXY at $15, targeting $18, keeping 20% cash for dips if tariffs, geopolitical tensions, or market volatility escalate. I’ll monitor earnings call details, ARM’s AI progress, and Qualcomm’s licensing dispute updates for cues.

Key Metrics

The Bigger Picture

ARM and Qualcomm’s earnings reveal a tale of two chipmakers navigating a tough smartphone market. ARM’s revenue miss and smartphone royalty weakness triggered an 8% stock drop, suggesting its results were “not good enough” for investors expecting more robust growth. Qualcomm’s strong beat and guidance were overshadowed by a stock slide, likely due to the ARM dispute or broader market concerns, indicating that even solid results fell short of lofty expectations. Both companies show promise—ARM in AI and cloud, Qualcomm in automotive and 5G—but near-term risks like tariffs, competition, and a potential market pullback loom. Investors should buy Qualcomm on dips for its resilience, approach ARM cautiously for its long-term potential, and hedge with VIXY or GLD to manage volatility. The earnings season is a proving ground—play it smart to seize the upside.

Are ARM and Qualcomm’s earnings a buy signal or a red flag for you? Share your strategy below! 🎁

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