Qualcomm Inc. (QCOM) posted better-than-expected fourth-quarter earnings on Wednesday and delivered an optimistic outlook for the next quarter, underscoring its ongoing transition from a smartphone chipmaker to a broader player in artificial intelligence and computing infrastructure. However, shares slipped more than 3% in after-hours trading as investors weighed the impact of a one-time tax charge and lingering competitive pressures.

Strong Quarter, Solid Outlook

The chipmaker reported adjusted earnings per share of $3.00, topping Wall Street’s consensus estimate of $2.88, while quarterly revenue climbed to $11.27 billion, beating expectations of $10.77 billion, according to Bloomberg data. That marked an improvement from $10.2 billion in the same period last year.

For its fiscal first quarter, Qualcomm projected revenue between $11.8 billion and $12.6 billion, outpacing analyst expectations of $11.59 billion. The upbeat guidance reflects optimism over demand for chips in mobile devices, automotive applications, and emerging AI-driven products.

However, the company also disclosed a one-time non-cash tax charge of $5.7 billion tied to President Trump’s “One Big Beautiful Bill Act,” which affected its GAAP results. Qualcomm said the charge would lower future cash tax payments, offsetting some near-term accounting impacts.

Despite the charge, the company’s performance highlights a resilient recovery across key business units. Its QCT segment, encompassing smartphone, Internet of Things (IoT), and automotive chips, generated $9.8 billion in revenue, ahead of the $9.3 billion forecast. The QTL licensing unit brought in $1.4 billion, matching expectations.

Transitioning Beyond Smartphones

Qualcomm’s strong earnings underscore its ability to stabilize its core smartphone business even as global handset demand slows. The company remains heavily reliant on the mobile market, with chips powering devices across Android ecosystems. But as the smartphone market matures, Qualcomm is strategically pivoting toward AI data center computing and PC chip development to secure future growth.

That shift is timely, as Apple (AAPL) continues developing in-house wireless modems, threatening to erode Qualcomm’s largest customer base. Apple’s latest iPhone models — including the iPhone 16e and iPhone Air — already feature proprietary chips, increasing competitive pressure on Qualcomm’s mobile business.

To mitigate this risk, Qualcomm is doubling down on AI infrastructure and high-performance computing. Last week, it unveiled its AI200 and AI250 data center chips, alongside rack-scale server products—its first direct challenge to Nvidia (NVDA) and Advanced Micro Devices (AMD) in the fast-growing AI data center market. These chips, slated for rollout between 2026 and 2028, aim to pool computing resources from multiple processors to improve performance and efficiency.

The announcement propelled Qualcomm’s stock up 11% on the day of the reveal, though shares remain up just 9% over the past 12 months, trailing peers. Nvidia’s shares have soared 44%, AMD’s 82%, and Intel’s 64% over the same period, while the S&P 500 is up 18%.

AI Ambitions and Market Positioning

Analysts see Qualcomm’s expansion into AI and data centers as a logical next step but caution that execution will be critical in a market already dominated by Nvidia and AMD. The AI chip sector’s high barriers to entry and capital intensity could limit Qualcomm’s near-term impact, though its focus on power efficiency and integration with mobile and edge devices may give it a differentiated niche.

On the PC side, Qualcomm continues to grow its presence with Snapdragon processors designed for Windows laptops, competing directly with Intel and AMD. Its new lineup promises extended battery life and AI-driven performance optimization—features increasingly prioritized in next-generation computing.

Forward-Looking Outlook: From Smartphones to Supercomputing

Qualcomm’s latest results reflect a company in transformation—balancing a mature smartphone business with ambitious bets on AI infrastructure and computing. The next two years will test whether Qualcomm can translate its engineering expertise into meaningful share gains in data centers and PCs.

If the company’s AI roadmap delivers on performance and efficiency promises, Qualcomm could emerge as a significant third force in the AI chip race. For investors, the coming quarters will reveal whether the company’s diversification push can sustain its earnings momentum and restore confidence in its long-term growth trajectory.