Qualcomm's 2025 10-K: Strong Revenue Growth Overshadowed by a Tax Hit

Qualcomm, a titan in the world of wireless technology and semiconductors, recently filed its annual 10-K report, providing a detailed look at its financial health for the fiscal year ending September 28, 2025. Let's peel back the layers of this comprehensive document to understand the company's performance over the past year. You can find the full report on the SEC's website.

Strong Revenue Growth Driven by Chips

At a high level, Qualcomm posted strong results. Total revenues for fiscal 2025 climbed to $44.3 billion, a healthy increase from $39.0 billion in the prior year. This growth was almost entirely fueled by its "Equipment and services" arm, which primarily represents the QCT (Qualcomm CDMA Technologies) segment—the part of the business that designs and sells the Snapdragon processors powering countless devices worldwide.

The following flow diagram breaks down Qualcomm's revenues and costs for the year, showing how the top line translates into the bottom line.

A Tale of Two Segments: QCT and QTL

Qualcomm’s business is largely split into two powerhouses: QCT (the chip business) and QTL (the licensing business).

• QCT (Qualcomm CDMA Technologies): This segment was the star of the show in 2025. Its revenues surged to $38.4 billion from $33.2 billion in 2024. The growth was broad-based:

  • Handsets: The core business grew by a solid $2.9 billion to reach $27.8 billion.
  • Automotive: A key growth area, automotive revenues jumped over $1 billion to hit nearly $4.0 billion, driven by the adoption of its Snapdragon digital cockpit products in new vehicles.
  • IoT (Internet of Things): This division, which includes products for networking, consumer, and industrial applications, also saw impressive growth, with revenues rising by $1.2 billion to $6.6 billion.

• QTL (Qualcomm Technology Licensing): This segment is the high-margin engine that licenses Qualcomm's vast portfolio of wireless patents. Its revenues remained stable at $5.6 billion. While it didn't grow, its profitability is immense, with earnings before tax (EBT) representing a staggering 72% of its revenue.

The Profitability Puzzle: A Tax Story

While revenues and operating income ($12.4 billion, up from $10.1 billion) were up, the headline net income figure tells a different story. Net income fell sharply from $10.1 billion in 2024 to just $5.5 billion in 2025.

So, what happened? The answer lies in the income tax line. Qualcomm recorded a massive income tax expense of $7.1 billion in 2025, compared to just $226 million in 2024. The filing points to a specific reason: a $5.7 billion "Valuation allowance on federal deferred tax assets." This is a complex, non-cash accounting adjustment related to tax regulations, which significantly impacts reported net income but doesn't reflect a change in the company's day-to-day operational profitability. In fact, cash from operations actually increased to $14.0 billion for the year.

Looking Ahead

Qualcomm's 2025 performance showcases a company successfully expanding beyond its mobile handset dominance into the promising automotive and IoT sectors. The chip business is firing on all cylinders, and the licensing division remains a reliable profit machine.

However, the company isn't without its challenges. The filing reiterates key risks, including the trend of major customers like smartphone makers developing their own chips ("vertical integration") and the company's significant concentration of business in China (46% of 2025 revenue), which exposes it to geopolitical tensions. While the steep drop in net income may look alarming at first glance, it's crucial to understand the tax-related accounting behind it. Operationally, Qualcomm appears to be navigating a complex market with solid execution.