We recently published a list of 10 Most Profitable Tech Stocks to Buy Now. In this article, we are going to take a look at where QUALCOMM Incorporated (NASDAQ:QCOM) stands against other most profitable tech stocks to buy now.
Profitability remains one of the most sought-after traits in the technology sector, yet it is also one of the most complex. It is shaped by a delicate balance of investment cycles, competition, and market perception. While topline growth often takes center stage—driving valuations and attracting top talent—sustained profitability becomes crucial as industries mature, competition peaks, and new investments become necessary for survival. In this ever-evolving landscape, technology companies have mastered the art of balancing revenue expansion with profit growth by diversifying their businesses, building vast customer ecosystems, and continuously enhancing product experiences.
Looking ahead, earnings growth will take on an even greater role in determining valuations, particularly as the breakneck pace of growth begins to slow. Investors will increasingly focus on sustainable profitability rather than just rapid growth. In a January 2024 article, Rob Haworth, Senior Investment Strategy Director at U.S. Bank Asset Management, emphasized that technology companies possess strong earnings growth potential, largely independent of traditional business cycles. He explained:
“What is not clear yet is how companies investing in AI as a way to increase efficiencies or monetize services for end users will benefit from these advancements. We’re in a consolidation phase to figure out what revenue growth will be going forward. If AI helps boost productivity, that will support not only current rising stock valuations but individual prosperity as well.”
Franklin Templeton’s 2025 Technology Outlook echoes this sentiment, predicting another year of strong growth in the sector. The report notes that the “Magnificent Seven”—a group of leading tech giants—delivered exceptional earnings in 2024, outpacing both the broader market and the tech industry itself. While these companies are expected to maintain strong momentum, The firm anticipates that the rest of the sector may start catching up in 2025.
Tech investments are projected to grow exponentially in the coming years, reshaping the profitability landscape. Emerging technologies such as artificial intelligence, quantum computing, and autonomous systems present both immense opportunities and significant challenges. Some companies will achieve sustainable profit margins through strategic pricing and ecosystem advantages, while others will struggle under the weight of fierce competition and heavy reinvestment costs. For investors and stakeholders, understanding these shifting dynamics is key to navigating the ever-changing tech sector.
Our Methodology
To identify the 10 most profitable stocks, we conducted extensive research on U.S.-listed technology and tech-adjacent companies with a market capitalization of at least $2 billion. Rather than relying solely on absolute net income, we refined our selection criteria by focusing on companies with both an operating margin and net profit margin exceeding 20%. This approach ensures that high-margin firms are not overshadowed by larger corporations with higher overall earnings. After applying these filters, we ranked the stocks in ascending order based on their trailing twelve-month net income, with the company reporting the highest net income securing the top position.
Note: All pricing data is as of market close on February 14.
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A technician testing the latest 5G device, demonstrating the company’s commitment to innovation.
QUALCOMM Incorporated (NASDAQ:QCOM)
TTM Net Income: $10.6 billion
Number of hedge funds: 74
QUALCOMM Incorporated (NASDAQ:QCOM) is a top fabless semiconductor firm that specializes in wireless technology and mobile communications. It is well-known for its extensive array of patents critical to 5G, 4G, and other mobile communication standards, which significantly boost its licensing revenue. With around 160,000 granted and pending patents in over 100 countries, QUALCOMM holds a formidable intellectual property position. It has an operating margin of around 27% and net profit margin of 26%.
During its November 2024 Investor Day presentation, QUALCOMM Inc. (NASDAQ:QCOM) projected a $900 billion addressable market and aims to be integrated into over 50 billion devices by 2030. The company is well-positioned to capitalize on the increasing demand for 5G technology and its applications in various sectors such as automotive, IoT, and mobile devices. With a strong financial footing, including over $13 billion in cash and equivalents, the company is well-prepared to pursue strategic acquisitions and investments to enhance its growth trajectory.
On February 5, QUALCOMM Inc. (NASDAQ:QCOM) delivered stronger-than-expected results for Q1 2025 (fiscal year ending in September), reporting a 17% increase in total revenue to $11.7 billion. Net income reached $3.8 billion, reflecting a solid net margin of 27.3%. The company’s semiconductor division, Qualcomm CDMA Technologies (QCT), experienced a 20% year-over-year (YoY) revenue growth, with a robust pre-tax income margin of 32%. All three of its key semiconductor end markets demonstrated strong performance during the quarter. Meanwhile, its high-margin Qualcomm Technology Licensing (QTL) segment saw a 20% YoY revenue increase, with a 100-basis-point improvement in pre-tax margin, reaching an impressive 75%. Looking ahead, QUALCOMM Inc. (NASDAQ:QCOM) provided guidance for the next quarter that exceeded expectations. However, ongoing licensing renegotiations with Chinese companies have not been factored into the full-year QTL outlook.
Following the strong earnings report, TD Cowen analyst raised his price target for QUALCOMM Inc. (NASDAQ:QCOM) from $180 to $195 while maintaining a Buy rating. The analyst noted that the company delivered another solid quarter, driven by record handset revenue. Despite this, investor attention remains on the flat YoY outlook for FY 2025 QTL revenue, which excludes royalty payments from Huawei. Benchmark Co. analyst also reiterated a Buy rating on the shares on February 11 with a price target of $240.
Overall, QCOM ranks 9th on our list of most profitable tech stocks to buy now. While we acknowledge the potential of QCOM to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than QCOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.