QUALCOMM Incorporated (QCOM), Financial Analysis

Key conclusions

1. Handset revenue is falling and automotive revenue is growing. Q3 FY2026 revenue (to 28 Jun 2026) was $9.95bn, down 4%. Handset chip revenue fell 20% to $5.09bn. Automotive rose 61% to $1.59bn and IoT rose 9% to $1.83bn. Automotive and IoT were 40% of chip revenue, against 30% a year earlier. Q4 FY2026 guidance is $9.7bn to 10.5bn, down 10% at the midpoint.
2. Margins fell. Core operating margin was 19.6% in Q3 FY2026, against 28.1% a year earlier and 28.6% in FY2025. The 10-Q cites higher product costs, lower revenue and higher R&D. The Q3 release cites higher wafer, assembly, test, packaging and memory costs and states that Qualcomm is raising product prices.
3. Apple and memory supply reduce handset demand. The 10-Q states that Apple uses its own modem in certain smartphones and that this will have a significant negative effect on chip revenue. It also states that memory supply constraints and price increases reduce demand from several handset makers. Inventory rose to $8.38bn from $6.53bn at FY2025 year end.
4. Data Center revenue is small today. Nonreportable segments, which hold Data Center, had revenue of $165m and a pre tax loss of $214m in Q3 FY2026. Qualcomm bought Alphawave for $2.3bn and Modular for about $3.1bn. On 3 Sep 2026 it issued Amazon a warrant for up to 25.0m shares at $161.26. Shares vest as Amazon orders and buys server chip products, up to $60bn of payments (8-K of 8 Sep 2026).
5. Shares trade at 15.9x TTM non GAAP EPS. TTM non GAAP EPS was $11.36. Core EPS, which counts stock compensation as a cost, was $8.83, a P/E of 20.5x at $180.79. TTM GAAP EPS was $8.64. Dividend yield is 2.0%. Qualcomm bought back $6.81bn of stock in nine months, with $20.6bn still authorized at 28 Jun 2026.
6. Scenario values for end FY2029 are $65 (worst), $182 (base) and $301 (best) per share. Current price is 34x worst case, 17x base case and 12x best case FY2029 core EPS. In the sensitivity analysis, the exit P/E, non handset revenue and core margin move value the most.

Views on these results differ. Arguments for a lower valuation cite Apple's move to its own modems, lower handset demand, falling margins, 46% of FY2025 revenue from customers based in China and license agreements that expire between FY2027 and FY2031. Arguments for a higher valuation cite automotive growth of 38% in nine months, the Amazon collaboration, the company target of $40bn of non handset revenue by FY2029, a 73% pre tax margin in licensing and buybacks.

1 Revenue and business model

Qualcomm designs chips and licenses patents and reports three segments. QCT (Qualcomm CDMA Technologies) is the chip business: it sells Snapdragon processors, modems and radio chips for handsets, cars and IoT devices, a group that includes PCs and industrial equipment. QTL (Qualcomm Technology Licensing) licenses cellular patents to device makers for a royalty on each device sold. QSI (Qualcomm Strategic Initiatives) holds venture investments. Handsets were 59% of TTM revenue, automotive and IoT 27% and licensing 13%. Customers based in China were 46% of FY2025 revenue.

• Customers. Apple, Samsung and Xiaomi each made up 10% or more of FY2025 revenue (10-K). Two customers were 24% and 20% of nine month FY2026 revenue.
• Apple modem transition. Apple buys modems without Qualcomm application processors. The FY2025 10-K states that Apple began using its own modem and will increasingly do so. On the Q3 FY2026 call, management forecast a fall of about 50% in Apple product revenue from the September quarter to the December quarter of 2026.
• Licensing. License agreements with key device makers expire between FY2027 and FY2031 (10-K). QTL revenue has excluded Huawei royalties since Q2 FY2025.
• Data center. Data Center is a nonreportable segment. Its revenue rose $182m in nine months, mainly from Alphawave (closed 18 Dec 2025). The 2026 proxy names HUMAIN as first customer for the AI200 and AI250 products. The Q3 release targets non handset revenue of $40bn by FY2029.
• Supply and people. Qualcomm is fabless except for some radio chips; TSMC, Samsung and GlobalFoundries are its main foundries. It had about 52,000 employees in Sep 2025.

2 Financial analysis and ratios

Nine month FY2026 revenue fell 0.7% to $32.80bn. Handset revenue fell 9.1%, automotive rose 38.3% and IoT rose 9.0%. GAAP operating income fell 22.6% to $7.30bn. Net income rose to $12.38bn from $8.66bn. The rise came from a $5.7bn tax benefit in Q2 FY2026, which reversed a $5.7bn tax charge booked in Q4 FY2025.

3 MD&A, guidance and management commentary

Qualcomm guided Q4 FY2026 revenue to $9.7bn to 10.5bn, with QCT at $8.4bn to 9.0bn and QTL at $1.2bn to 1.4bn. It guided EPS to $1.22 to 1.42 GAAP and $2.05 to 2.25 non GAAP. Releases guide one quarter ahead. Segment margin guidance comes from the call. FY2029 targets come from company releases.

• MD&A, FY2025 10-K. Revenue rose 14% to $44.28bn. Handset revenue rose $2.9bn, of which $2.5bn came from higher revenue per chipset in premium Android devices. Automotive rose 36% and IoT 22%. A $5.7bn tax charge followed the July 2025 tax act and cut net income to $5.54bn.
• MD&A, Q3 FY2026 10-Q. Handset shipments fell as customers cut build plans to reduce inventory after memory supply constraints and price increases. Automotive revenue rose $381m on revenue per unit and $223m on shipments. R&D rose $381m to $2.61bn, or 26% of revenue. Investment income of $1.01bn included $726m of gains on marketable securities.
• Tax. In Q2 FY2026, IRS guidance on the corporate alternative minimum tax led Qualcomm to release the valuation allowance, a $5.7bn benefit.
• Earnings call, 29 Jul 2026 (third party transcript). Management said handset revenue from Chinese makers reached its low point in Q3 and forecast double digit sequential growth in Q4. It said the share of new Apple launches would be materially below its earlier 20% estimate. It forecast Data Center revenue of $5bn in FY2027, with first revenue from two custom chip customers in Q1 FY2027.
• Targets. Q3 release (8-K): non handset revenue growth of 24% in FY2026 and more than 60% in FY2027, and $40bn of non handset revenue in FY2029. Investor Day release of 24 Jun 2026 (company release, no 8-K): FY2029 Data Center revenue above $15bn, automotive $10bn, IoT above $14bn and non GAAP EPS above $18.

• AI data center demand. NVIDIA's data center revenue was $164.3bn in its first half to Jul 2026, against $80.2bn a year earlier (10-Q). Broadcom reported AI revenue of $16.7bn in its quarter to Aug 2026 (8-K). Marvell's data center revenue rose 36.6% in its first half. Qualcomm's nonreportable segments had $353m of revenue in nine months.
• Memory. Micron's revenue for its year to 3 Sep 2026 rose 256% to $133.19bn at an 80.7% GAAP gross margin (8-K). Qualcomm's 10-Q names memory supply and prices as a cause of lower handset demand.
• Competitors. The FY2025 10-K names Broadcom, HiSilicon, MediaTek, Mobileye, Nvidia, NXP, Qorvo, Samsung, Skyworks, Texas Instruments and UNISOC. It names Apple, Samsung and Xiaomi as customers that develop their own chips.
• Arm. Arm licenses the processor designs used in Snapdragon chips and had revenue of $4.92bn in its year to Mar 2026, up 22.8% (20-F). A court upheld a jury verdict for Qualcomm on 30 Sep 2025 and Arm appealed. The trial of Qualcomm's own claims against Arm was scheduled to begin on 5 Oct 2026 (10-Q).
• Licensing margin. QTL was 13% of TTM revenue at a 73% EBT margin. QCT had a 28.6% EBT margin.

6 Annual shareholder meeting, ownership and insider activity

Annual shareholder meeting, 17 Mar 2026

Shareholders elected all eleven directors and ratified the auditor. Say on pay received 91.8% support, against 89.5% in 2025. A stockholder proposal for a 10% special meeting threshold received 42.2%. Shares represented were 0.91bn of 1.07bn (computed from vote totals).

• Board. Neil Smit and Christopher Young left the board at the meeting. Irene Rosenfeld had the lowest support, 92.7%; Cristiano Amon had 99.6%. In Dec 2025 the board gave holders of 25% of shares the right to call a special meeting.
• Pay. Cristiano Amon's reported pay was $29.7m in FY2025, $25.9m in FY2024 and $23.5m in FY2023. Stock awards were $24.2m of the FY2025 total. CEO pay ratio was 292 to 1.

7 Share price and valuation history

P/E on core EPS was 16.5x at FY2025 year end and is 20.5x now. EV is 4.5x TTM revenue and 4.7x the FY2026 revenue estimate of $42.90bn. Market capitalization is $193bn on 1.07bn shares. TTM free cash flow is 5.4% of market capitalization. The highest close in 52 weeks was $251.02 on 29 May 2026.

Critical factors behind the best case

Core assumptions and demand drivers

• Demand. Best case follows the company targets for non handset revenue. Base case reaches $27bn in FY2029, about two thirds of the target. Worst case reaches $18bn, with growth of 11% a year from the FY2026 estimate. Handset revenue falls in FY2027 in every case, by 6% to 18%, as Apple uses more of its own modems.
• Margin. Core margin counts stock compensation (7.4% of TTM revenue) as a cost. On the call, management said custom data center chips would lower QCT gross margin by 1.5 to 2 points. In the base case, core margin rises from 22.7% in FY2026 to 24% in FY2029. FY2025 core margin was 28.6%.
• Per share. In the base case, buybacks reduce the share count by 2% a year. The count fell 3.5% in FY2025. Dividends are excluded from implied value.
• Excluded. Acquisitions, QSI gains, legal outcomes, changes in export rules and one off tax items.

9 Sensitivity analysis

In Figure 9.1, 13 of 25 combinations of exit P/E and FY2029 core margin give a value at or above today's $180.79. At 11x, the highest value is $148. In Table 9.1, 13 of 25 combinations of non handset revenue and margin reach today's price at 17x.

Other sensitivities

• Amazon warrant. The warrant covers up to 25.0m shares at $161.26, of which 3.75m have vested; the rest vest as Amazon orders and buys. On a cashless exercise Qualcomm issues only shares equal to the gain. At $180.79, the vested part equals 0.4m new shares and the full warrant 2.7m, or 0.25% of shares outstanding. Scenario share counts exclude the warrant. At the best case value of $301, the full warrant equals 11.6m shares, 1.1% of the share count, which lowers that value to about $298 (computed).
• Inventory. Inventory was 152 days of TTM cost of revenues at 28 Jun 2026, against 121 days at FY2025 year end.
• Rates and debt. Notes of $2.0bn mature in May 2027. Interest rate swaps with a notional amount of $5.0bn convert fixed rate notes to floating rates.

Appendix: method, sources and definitions

• Data. Financial statements from XBRL in the 10-K for FY2021 to FY2025 and 10-Q filings for Q1 FY2025 to Q3 FY2026, retrieved through the SEC-API.io MCP server. Q4 FY2025 equals full year less the first nine months; quarterly cash flows are derived from year to date statements. FY2026 ended on 27 Sep 2026; its 10-K is pending.
• Other sources. Earnings call of 29 Jul 2026 from a third party transcript; Investor Day targets from the company release of 24 Jun 2026. Peer data from peer filings. Market prices: closes of 5 Oct 2026 for Qualcomm and peers; fiscal year end prices are derived from position values in Forms 13F for the last trading day of September.
• Definitions. QCT = Qualcomm CDMA Technologies (chips). QTL = Qualcomm Technology Licensing. QSI = Qualcomm Strategic Initiatives. EBT = earnings before tax. FCF = operating cash flow less capital expenditures. Core operating income = company non GAAP operating income less stock compensation. This equals GAAP operating income before QSI, acquisition items including acquired intangible amortization, restructuring and other items the company excludes. Core net income = non GAAP net income less stock compensation after tax. Net debt = debt less cash and securities.
• Scenario model. EPS = ((handset, non handset and QTL revenue) x core margin less $0.33bn) x (1 less 13%) over diluted shares. Implied value = FY2029 EPS x exit P/E, undiscounted.