QCOM Q4 Earnings Beat Estimates on Robust Automotive Growth

QUALCOMM Incorporated QCOM reported fourth-quarter fiscal 2026 non-GAAP earnings of $2.17 per share, down 27.7% year over year but beating the Zacks Consensus Estimate of $2.16 by 0.46%. Revenues of $10.44 billion declined 7.3% year over year but surpassed the consensus mark of $10.15 billion by 2.92%.

Handset weakness and higher semiconductor costs pressured results, while automotive and IoT growth supported revenues. Automotive sales surged 89% to $1.99 billion, marking the company’s first quarter approaching $2 billion in automotive revenues.

QUALCOMM Incorporated Price, Consensus and EPS Surprise

QUALCOMM Incorporated price-consensus-eps-surprise-chart | QUALCOMM Incorporated Quote

QCOM’s Handset Weakness Weighs on Chipset Revenues

QCT revenues declined 8.2% year over year to $9.02 billion. Handset revenues plunged 26.2% to $5.14 billion, reflecting industrywide memory constraints, higher prices and reduced chipset demand.

Management indicated that China Android revenues recovered sequentially after reaching a bottom in the June quarter. However, the continued transition away from supplying Apple modems remains a headwind. Qualcomm expects global handset shipments to remain flat to slightly lower in calendar 2027.

Qualcomm’s Automotive and IoT Businesses Gain Traction

Automotive revenues increased $937 million year over year to $1.99 billion, driven by growing adoption of integrated compute modules for fifth-generation Snapdragon Digital Chassis platforms. Management highlighted substantially higher semiconductor content in newer automotive platforms and continued conversion of design wins into revenues.

IoT revenues increased 4.5% to $1.89 billion, supported by industrial, networking and robotics products, which recorded 20% growth. Consumer products faced memory-related constraints. Combined automotive and IoT revenues increased 36% to $3.88 billion.

The company exited fiscal 2026 with an automotive annualized revenue run rate of approximately $8 billion, exceeding its previous $7 billion expectation.

QCOM’s Margins Contract Amid Higher Input Costs

QCT earnings before taxes (EBT) declined 26% to $2.14 billion, while EBT margin contracted five percentage points to 24%. Lower handset revenues and rising semiconductor input costs weighed on profitability.

QTL revenues declined 7.5% to $1.3 billion, while EBT decreased 10% to $918 million. Its EBT margin narrowed to 70% from 72%. Qualcomm renewed long-term licensing agreements with Apple, Huawei and Transsion, maintaining its licensing revenue run rate.
GAAP research and development expenses increased to $2.68 billion from $2.37 billion, while selling, general and administrative expenses rose to $963 million from $910 million. Non-GAAP operating expenses totaled $2.7 billion.

Qualcomm is implementing product price increases to offset higher manufacturing costs, with the full benefit expected in the second half of fiscal 2027.

Qualcomm Accelerates Data Center Expansion

The company reiterated its fiscal 2027 data center revenue target of $5 billion, with revenues expected to exceed $650 million in the December quarter. Management anticipates sequential growth throughout fiscal 2027, reaching a $7 billion annualized exit rate.

A multigenerational collaboration with Amazon spans customized AI silicon and optical connectivity. The arrangement includes warrants covering up to $60 billion in potential purchases over 10 years.

Qualcomm has secured three custom silicon and AI accelerator customers, alongside optical connectivity engagements and a CPU design win with Meta. Its high-bandwidth compute technology also demonstrated better-than-targeted power efficiency during laboratory validation.

The company continues targeting more than $15 billion in annual data center revenues by fiscal 2029, supported by expanding hyperscaler engagements.

QCOM’s Cash Position and Shareholder Returns

Qualcomm returned approximately $2 billion to shareholders during the quarter, comprising $1.01 billion in share repurchases and $987 million in dividends. Full-year capital returns totaled $11.67 billion.

Cash, cash equivalents and marketable securities totaled $7.68 billion as of Sept. 27, 2026, while total debt stood at $15.11 billion. Fiscal 2026 operating cash flow reached $11.15 billion, compared with $14.01 billion in fiscal 2025. Capital expenditures increased to $2.49 billion from $1.19 billion.

Qualcomm Projects Data Center-Led Growth in Fiscal 2027

For the first quarter of fiscal 2027, Qualcomm forecasts revenues of $10.4-$11.2 billion and non-GAAP earnings of $2.15-$2.35 per share. QCT revenues are projected at $9.0-$9.6 billion, with an EBT margin of 20-22%.

QTL revenues are expected between $1.3 billion and $1.5 billion, with an EBT margin of 72-76%. Non-GAAP operating expenses are projected at approximately $2.8 billion.

QCT handset revenues are expected to decline by a mid-single-digit percentage sequentially as Android growth is offset by declining Apple revenues. Combined automotive and IoT revenues should remain approximately flat sequentially.

For fiscal 2027, Qualcomm expects non-handset QCT revenues to grow more than 60% year over year and account for over half of QCT sales, marking a significant milestone in its diversification strategy.

Zacks Rank

QCOM currently carries a Zacks Rank #4 (Sell).

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