QUALCOMM Incorporated

What they do

Qualcomm operates through two main segments: QCT, which develops and sells integrated circuit platforms (e.g., Snapdragon and Qualcomm Dragonwing families) for mobile devices, automotive (Snapdragon Digital Chassis), and IoT; and QTL, which licenses portions of its patent portfolio, including rights essential to cellular standards. The company generates revenues from chip sales and licensing royalties, with significant exposure to premium-tier handsets and China.

Revenue drivers

• QCT Handsets — Largest revenue stream, $5.1 billion in Q3 fiscal 2026, down 20% year-over-year.
• QCT Automotive — Revenues of $1.6 billion in Q3 fiscal 2026, up 61% year-over-year; 23 consecutive quarters of double-digit growth.
• QCT IoT — Revenues of $1.8 billion in Q3 fiscal 2026, up 9% year-over-year; includes consumer, edge networking, and industrial products.
• QTL Licensing — Licensing business generated $1.3 billion in revenue in Q3 fiscal 2026, down 3% year-over-year, with EBT margin of 69%.

Recent performance

For the fiscal third quarter ended June 28, 2026, Qualcomm reported revenues of $9.9 billion, down 4% year-over-year, GAAP EPS of $1.87, and non-GAAP EPS of $2.21. QCT revenues fell 5% to $8.5 billion, while QTL revenues declined 3% to $1.3 billion. Combined QCT Automotive and IoT revenues grew 28% year-over-year. During the quarter, the company returned $2.3 billion to stockholders via dividends and share repurchases.

Strategy

Qualcomm is focused on growing non-handset revenues, targeting $40 billion by fiscal 2029, nearly double its November 2024 target. The company is investing in on-device AI, automotive, IoT, and data center opportunities. Management highlighted the acquisition of Modular Inc to create an open software foundation for generative and agentic AI. Ongoing actions to address higher input costs include pricing changes expected to benefit gross margins over time.

Risks

• Customer concentration and vertical integration — A significant portion of revenues comes from a small number of customers and licensees, particularly premium-tier handset makers; customer vertical integration (developing their own chips) could hurt semiconductor sales.
• China concentration and trade tensions — A significant portion of business is concentrated in China, and U.S./China trade and national security tensions could disrupt operations and revenues.
• Dependence on third-party suppliers — The fabless model relies on a limited number of suppliers for manufacturing and assembly; supply chain disruptions, input cost increases, or order uncertainties could harm results.
• Licensing legal and regulatory challenges — Efforts by OEMs to avoid royalty payments, adverse rulings from investigations or litigation, and changes in patent licensing practices could materially harm the licensing business.

Outlook

Management expects non-handset revenues, including data center, to accelerate from 24% growth in fiscal 2026 to greater than 60% growth in fiscal 2027, citing an inflection point in its growth strategy. Guidance for fiscal Q4 2026 reflects the impact of higher input costs across wafer fabrication, assembly, memory, and other materials, with pricing actions gradually benefiting gross margins. The company believes its cash, marketable securities, and operating cash flows will fund working capital needs for at least the next 12 months.