QUALCOMM Incorporated
QCOM · Nasdaq
Next quarter
Expected to report Nov 4, 2026 — estimated from last year’s reporting date.
Consensus is $1.50 EPS for Sep 2026 across 8 estimates, ranging $1.42 to $1.76.
QCOM Jun 2026
- 0.65%
- -2.62%
- $1.54
- $1.53
- —
- $9.95B
Reported results
- $9.95B
- 53.05%
- $1.63B
- 16.35%
- $2.00B
- $1.87
Highlights
- Revenue: Q3 FY2026 revenue was $9.95 billion, down 4% year over year from $10.37 billion and 6% sequentially from $10.60 billion; it was at the high end of guidance.
- EPS: Supplied results show reported EPS of $1.53 versus $1.54 consensus, a 0.65% shortfall; the release separately reports $1.87 GAAP diluted EPS and $2.21 non-GAAP diluted EPS.
- Handsets: QCT handset revenue fell 20% year over year to $5.09 billion as OEMs reduced builds and inventories amid memory constraints and price increases.
- Diversification: Automotive revenue rose 61% to $1.59 billion and IoT revenue increased 9% to $1.83 billion, lifting combined automotive and IoT revenue 28%.
- Profitability: GAAP operating income declined 41% to $1.63 billion, while QCT EBT margin fell to 26% from 30% as product costs increased and revenue declined.
- Licensing: QTL revenue decreased 3% to $1.28 billion, with EBT down 6% to $881 million and EBT margin declining two points to 69%.
- Outlook: Q4 FY2026 revenue guidance is $9.7 billion-$10.5 billion, including QCT revenue of $8.4 billion-$9.0 billion and non-GAAP EPS of $2.05-$2.25.
- AI and data center: Qualcomm completed its approximately $3.1 billion acquisition of Modular, primarily issuing 18 million shares, to strengthen its software platform for generative and agentic AI.
- Capital returns: Qualcomm returned $2.3 billion in the quarter through $973 million of dividends and $1.4 billion of repurchases covering 8 million shares.
Analysis
Qualcomm's fiscal third quarter was a handset-led contraction with a clear diversification offset. Revenue of $9.95 billion fell 4% from $10.37 billion a year ago and 6% from $10.60 billion in Q2, while GAAP operating income dropped 41% year over year to $1.63 billion. GAAP net income was $2.00 billion, down 25% from $2.67 billion last year; the prior quarter's $7.37 billion net income was inflated by a $5.7 billion deferred-tax valuation allowance release. Against the supplied consensus, reported EPS was $1.53 versus $1.54 expected, a 0.65% miss, although Qualcomm's release reports $1.87 GAAP EPS and $2.21 non-GAAP EPS.
The central operating issue was memory-related supply and inventory pressure in handsets: QCT handset revenue declined 20% to $5.09 billion, more than offsetting automotive growth of 61% to $1.59 billion and IoT growth of 9% to $1.83 billion. Automotive and IoT together grew 28%, supporting management's longer-term strategy to reach $40 billion of non-handset revenue by fiscal 2029. Near term, however, gross margin fell to 53% from 56%, and Q4 guidance implies revenue of $9.7 billion-$10.5 billion amid continued input-cost pressure. Qualcomm also completed the Modular acquisition and continued aggressive capital returns, including $1.4 billion of buybacks.
Handset pressure
QCT revenue declined 5% to $8.50 billion, with the handset business driving the shortfall. Management attributed the 20% decline in handset revenue to lower chipset shipments to major OEMs as customers adjusted build plans and reduced inventories in response to memory shortages and higher memory prices. The weakness also pressured profitability: QCT EBT fell 18% to $2.19 billion, and EBT margin declined four points to 26%.
- Costs: Consolidated gross margin fell to 53% from 56%, primarily because QCT product costs increased; higher average selling prices only partly offset the pressure.
- Investment: R&D rose 17% to $2.61 billion, including higher wireless and integrated-circuit development costs and $101 million of additional share-based compensation.
- Structural risks: Qualcomm continues to flag customer vertical integration, including Apple's increasing use of its own modem products, as a future headwind to QCT revenue and cash flow.
Automotive and IoT
The quarter provided further evidence that Qualcomm's non-handset businesses are becoming a meaningful counterweight to mobile weakness. Automotive revenue increased $604 million year over year to $1.59 billion, supported by favorable mix, higher average selling prices, new vehicle launches and higher shipments of digital cockpit and ADAS/AD products. IoT revenue rose $149 million to $1.83 billion, primarily from favorable mix and higher revenue per unit.
- Growth profile: Combined automotive and IoT revenue grew 28% year over year, while automotive alone delivered its 23rd consecutive quarter of double-digit growth.
- Longer-term target: Management raised the strategic emphasis on non-handset expansion, targeting $40 billion of non-handset revenue by fiscal 2029 and growth of more than 60% in fiscal 2027, including data center.
- Data center: Data center revenue increased $88 million year over year, primarily reflecting the Alphawave acquisition completed in Q1 FY2026.
QTL licensing
QTL remained highly profitable but was slightly softer in the quarter. Revenue declined 3% to $1.28 billion, while EBT fell 6% to $881 million. The revenue decline reflected $67 million of lower estimated cellular-product sales and $25 million less royalty revenue from devices sold in prior periods, partly offset by a $59 million increase in revenue per unit from favorable mix.
- Margin: QTL EBT margin was 69%, down from 71% a year earlier as revenue declined and operating expenses increased.
- Nine-month context: For the first nine months, QTL revenue was $4.25 billion, up 2% year over year, and EBT was $3.11 billion, up 3%.
- Contract base: Key patent license agreements generally expire between fiscal 2027 and 2031, requiring future renewals or renegotiations.
AI acquisitions
Qualcomm completed its acquisition of Modular on July 28, immediately after the quarter ended. The transaction values Modular at approximately $3.1 billion based on Qualcomm's closing share price, with consideration consisting primarily of 18 million newly issued shares. Modular's open, AI-native software platform is intended to let AI run efficiently across hardware architectures and strengthen Qualcomm's software position in data center and edge markets.
- Prior deal: Qualcomm's $2.3 billion Alphawave acquisition, completed in December 2025, added high-speed wired connectivity, custom silicon and connectivity technologies aimed primarily at data centers.
- Investment burden: Goodwill stood at $14.27 billion at quarter end versus $11.36 billion at fiscal year-end, reflecting acquisitions and expansion of the diversification portfolio.
- Earnings impact: Q4 guidance includes $0.11 per share of other items, primarily acquisition-related, and $0.72 per share of share-based compensation.
Fourth-quarter outlook
Qualcomm expects Q4 revenue of $9.7 billion-$10.5 billion, with QCT revenue of $8.4 billion-$9.0 billion and QTL revenue of $1.2 billion-$1.4 billion. Non-GAAP diluted EPS is guided to $2.05-$2.25, while GAAP diluted EPS is expected at $1.22-$1.42. The outlook incorporates broad-based increases in wafer, assembly, test, packaging, memory and other input costs.
- Pricing response: Qualcomm is implementing product-price increases intended to offset higher input costs, but expects the benefit to flow through gradually.
- Demand risk: Management expects memory supply constraints and related price increases to continue weighing on handset OEM demand and financial results.
- Balance sheet: Cash, cash equivalents and marketable securities totaled $8.30 billion at quarter end, compared with $12.48 billion at fiscal year-end, while debt was $15.27 billion.
Capital returns
Qualcomm continued to return substantial capital despite the softer operating result. It paid $973 million in dividends, or $0.92 per share, and repurchased 8 million shares for $1.4 billion during the quarter. Through the first nine months, repurchases totaled $6.8 billion and dividends totaled $2.9 billion.
- Authorization: $20.6 billion remained available under the company's repurchase programs at June 28, 2026.
- Share count: Shares outstanding declined to 1.057 billion at quarter end from 1.074 billion at September 28, 2025, after 42 million repurchases partly offset by 25 million shares issued.
- Cash generation: Nine-month operating cash flow was $8.41 billion, down from $10.02 billion a year earlier, partly because inventory increased by $1.80 billion.
