Qualcomm Beat on Earnings, but Its Shrinking Phone-Chip Business Is the Real Story
Qualcomm's fiscal fourth quarter beat consensus, but handset chip sales fell 26% and EPS guidance came in light on margin pressure. The stock fell 9.5% to $156.75. We rate it a hold until gross margins recover.
Maz Vantage Research ·
Key points
- Qualcomm's fiscal fourth-quarter adjusted EPS of $2.17 edged past consensus, but chip sales for phones fell 26% from a year earlier.
- Revenue guidance for the December quarter came in above estimates. EPS guidance came in below, because of costlier inputs and a lower-margin data center ramp.
- At $156.75, the stock trades at about 15 times trailing adjusted earnings. We rate it a hold until gross margins start to recover.
Qualcomm (NASDAQ: QCOM) fell 9.5% on Thursday, Nov. 5, to close at $156.75, a day after it reported results for its fiscal fourth quarter, which ended Sept. 27. The quarter itself was fine. The problem is that its phone-chip business, still the core of its profits, is shrinking faster than its new businesses can make up for. We think the selloff is understandable but not a reason to buy yet.
What happened
Adjusted revenue fell 7% from a year earlier to $10.44 billion, near the top of the company's own guidance range. Adjusted EPS (earnings per share, excluding items such as stock-based pay and acquisition costs) fell 28% to $2.17. Maz Vantage's data puts that less than 1% above consensus, with revenue about 2% above.
On a GAAP basis, the official accounting standard, revenue was $10.32 billion and EPS was $1.17. That compares with a loss of $2.89 a share a year earlier, when Qualcomm took a large tax charge.
Timing made the drop worse. Nov. 5 was a bad day for chip stocks in general: Yahoo Finance reported the Nasdaq fell more than 5% as chip shares sank. Some of Qualcomm's fall was the market, not the report.
| Fiscal Q4 2026 | Actual | Year earlier | Change |
|---|---|---|---|
| Adjusted revenue | $10.44B | $11.27B | -7% |
| Adjusted EPS | $2.17 | $3.00 | -28% |
| GAAP EPS | $1.17 | -$2.89 | n/m |
| QCT handsets | $5.14B | $6.96B | -26% |
| QCT automotive | $1.99B | $1.05B | +89% |
| QCT IoT | $1.89B | $1.81B | +4% |
| QTL licensing | $1.30B | $1.41B | -7% |
Source: Qualcomm earnings release, Nov. 4, 2026. QCT is the chip business; QTL is patent licensing.
The numbers that matter
The split inside the chip business tells the story. Handset revenue dropped to $5.14 billion. On the call, CFO Akash Palkhiwala blamed "industry wide memory dynamics": higher memory-chip prices have raised phone costs and cut phone sales. Apple is also moving away from Qualcomm's modems.
Automotive was the bright spot. It produced Qualcomm's first $2 billion quarter, up 89% from a year earlier. Automotive and IoT (Internet of Things, meaning connected industrial and consumer devices) together grew 36% to $3.88 billion. That is 43% of chip revenue, up from 29% a year earlier.
Qualcomm chip revenue by end marketThis content is hosted by datawrapper.dwcdn.net, which may set its own cookies. It is not loaded until you allow it.
Profitability is going the other way. The chip segment's pretax margin fell to 24% from 29% a year earlier. For the full fiscal year, adjusted EPS fell 12% to $10.54. GAAP EPS jumped to $12.70, but only because of a one-time tax benefit worth $5.32 a share.
What management guided
For the December quarter, Qualcomm guided revenue of $10.4 billion to $11.2 billion and adjusted EPS of $2.15 to $2.35. The $10.8 billion revenue midpoint is about 2% above the $10.57 billion consensus in Maz Vantage's data. The $2.25 EPS midpoint is about 2% below the $2.29 consensus.
The gap comes from margins. Qualcomm guided a chip-segment pretax margin of 20% to 22%. That includes a 3-point hit from moving data center into the segment and from spending ahead of revenue. The company says it is raising prices to pass on higher costs for wafers, packaging and memory, with the full benefit expected in the second half of fiscal 2027. Custom chips for data centers will add revenue but will lower gross margin.
Management also gave the bull case. CEO Cristiano Amon said "Fiscal 2027 marks the start of our non-handset revenue inflection." Qualcomm repeated its target of $5 billion in data center revenue in fiscal 2027, starting with more than $650 million this quarter. It expects to exit the year at a $7 billion annual rate. Palkhiwala said any upside would be "constrained by supply rather than demand." Licensing renewals with Apple, Huawei and Transsion also remove a risk that hung over the stock.
Valuation and the Street
At $156.75, Qualcomm trades at 14.9 times fiscal 2026 adjusted EPS of $10.54. If you multiply the December-quarter guidance midpoint by four, the multiple is 17.4 times. That rough measure ignores the expected margin recovery later in the year. The quarterly dividend of $0.92 a share gives a yield of about 2.3%. In fiscal 2026 Qualcomm returned $11.7 billion to shareholders through buybacks and dividends, which is more than the $8.65 billion of trailing free cash flow (the cash left after capital spending) in Maz Vantage's data.
Analysts cut their targets after the report. Seeking Alpha and MarketBeat reported cuts at Rosenblatt (to $205), TD Cowen ($185), Bank of America ($170), Susquehanna ($165) and Barclays ($150). The consensus target in Maz Vantage's data is $205.50, 31% above the close. Ratings lean cautious: of 69 analysts, 30 rate it a buy, 34 a hold and 5 a sell.
Qualcomm post-earnings price targetsThis content is hosted by datawrapper.dwcdn.net, which may set its own cookies. It is not loaded until you allow it.
Maz Vantage's quant grade, last updated Nov. 1 before the report, scored Qualcomm 3.88 out of 5 (Buy). Profitability scored 4.77, Momentum 3.59, Valuation 3.32 and Financial Health 3.30. Growth scored only 1.87. The momentum score will likely fall after this week.
Our verdict: hold
The bull case is real. The data center business should go from close to zero to $5 billion in a year, automotive is already an $8 billion annual business, and the licensing income looks steady. If that holds, a price near 15 times earnings looks cheap for a company whose non-handset revenue is set to grow more than 60% this fiscal year.
The bear case is just as specific. The handset market is still shrinking, Apple revenue keeps falling, and the margin recovery depends on price increases that have not yet shown up. The new data center revenue also earns lower gross margins. Earnings estimates may keep drifting lower before they rise.
We rate Qualcomm a hold at $156.75, or about 15 times trailing adjusted EPS. That rating rests on one test: whether gross margins recover in the second half of fiscal 2027 as management promised. A good entry point would be proof that they do, or a lower price that already assumes they won't.
What would change our view
- Next report, expected Feb. 3, 2027: data center revenue above $650 million and a March-quarter guide showing handset revenue has stabilized.
- Gross margin: signs that price increases are sticking. A chip-segment margin back above 24% would make us more positive.
- Data center customers: a third hyperscaler (one of the very large cloud operators) moving to volume orders, or a firm order for its AI250 inference chip.
- Downside signpost: a cut to the $5 billion fiscal 2027 data center target, or handset revenue falling more than the mid-single-digit sequential drop guided for December.
Prices as of the market close on Thursday, Nov. 5, 2026 (4:00 p.m. ET). Data sources: Maz Vantage's data (prices, consensus estimates, price targets, quant grade), Qualcomm's earnings release and earnings call, and the news sources below.
This article is general research, not personal investment advice. It does not consider your goals, timeline or tax situation.
AI disclosure: written with the help of AI tools from market data and the sources listed.
Sources: Qualcomm, "Qualcomm Announces Fourth Quarter and Fiscal 2026 Results," Form 8-K Exhibit 99.1, SEC, Nov. 4, 2026, https://www.sec.gov/Archives/edgar/data/804328/000080432826000127/qcom092726erex991.htm; The Motley Fool, "QUALCOMM (QCOM) Q4 2026 Earnings Call Transcript," Nov. 5, 2026, https://www.fool.com/earnings/call-transcripts/2026/11/05/qualcomm-qcom-q4-2026-earnings-call-transcript/; Seeking Alpha, "Qualcomm crashes, analysts flag handset weakness, margin pressure," Nov. 5, 2026, https://seekingalpha.com/news/4666622-qualcomm-crashes-analysts-flag-handset-weakness-margin-pressure; Seeking Alpha, "Qualcomm slides as mixed guidance overshadows Q4 results," Nov. 4, 2026, https://seekingalpha.com/news/4664977-qualcomm-ticks-up-as-q4-results-outweigh-mixed-guidance; MarketBeat, "Qualcomm Price Target Cut to $205.00 by Analysts at Rosenblatt Securities," Nov. 5, 2026, https://www.marketbeat.com/instant-alerts/analyst-qualcomm-nasdaq-qcom-price-target-cut-to-20500-by-analysts-at-rosenblatt-securities-2026-11-05/; Yahoo Finance, "Markets News, Nov. 5, 2026: Nasdaq Plunges More Than 5%," Nov. 5, 2026, https://finance.yahoo.com/markets/stocks/articles/stock-market-today-futures-mixed-130952710.html