Qualcomm (QCOM.O) released its third-quarter fiscal year 2026 earnings report (ended June 2026) after hours on U.S. markets on July 30, 2026, Beijing Time, with the following key points:
1. Key Data: Qualcomm's revenue this quarter was $9.95 billion, a 4% year-over-year decline, surpassing market expectations of $9.6 billion. Although the automotive business saw significant growth, overall revenue was weighed down by a decline in the mobile business.
The company's gross margin for the quarter was 53.1%, a 2.5 percentage point decline year-over-year, below market expectations of 54.6%. Costs across wafer manufacturing, packaging, testing, advanced packaging, memory, and other materials all increased, placing significant pressure on the company's gross margin.
2. Specific business situation: Qualcomm's (QCOM.US) business is primarily divided into two segments: semiconductor chips (QCT) and technology licensing (QTL), with the semiconductor chip segment being the company’s largest revenue source, accounting for over 80%.
In the semiconductor chip business: ① This quarter, mobile business revenue was $5.09 billion, a 19.6% year-over-year decline. The decline in the company’s mobile business was primarily driven by two factors: first, industry-wide trends, with smartphone shipments excluding Apple falling 11% this quarter; second, weakening demand for high-end models, as smartphone manufacturers prefer to reuse last-generation platforms to reduce costs.
② Automotive revenue for the quarter was $1.59 billion, up 61% year-over-year, driven by increased shipments of the fourth-generation Snapdragon Digital Chassis. The company’s fifth-generation Snapdragon Digital Chassis is set to ramp up in September, significantly increasing the value per vehicle; ③ IoT revenue for the quarter was $1.83 billion, up 9% year-over-year, fueled by demand for consumer and industrial-grade products.
3. Operating Expenses: The company’s core operating expenses increased to approximately $3.6 billion, with R&D expenses rising to $2.6 billion this quarter and sales expenses totaling $980 million for the quarter.
The company reported a net profit of $2 billion for this quarter, following the release of deferred tax asset valuation allowances in the prior quarter (approximately $5.7 billion). From an operational perspective, the company’s core operating profit for this quarter was $1.63 billion, a 41% year-over-year decline, primarily due to lower gross margins and increased expenses.
4. Guidance for next quarter: Qualcomm expects revenue of $9.7–$10.5 billion for the fourth quarter of fiscal year 2026, in line with market expectations ($9.95 billion). The company forecasts non-GAAP earnings per share of $2.05–$2.25 for the next quarter, below market expectations ($2.36).
Dolphin's overall view: Storage has suppressed smartphones, while data centers remain a promise yet to be fulfilled.
Qualcomm's latest earnings report remained lackluster. While revenue met market expectations, it continued to decline. Gross margin further contracted, primarily due to rising storage costs and weak demand, which increased cost pressures.
Based on the guidance for next quarter, the company expects revenue of $9.7 to $10.5 billion, with no clear signs of recovery; non-GAAP EPS is projected at $2.05 to $2.25, below market expectations of $2.36. Demand for end devices such as smartphones remains weak, and factors like rising memory prices will continue to pressure the company’s costs.
Amid sluggish performance in its traditional core business, the company has been striving to break through in the data center sector. It has strategically positioned itself in four areas: custom chips, commercial CPUs, AI accelerators, and connectivity products, which once pushed its stock price above $250. However, as market concerns about the sustainability of AI capital expenditures have grown, the stock has retreated below $160, erasing nearly all of the gains driven by its data center initiatives.
Outside of this earnings report, the market is focused on the following aspects of Qualcomm:
1) Traditional sectors: Core foundation, bearing the pressure of storage
Mobile business is the largest segment of Qualcomm's operations, accounting for more than half of its revenue. Amid weak overall performance in the mobile market, this has placed significant pressure on the company’s financial results. This quarter, global mobile shipments remained at 290 million units, a 6% year-over-year decline.
The mobile market is primarily dominated by two major camps: Apple and Android. Breaking it down further, Apple’s smartphone shipments increased by nearly 20% year-over-year this quarter, while shipments from other Android manufacturers declined by 11% year-over-year, directly impacting Qualcomm’s smartphone business performance this quarter.
The company expects mobile revenue for the next quarter to be approximately $5.2 billion, a year-over-year decline of about 25%, with the sequential growth in Android offset by a decline in Apple product revenue (the second half is traditionally a peak season, with seasonal recovery).
The rate of recent storage price increases has begun to slow, and the refusal of manufacturers like OPPO and VIVO to accept further price hikes indicates that the sharp rise in storage costs has sparked market dissatisfaction. If the storage cycle subsequently enters a downturn, it could help alleviate pressure on the company’s core business.
2) AI sector: Edge AI and data centers represent potential growth markets
Even amid a sluggish traditional market, the company is actively expanding its presence in the AI sector, aiming to achieve new breakthroughs.
a) Edge AI: The company views edge AI as a core component of its Physical AI strategy, covering all endpoint devices including smartphones, PCs, automobiles, XR, robotics, and industrial IoT, with the company having a presence in each of these areas.
The two primary areas: ① The potential device upgrade cycle driven by AI phones, accompanied by AI agents becoming the “new interface” for smartphones; ② The company’s introduction of the Snapdragon C platform for Windows laptops in the AI PC space, whose core advantages include the Oryon CPU, low-power AI inference, and heterogeneous computing (CPU + GPU + NPU working together to support on-device AI agent execution).
b) AI Data Center: Qualcomm ultimately couldn't resist entering the main arena of AI, which represents the company's most prominent strategic initiative in the AI field.
On its Investor Day on June 24, 2026, the company disclosed that Qualcomm's AI data center strategy will encompass four product lines:
① AI Accelerator (HBC): Microsoft has confirmed a multi-generation partnership
Qualcomm's core differentiated technology enables Processing Near Memory via LPDDR5X (vs. HBM), optimized for AI inference workloads that are memory capacity-intensive.
AI200 has already begun mass production scaling, and the next-generation AI250 is expected to be sampled in 2027. The subsequent AI300 will leverage UALink and ESUN for scale-up network interconnection, achieving an effective bandwidth 54 times that of AI200.
② Commercial CPU (Dragonfly C1000): Meta has confirmed a multi-generation partnership
This is primarily based on Qualcomm’s Oryon CPU architecture, originally developed for smartphones and PCs, which the company has extended to data centers. Positioned as an “Agentic CPU,” it is specifically designed for CPU-intensive workloads such as agent orchestration, multi-step reasoning, and tool invocation.
③ Custom Silicon Business: Two hyperscale customers confirmed (each contributing over $1 billion in fiscal year 2027)
This leverages capabilities acquired through the acquisition of Alphawave Semi (SerDes, Die-to-Die, PCIe/CXL, HBM PHY) and Ventana (Veyron V2 RISC-V CPU), primarily offering customized AI chip (XPU) design services to hyperscale customers.
④ Connectivity Services: Secured first ultra-large client
Based on Alphawave's IP, the company offers 800G/1.6T optical modules, AOCs, and AECs. The company is currently producing 800G LR2 modules, 800G optical modules, AOCs, and AECs, with 1.6T optical modules, AOCs, and AECs expected to be launched in 2026–2027.
Previously, fueled by the hype around AI, the company entered the AI data center market, pushing its stock price above $250. Now, amid concerns over AI capital expenditures, the stock has fallen back to around $160, erasing expectations for data center growth.
Although the company has estimated a $1 trillion market opportunity for its AI data center business, its data center operations have not yet generated significant revenue. Returning to the company’s traditional business, given the current sluggishness in the smartphone and other terminal markets, the company’s current P/E ratio remains relatively high.
Regarding the data center business, while management has set a $15 billion revenue target for fiscal year 2029, the focus should currently be on more near-term performance. With the company’s $5 billion data center revenue target for fiscal year 2027, this is expected to contribute $1.2 billion in operating profit (based on the company’s OPM).
In the current fragile market environment, it is even more important to identify relatively safe bottom zones for Qualcomm. From a traditional business perspective, further declines in the company’s stock price would be more prudent. Of course, this effectively treats the company’s data center business as “an option.”
If the company achieves its fiscal year 2027 targets, it will elevate the valuation outlook for its data center segment.
Here are the data charts from Dolphin regarding Qualcomm's latest earnings report:
This article is from the WeChat official account "Haitun Research" (ID: haituntouyan), authored by Haitun.