Qualcomm (QCOM) — Earnings Preview Memo
Key Points Table
| Topic | Details |
|---|---|
| Next Report Focus | Q4 FY26 (quarter ending Sep 2026) |
| Forward Consensus | Q4 FY26 revenue consensus: $10,138M; EPS consensus: $1.29 (GAAP) |
| Guidance | Q4 FY26 revenue guidance: $9,700M–$10,500M; Non-GAAP EPS: $2.05–$2.25 |
| YoY Comparable | Q4 FY25 actual revenue: $11,270M; Non-GAAP EPS: $3.00 |
| YoY Change | Q4 FY26 consensus revenue implies -11% YoY; Non-GAAP EPS guide midpoint -28% YoY |
| Key Watch Areas | Data center ramp, non-handset growth, gross margin recovery, Apple revenue step-down, pricing actions, supply chain constraints, Modular integration |
| Segment Dynamics | Handsets pressured by memory costs/Apple share loss; Automotive and IoT accelerating; Data center inflecting |
Summary and Conclusions
- Q4 FY26 is set up as a transition quarter: Qualcomm is coming off a tough YoY comparable, with Q4 FY25 revenue at $11.3B and Non-GAAP EPS at $3.00. The Q4 FY26 consensus ($10.1B revenue, $1.29 GAAP EPS) and company guidance ($9.7B–$10.5B revenue, $2.05–$2.25 Non-GAAP EPS) both imply double-digit YoY declines.
- Key drivers to watch:
- Data Center: Initial custom silicon shipments (notably Amazon, plus another hyperscaler) begin in the December quarter, expected to drive a >60% YoY acceleration in non-handset revenue in FY27.
- Handsets: Android bottomed in Q3; Q4 guide assumes sequential Android growth but a sharp Apple product revenue step-down (materially below prior 20% share assumption).
- Automotive/IoT: Both segments are expected to deliver strong double-digit growth, with Automotive guided to ~+60% YoY in Q4.
- Margins: Gross margins are under pressure from input cost inflation (wafer, memory, packaging), but management expects price increases to gradually restore margins over coming quarters.
- Modular Integration: The Modular acquisition is now closed; investors will look for early signals on software ecosystem traction and cross-platform enablement.
- Conclusion: The next print will likely show continued top-line/margin pressure, but the focus will be on evidence of bottoming in handsets, execution on data center ramps, and progress on diversification targets. The YoY comp is tough, but the setup for FY27 is for a significant inflection in non-handset growth.
Forward-Looking Table: Q4 FY26 Guidance vs. Consensus
| Metric | Q4 FY26 Guidance | Q4 FY26 Consensus | Q4 FY25 Actual | YoY Change (Guidance Midpoint vs. Actual) | Notes |
|---|---|---|---|---|---|
| Revenue ($M) | $9,700–$10,500 | $10,138 | $11,270 | -11% | Guidance and consensus below prior year |
| Non-GAAP EPS ($) | $2.05–$2.25 | $3.00 | -28% | Guidance midpoint vs. prior year | |
| GAAP EPS ($) | $1.29 | $(2.89) | N/A | Q4 FY25 GAAP EPS impacted by tax charge | |
| QCT Revenue ($M) | $8,400–$9,000 | $9,821 | -8% | ||
| QTL Revenue ($M) | $1,200–$1,400 | $1,409 | -14% | ||
| QCT Handset Rev ($M) | ~$5,200 | $6,961 | -25% | Sequential Android growth, Apple down | |
| QCT Auto Rev YoY (%) | ~+60% | $1,053 | +60% | Record quarter expected | |
| QCT IoT Rev YoY (%) | Flat | $1,807 | 0% | Industrial up, consumer/tablet down | |
| QCT EBT Margin (%) | 23–25 | 29 | -5 pts | Margin pressure persists | |
| QTL EBT Margin (%) | 68–72 | 72 | Flat | ||
| Non-GAAP OpEx ($M) | ~$2,700 | Modular/Alphawave investments |
Recent Actuals: Q4 FY25 Results
| Metric | Q4 FY25 Actual | YoY Change vs. Q4 FY24 | Notes |
|---|---|---|---|
| Revenue ($M) | $11,270 | +10% | Record QCT revenues |
| Non-GAAP EPS ($) | $3.00 | +12% | |
| GAAP EPS ($) | $(2.89) | N/A | Impacted by $5.7B non-cash tax charge |
| QCT Revenue ($M) | $9,821 | +13% | |
| QTL Revenue ($M) | $1,409 | -7% | |
| QCT Handset Rev ($M) | $6,961 | +14% | |
| QCT Auto Rev ($M) | $1,053 | +17% | |
| QCT IoT Rev ($M) | $1,807 | +7% | |
| QCT EBT Margin (%) | 29 | +1 pt | |
| QTL EBT Margin (%) | 72 | -2 pts |
Quarterly Trend: Revenue and EPS (Actuals and Consensus)
| Quarter | Revenue ($M) | YoY Growth | GAAP EPS | Non-GAAP EPS | Notes |
|---|---|---|---|---|---|
| Q3 FY26 | 9,947 | -4% | 1.87 | 2.21 | QCT non-handset +28% YoY |
| Q2 FY26 | 10,599 | -3% | 6.88 | 2.65 | GAAP EPS includes $5.7B tax benefit |
| Q1 FY26 | 12,252 | +5% | 2.78 | 3.50 | Record QCT/Auto/Handset revenues |
| Q4 FY25 | 11,270 | +10% | (2.89) | 3.00 | GAAP EPS hit by $5.7B tax charge |
| Q3 FY25 | 10,244 | -23% | 2.59 | 2.69 |
Segment Trends: QCT Revenue Streams
| Quarter | QCT Handsets ($M) | QCT Auto ($M) | QCT IoT ($M) | Notes |
|---|---|---|---|---|
| Q3 FY26 | 5,086 | 1,588 | 1,830 | Auto +61% YoY, IoT +9% YoY |
| Q2 FY26 | 6,024 | 1,326 | 1,726 | Auto +38% YoY, IoT +9% YoY |
| Q1 FY26 | 7,824 | 1,101 | 1,688 | Auto +15% YoY, IoT +9% YoY |
| Q4 FY25 | 6,961 | 1,053 | 1,807 | Auto +17% YoY, IoT +7% YoY |
What to Watch This Quarter
1. Data Center Ramp and Amazon Deal
- Initial custom silicon shipments to Amazon (and another hyperscaler) begin in the December quarter.
- Amazon deal includes warrants tied to up to $60B in purchases over 10 years; 15% upfront vesting tied to initial commitments.
- Management has "very high confidence" in hitting $5B data center revenue in FY27, with $15B targeted for FY29.
- Investors will look for commentary on pipeline, customer diversity, and early revenue recognition.
2. Non-Handset Revenue Inflection
- Non-handset (Automotive, IoT, Data Center) revenue expected to accelerate from +24% in FY26 to >+60% in FY27.
- QCT non-handset share to exceed 50% in FY27, ~2/3 by FY29.
- Automotive guided to ~+60% YoY in Q4; IoT flat overall but double-digit growth in industrial/robotics.
3. Handset Dynamics: Android Bottom, Apple Step-Down
- QCT handset revenue bottomed in Q3; Q4 guide assumes double-digit sequential Android growth.
- Apple product revenue to decline ~50% sequentially in Q4 as share drops materially below prior 20% assumption.
- Management expects non-handset growth in FY27 to fully offset lost Apple product revenue.
4. Margin Recovery and Pricing Actions
- Gross margins pressured by broad-based input cost inflation (wafer, memory, packaging).
- Double-digit price increases being implemented across products; expected to benefit gross margins over next several quarters as contracts/product cycles roll.
- QCT EBT margin guided to 23–25% in Q4 (vs. 29% prior year); management expects return to historical range as pricing actions take effect.
5. Modular Integration and Software Ecosystem
- Modular acquisition closed; focus on building an open, hardware-agnostic AI software stack.
- Early developer traction, Hugging Face partnership, and cross-platform enablement are key proof points.
- Investors will look for updates on Modular's impact on data center and edge AI adoption.
6. Supply Chain and Capacity
- Industry operating at 100% utilization; management confident in supply for planned ramps.
- Inventory build seen as strategic advantage in constrained environment.
How Did They Report Last Year? Are They Coming Off a Tough Comparable?
- Q4 FY25 was a strong quarter: Revenue $11.3B (+10% YoY), Non-GAAP EPS $3.00 (+12% YoY), record QCT revenues, Automotive +17% YoY, IoT +7% YoY.
- Q4 FY26 guidance and consensus imply a tough YoY comp: Revenue guide midpoint ($10.1B) is -11% YoY; Non-GAAP EPS guide midpoint ($2.15) is -28% YoY.
- Drivers of the YoY decline: Handset revenue down sharply due to memory-driven market contraction and Apple share loss; margin pressure from input costs; offset partially by strong Automotive and IoT growth.
Summary Table: Most Important Factors for Next Earnings
| Factor | Why It Matters | What to Watch For |
|---|---|---|
| Data Center Revenue Ramp | New growth vector, Amazon deal, FY27 inflection | Initial revenue recognition, customer diversity, pipeline |
| Non-Handset Revenue Growth | Diversification, replaces Apple revenue | Automotive/IoT growth rates, segment mix |
| Handset Recovery/Apple Step-Down | Android bottoming, Apple share loss, market normalization | Sequential Android growth, Apple revenue trajectory |
| Margin Recovery | Input cost inflation, pricing actions | Gross margin trend, timing of price increases, OpEx discipline |
| Modular Integration | Software ecosystem, cross-platform enablement | Developer traction, Hugging Face partnership, open source |
| Supply Chain/Capacity | Ability to deliver on ramps, inventory strategy | Commentary on wafer/memory supply, inventory levels |
Management Commentary — Recent Tone
- On Data Center: "We have 2 near-term custom silicon wins... Both projects are in the first phase of strategic multiyear customer relationships that we expect to expand over time."
- On Handsets: "We estimate that QCT handset revenues from Chinese OEMs reached a bottom in the third fiscal quarter and will return to double-digit sequential growth in the fourth quarter."
- On Margins: "We are taking concrete actions to reflect the higher input costs in our product pricing. These actions will benefit our gross margins over time as the pricing changes gradually come into effect."
- On Apple: "We now expect an acceleration in the step-down of Apple product revenues starting in the fourth fiscal quarter as our share for upcoming iPhone launch is expected to be materially lower than our prior estimate of 20%."
- On Modular: "Modular strengthens our ability to deliver an end-to-end software stack for data center and Edge AI deployments. It will also be hardware-agnostic helping simplify AI software complexity across multiple platforms..."
Conclusion
Qualcomm enters Q4 FY26 earnings with a challenging YoY comp, pressured by handset market contraction, Apple share loss, and margin headwinds. However, the company is at a major inflection point: data center ramps (notably Amazon), Automotive and IoT growth, and Modular integration are set to drive a >60% YoY acceleration in non-handset revenue in FY27. The key for this print is evidence of bottoming in handsets, execution on new growth vectors, and progress on restoring margins. The setup for FY27 is for a significant positive inflection, but Q4 FY26 will likely still reflect transitionary pressures.
