Key Moments
- Qualcomm Inc. (NASDAQ: QCOM) fell roughly 10% in premarket trading after weaker handset revenue and margin concerns outweighed an earnings beat.
- Fourth-quarter adjusted revenue of $10.44 billion and EPS of $2.17 both exceeded consensus, but gross margin contracted to 52.4%, below the 53.2% estimate.
- Automotive revenue jumped 89% year over year to $1.99 billion, while Internet of Things revenue rose 4% to $1.89 billion, both topping expectations.
Market Reaction to Quarterly Results
Qualcomm Inc. (NASDAQ: QCOM) came under pressure in premarket trading Thursday, with the stock sliding about 10% after the company flagged mounting cost headwinds and delivered weaker handset performance, stoking investor worries about margins despite headline figures that surpassed Wall Street forecasts.
The chipmaker’s fourth-quarter adjusted earnings came in at $2.17 per share, marginally ahead of the $2.16 consensus estimate. Adjusted revenue reached $10.44 billion, topping expectations of $10.12 billion. Still, those beats were overshadowed by signs of strain in Qualcomm’s core smartphone business and a deterioration in profitability.
Handset Weakness and Overall Revenue Trend
Revenue from handset chips fell sharply, declining 26% year over year to $5.14 billion. That figure came in below analyst estimates of $5.25 billion and highlighted ongoing softness in smartphone demand. Total revenue slipped 7% from $11.27 billion in the same quarter a year earlier.
| Metric | Current Period | Year-Ago Period | Consensus (Current) |
|---|---|---|---|
| Adjusted EPS | $2.17 | – | $2.16 |
| Adjusted Revenue | $10.44 billion | $11.27 billion | $10.12 billion |
| Handset Revenue | $5.14 billion | – | $5.25 billion |
Guidance and Margin Compression
Looking ahead, Qualcomm projected first-quarter revenue in a range of $10.4 billion to $11.2 billion, with the midpoint of $10.8 billion coming in above the $10.55 billion consensus. However, the company’s earnings outlook was more cautious. Adjusted EPS guidance was set at $2.15 to $2.35, with the midpoint below the $2.32 analyst estimate.
Profitability metrics added to investor unease. Gross margin narrowed to 52.4%, missing expectations of 53.2%. The company pointed to broad-based cost inflation across multiple parts of the semiconductor supply chain, including wafer fabrication, assembly, testing, advanced packaging, memory, and other materials.
Qualcomm indicated it expects pricing initiatives aimed at offsetting these higher input costs to be fully realized in the second half of fiscal 2027.
Analyst Concerns on Datacenter Ramp and Margins
Commentary from analysts highlighted skepticism around the near-term risk-reward profile for the stock, particularly in light of smartphone weakness and margin pressure.
Goldman Sachs analysts wrote: “Although we believe investor positioning was relatively balanced heading into the quarter, we think investors will want to see more evidence of the magnitude and timing of the Datacenter ramp through FY27 – especially in light of near-term smartphone weakness.” They added: “We also believe investors may look for more evidence of gross margin stabilization before getting more constructive on the stock.”
Raymond James analysts echoed these concerns: “Elevated manufacturing costs continue to pressure margins, with expected pricing benefits largely offset by Data Center custom silicon dilution,” they wrote. “We believe the key investment debate has shifted toward execution of the Data Center roadmap and look for further evidence of customer ramps and margin recovery before becoming more constructive.”
Segment Performance: Automotive and IoT Stand Out
While handset trends weighed on overall results, Qualcomm’s diversification efforts showed momentum in other areas. Automotive revenue surged 89% year over year to $1.99 billion, topping expectations of $1.69 billion and bringing the segment close to the $2 billion threshold for the first time.
Internet of Things revenue also advanced, rising 4% to $1.89 billion and exceeding analyst forecasts.
| Segment | Revenue | Year-over-Year Change | Consensus |
|---|---|---|---|
| Automotive | $1.99 billion | +89% | $1.69 billion |
| Internet of Things (IoT) | $1.89 billion | +4% | – |
QCT and QTL Business Lines
Within Qualcomm’s operating structure, the QCT semiconductor unit generated $9.02 billion in revenue, an 8% decline from the prior year but ahead of the $8.8 billion consensus estimate. The QTL licensing segment posted revenue of $1.30 billion, down 7% year over year yet slightly above expectations of $1.29 billion.
| Business Unit | Revenue | Year-over-Year Change | Consensus |
|---|---|---|---|
| QCT (Semiconductors) | $9.02 billion | -8% | $8.8 billion |
| QTL (Licensing) | $1.30 billion | -7% | $1.29 billion |
Management Commentary and Long-Term Outlook
Company leadership emphasized strength in non-handset segments and pointed to an inflection in revenue mix over the coming years.
“We are pleased to deliver fourth quarter non-GAAP revenues at the high end of our guidance, along with 36% year-over-year growth in combined QCT Automotive and IoT revenues,” said Cristiano Amon, Qualcomm’s president and chief executive.
“Fiscal 2027 marks the start of our non-handset revenue inflection, including the ramp of our Data Center business,” Amon added.
Full-Year Fiscal 2026 Performance
For fiscal 2026, Qualcomm reported that adjusted revenue fell 2% to $43.24 billion. Adjusted earnings per share declined 12% to $10.54, illustrating the impact of both softer demand in key markets and higher costs on the company’s bottom line.
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