Key Moments
- Freedom Broker downgraded Qualcomm (NASDAQ: QCOM) to Hold and lowered its price target to $185 from $200.
- Fiscal Q4 revenue of $10.44 billion exceeded consensus by 3.2%, while EPS of $2.17 only narrowly topped expectations.
- Gross margin declined for a fourth consecutive quarter to 52.4% and is not expected to fully reflect price hikes until the second half of fiscal 2027.
Rating Cut as New Growth Strategy Pressures Margins
Freedom Broker reduced its stance on Qualcomm (NASDAQ: QCOM), moving the stock from Buy to Hold, according to a note published on Tuesday. The firm also trimmed its price target on the shares to $185 from $200, citing a longer-than-anticipated drag on profitability from the chipmaker’s transition into new growth areas.
Analyst Egor Tolmachev wrote that,
“FQ4’26 removed most of the uncertainties that have weighed on Qualcomm, but it also showed that the shift to new growth engines will cost more margin, for longer, than we had assumed.”
Fourth-Quarter Results: Revenue Outperforms, Margins Disappoint
Qualcomm reported fiscal fourth-quarter revenue of $10.44 billion, surpassing consensus expectations by 3.2%. Earnings per share came in at $2.17, only $0.01 ahead of forecasts.
Tolmachev commented that,
“The quarter was a revenue beat and an EPS beat in name only, as margin again absorbed nearly all of the upside,”
underscoring that profitability rather than top-line growth remains the key concern.
Margin Trends and Cost Pressures
Gross margin declined for the fourth quarter in a row, reaching 52.4%, as expenses increased across chip manufacturing, packaging, and memory. Qualcomm indicated that investors should not expect to see the full impact of its recent price hikes reflected in margins until the second half of fiscal 2027.
| Metric | Latest Result | Commentary |
|---|---|---|
| Fiscal Q4 Revenue | $10.44 billion | Beat consensus by 3.2% |
| Fiscal Q4 EPS | $2.17 | Exceeded expectations by $0.01 |
| Gross Margin | 52.4% | Fourth consecutive quarterly decline |
Licensing Wins Reduce Long-Term Risk
Despite the margin headwinds, Tolmachev highlighted positive developments in Qualcomm’s licensing portfolio. The company secured long-term licensing agreements with Apple, Huawei, and Transsion. According to the analyst, these deals remove a significant overhang for the patent licensing segment through the next renewal cycle in fiscal 2030.
Data Center Outlook and Forecast Revisions
Qualcomm provided an upbeat view for its data center operations, projecting revenue of more than $650 million in the current quarter, supported by shipments to two hyperscale customers, including AWS.
Reflecting both the growth opportunity and the margin pressures, Freedom Broker adjusted its financial models. The firm lifted its revenue projections but reduced its non-GAAP EPS estimates by approximately 3% for fiscal 2027 and 8% for fiscal 2028.
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