Qualcomm NASDAQ: QCOM reported fiscal second-quarter 2026 results Tuesday, highlighting record automotive revenue, continued growth in IoT, and a handset business that management said is being affected in the near term by memory-related supply and pricing dynamics. The company also discussed rising customer engagement tied to “agentic AI” workloads and provided an update on its data center roadmap, including a custom silicon engagement with a large hyperscaler that is expected to begin shipping later this calendar year.
Quarterly results and segment performance
President and CEO Cristiano Amon said Qualcomm delivered revenue of $10.6 billion and non-GAAP earnings per share of $2.65, with EPS “at the high end of our guidance.” He said QCT revenue was $9.1 billion, supported by “another quarter of record automotive revenues as well as growth in IoT,” while licensing (QTL) revenue was $1.4 billion.
Chief Financial Officer Akash Palkhiwala provided additional segment details:
- QTL: Revenue of $1.4 billion with 72% EBT margin, which Palkhiwala said was driven by favorable mix, with global handset units “approximately flat on a year-over-year basis.”
- QCT Handsets: Revenue of $6.0 billion, which he said came in as anticipated as OEMs remained cautious “due to the impact of challenging memory industry dynamics.”
- QCT IoT: Revenue of $1.7 billion, up 9% year over year, driven by growth across consumer and industrial products.
- QCT Automotive: Revenue of $1.3 billion, up 38% year over year, with Palkhiwala citing increasing content per vehicle as new digital cockpit and ADAS launches transition to Qualcomm’s fourth-generation chipsets.
Palkhiwala also said Qualcomm returned $3.7 billion to shareholders during the quarter, including $2.8 billion of share repurchases and $945 million in dividends, which he described as an acceleration of its capital return program.
On the GAAP side, Palkhiwala said Qualcomm released a previously recorded tax valuation allowance, resulting in a $5.7 billion non-cash GAAP tax benefit, which was excluded from non-GAAP results. He said the reversal reflected Treasury and IRS guidance issued in February that permits taxpayers to deduct previously capitalized domestic R&D expenses under the corporate alternative minimum tax framework.
Handsets: memory dynamics and expectations for China Android
Both Amon and Palkhiwala emphasized that memory market conditions are influencing handset OEM behavior, particularly in China. Palkhiwala said increasing demand for memory in AI data centers has contributed to uncertainty in memory supply and higher prices to handset OEMs, prompting OEMs to reduce build plans and draw down channel inventory.
He said those dynamics affected the March quarter and are reflected in Qualcomm’s June-quarter guidance, adding that “in both quarters, our China QCT Android shipments are meaningfully below the scale of end consumer handset demand.” Palkhiwala said the company now estimates QCT handset revenues from Chinese customers will “reach a bottom in the third quarter and return to sequential growth in the following quarter.”
In response to an analyst question about why the company expects a bottom in fiscal Q3, Palkhiwala said the impact has two components: a smaller effect from market scale (with some decline “especially in the mid-low tiers”), and a larger impact from OEMs slowing builds and drawing down inventory. He said Qualcomm expects the inventory drawdown effect to end, bringing shipments closer to end-market demand. Amon added that licensing gives Qualcomm visibility into sell-through and activations, which supports its view that fiscal Q3 will be the bottom.
On customer dynamics, Amon addressed Qualcomm’s premium smartphone engagement with Samsung, calling it “a very, very stable” relationship. He said the framework has shifted from a historical 50% share split to “greater than 70%,” and said Qualcomm plans its business at that level for both this year and next year.
Regarding Apple, management reiterated prior assumptions. In Q&A, the company said there was “no change” to its assumption of a 20% share of iPhones launching in fall 2026 and “no product relationship beyond that.” Management added it has seen sell-side models for fiscal 2027 Apple-related QCT product revenue “in the range of a little over $2 billion” and said that is “a reasonable place to model the business.” On royalties, management said it does not expect Apple-related royalty scale to change pending renegotiation and noted it is separate from the chip business.
Automotive and IoT: record revenue and content expansion
Amon said automotive exceeded $5 billion in annualized revenue for the first time and that Qualcomm expects to exit fiscal 2026 at a run rate “above $6 billion.” He attributed automotive growth to the fourth-generation Snapdragon Digital Chassis platform and said Qualcomm has enabled “more than 1 million cars” operating ADAS and autonomy using Snapdragon Ride processors.
Looking ahead, Amon said Qualcomm expects to begin commercial shipments of its fifth-generation Snapdragon Digital Chassis platform by the end of the fiscal year. He described it as the “largest generation-to-generation content increase” in company history, including three times higher CPU throughput, a threefold increase in GPU capability, and 12 times higher NPU performance, while supporting in-vehicle agents and processing for Level 3 and Level 4 autonomous driving.
Palkhiwala said automotive and IoT combined grew 20% year over year, which he said supports the company’s diversification efforts. For the fiscal third quarter, he forecast automotive year-over-year revenue growth accelerating to approximately 50%.
When asked about margin implications as ADAS becomes a larger mix, management pointed to multiple factors. Amon said ADAS represents “a lot more silicon content,” which accelerates revenue. Palkhiwala added that Qualcomm is transitioning from chip sales to “SiP” (module) sales and also sees software opportunities on top of the chipset. He said Qualcomm still models automotive “in line with our corporate average.”
Data center and custom silicon: hyperscaler engagement and strategy
Amon said Qualcomm is pursuing data center opportunities with “large hyperscalers, cloud service providers, sovereign AI projects, and other global partners.” He said integration of Alphawave is “off to a great start” and that Qualcomm is entering the custom silicon space, beginning a ramp with a leading hyperscaler, with “initial shipments in the December quarter.” Palkhiwala also said Qualcomm expects initial shipments for the custom silicon engagement “later this calendar year.”
Management did not specify whether the December-quarter hyperscaler engagement is a CPU, accelerator, or other component, describing it as a “custom product.” However, Amon outlined Qualcomm’s broader view of differentiation in the “agentic” phase of AI, arguing CPU performance becomes more important as AI moves toward orchestrated, multi-step agent workloads. He said Qualcomm has built a dedicated data center CPU for agentic experiences and is also developing “high-performance AI inference accelerators.”
On go-to-market strategy, Amon said Qualcomm intends to participate in both merchant and custom approaches, describing a “combination of how we’re gonna configure our IP in different IP blocks for different solutions” and calling it “a bespoke business.” Palkhiwala added that the custom engagement discussed on the call is expected to be “accretive at the operating margin level.”
Guidance and outlook: Q3 expectations and Investor Day
For fiscal Q3, Qualcomm guided revenue of $9.2 billion to $10.0 billion and non-GAAP EPS of $2.10 to $2.30. Segment expectations included:
- QTL: Revenue of $1.15 billion to $1.35 billion with EBT margins of 67% to 71%, with sequential decline tied primarily to an operating assumption of weaker low-tier handset units.
- QCT: Revenue of $7.9 billion to $8.5 billion with EBT margins of 25% to 27%.
- QCT Handsets: Approximately $4.9 billion, reflecting the impact of memory dynamics described on the call.
- QCT IoT: Expected to grow by “high single digits” year over year.
- QCT Automotive: Expected year-over-year growth of approximately 50%.
Palkhiwala said non-GAAP operating expenses are expected to be approximately $2.6 billion in the quarter. He concluded that while near-term revenue is being impacted by cyclical memory dynamics, Qualcomm remains confident in Snapdragon product leadership and content growth opportunities, including adoption of agentic AI technologies.
Amon repeatedly pointed investors to Qualcomm’s June 24 Investor Day, where the company plans to provide more detail on its data center roadmap, customer wins, physical AI and robotics initiatives, next-generation ADAS, personal AI devices, and its 6G strategy. On 6G timing, Amon said Qualcomm expects prototype-based demonstrations in 2028, likely first silicon in 2028, early launches in 2029, and scale by 2030.
About Qualcomm NASDAQ: QCOM
Qualcomm Incorporated is a global semiconductor and telecommunications equipment company headquartered in San Diego, California. Founded in 1985, the company is known for its development of wireless technologies and for playing a central role in the evolution of digital cellular standards, including CDMA and subsequent generations of mobile standards. Qualcomm’s business combines the design and sale of semiconductor products with a patent licensing program for wireless technologies and related intellectual property.
The company’s product portfolio includes system-on-chip (SoC) platforms marketed under the Snapdragon brand, cellular modem and RF front-end components, connectivity solutions for Wi‑Fi and Bluetooth, and processors and platforms aimed at automotive, IoT, networking and edge-computing applications.
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