Qualcomm NASDAQ: QCOM reported fiscal third-quarter revenue of $9.9 billion and non-GAAP earnings per share of $2.21, with revenue reaching the high end of the company’s guidance range. The company said record automotive sales and growth in Internet of Things products helped offset pressure in its handset business from elevated memory prices, broader input-cost inflation and supply constraints.
QCT, Qualcomm’s chip business, generated $8.5 billion in revenue, while QTL, its licensing operation, produced $1.3 billion. Automotive revenue reached $1.6 billion, up 61% from a year earlier, and IoT revenue increased 9% to $1.8 billion. Combined QCT non-handset revenue, including automotive and IoT, rose 28% year over year.
“We are already seeing an inflection in our non-handset businesses, which underscores the success of our diversification strategy,” President and Chief Executive Officer Cristiano Amon said during the company’s July 29 earnings call.
Memory Costs Weigh on Handsets and Margins
Qualcomm said unusually high memory prices, rising manufacturing and materials costs, and supply-chain shortages tied to data-center demand have hurt mobile and consumer-electronics demand. The environment has also put near-term pressure on QCT gross margins.
Chief Financial Officer and Chief Operating Officer Akash Palkhiwala said QCT handset revenue was $5.1 billion during the fiscal third quarter, reflecting the effect of memory-market dynamics on the global smartphone industry. He said the company believes handset revenue from Chinese original equipment manufacturers bottomed in the June quarter and is expected to return to double-digit sequential growth in the September quarter.
Qualcomm is implementing broad-based, double-digit price increases across end markets to address higher input costs. Palkhiwala said the benefits will appear gradually as contracts expire and product cycles turn over, with gross margins expected to return to the company’s historical range over the next several quarters.
Amon said the company does not expect its price actions to cause fundamental changes in premium-tier smartphone volume because the increases are relatively small compared with higher memory-related bill-of-materials costs.
The company estimates that the handset market will decline by the low teens in 2026 versus 2025, with much of the weakness concentrated in lower-tier devices. Palkhiwala said the impact on QCT Android revenue is expected to be a 20% year-over-year decline, with an earnings-per-share effect exceeding $1.50.
Apple Revenue Expected to Fall Faster
Qualcomm also said supply constraints have contributed to an accelerated reduction in Apple-related revenue. The company now expects its share of modems in Apple’s upcoming iPhone launch to be materially below its prior estimate of 20%.
Palkhiwala said Qualcomm expects Apple product revenue to decline by about 50% from the September quarter to the December quarter. Revenue from Apple products in fiscal 2027 is now expected to be below the company’s previous forecast of slightly more than $2 billion.
Rather than characterizing the change as a decision to divert supply away from Apple, Palkhiwala said Qualcomm’s supply constraints were one factor in discussions that resulted in a share level “materially less than 20%.” He said expected growth in non-handset businesses during fiscal 2027 is projected to replace the company’s Apple product revenue.
Despite the accelerated Apple decline, Qualcomm expects QCT revenue in the December quarter to rise slightly sequentially, supported by Android growth and the start of data-center revenue. The company also expects revenue to increase from the December quarter into the March quarter, rather than following its prior seasonal pattern in which the December quarter was its annual high point.
Data-Center Plans Move Toward Revenue Ramp
Qualcomm reiterated its growing ambitions in data centers, where it plans to offer connectivity products in fiscal 2026, custom silicon and AI accelerators in fiscal 2027, and server-class CPUs in fiscal 2028. Its updated fiscal 2029 outlook calls for more than $15 billion in data-center revenue and more than $40 billion in total non-handset revenue.
The company’s two custom-silicon design wins with global-scale hyperscalers are expected to begin generating revenue in the December quarter. Qualcomm has received purchase orders and begun wafer production, Palkhiwala said, with revenue expected to ramp throughout fiscal 2027.
Amon said Qualcomm completed the tape-out of its first High Bandwidth Compute, or HBC, generation. The technology is intended to integrate compute with high-density memory and improve performance per watt, memory efficiency and total cost of ownership. Qualcomm plans to demonstrate HBC silicon performance in coming quarters ahead of the first HBC product launch in mid-2027.
The company also completed its acquisition of Modular Inc., which Amon said will strengthen Qualcomm’s end-to-end AI software capabilities across data-center and edge deployments. Qualcomm expects the Modular software environment to remain hardware-agnostic and support heterogeneous compute systems.
Palkhiwala said the company expects custom-chip data-center revenue to carry gross margins significantly below Qualcomm’s baseline range, creating a 1.5 to 2 percentage point drag on QCT’s weighted-average gross margin.
Automotive Outlook Raised as Platform Wins Expand
Qualcomm raised its forecast for automotive sales exiting fiscal 2026, now expecting an annualized revenue run rate of about $7 billion, up from a prior $6 billion outlook. The company cited a growing mix of advanced driver-assistance systems and digital-cockpit content, as well as increased compute requirements in newer vehicle platforms.
During the quarter, Qualcomm signed an expanded agreement with BMW to become the lead compute-silicon provider for the automaker’s next-generation ADAS and Digital Cockpit programs. Amon said the arrangement extends across model programs into the next decade. Qualcomm also pointed to a recently announced Stellantis collaboration that supports its automotive pipeline into the 2030s.
Management said automakers are increasingly shifting from individual component awards toward multi-generation, platform-level engagements. Qualcomm’s fifth-generation Snapdragon Digital Chassis is set to begin ramping in September, increasing content per vehicle, the company said.
For the fiscal fourth quarter, Qualcomm forecast total revenue of $9.7 billion to $10.5 billion and non-GAAP EPS of $2.05 to $2.25. It expects QCT revenue of $8.4 billion to $9 billion, with automotive sales expected to deliver another record quarter and grow about 60% year over year.
Qualcomm also expects fourth-quarter non-GAAP operating expenses of approximately $2.7 billion, reflecting the Modular acquisition and continued investment in its data-center roadmap.
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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