Qualcomm’s Mixed Earnings Report
The earnings season is in full swing, with tech giants unveiling their quarterly results one after another. This time, however, the market has been highly selective. Even companies posting blockbuster earnings have struggled to impress investors as concerns over heavy artificial intelligence (AI) spending and sky-high expectations continue to weigh on sentiment.
Qualcomm (QCOM) became the latest casualty after reporting its fiscal 2026 third-quarter results on July 29. While the chipmaker posted another solid quarter overall, its earnings report revealed a few cracks that were enough to sour investor sentiment.
Handset Revenue Tumbles
The biggest weakness came from Qualcomm’s core semiconductor business (QCT), where handset revenue tumbled nearly 20% year-over-year (YOY). The decline was driven by ongoing memory supply shortages and a faster-than-expected loss of modem share at Apple (AAPL). Qualcomm said the impact will intensify in its fiscal fourth quarter after its share in Apple’s next iPhone lineup fell materially below its earlier expectations.
Apple has been steadily rolling out its in-house modem across more iPhone models as part of its long-term plan to reduce its dependence on third-party suppliers. Adding to investor concerns, Qualcomm issued softer-than-expected guidance for the fourth quarter, citing persistent supply shortages for PC components, particularly memory.
Analysts See Beyond Handset Struggles
However, many analysts argue that the market is focusing too much on Qualcomm’s near-term handset struggles while overlooking the company’s rapidly growing businesses in AI data centers, automotive, and the Internet of Things (IoT). They believe that Qualcomm’s recent pullback may be more of a buying opportunity than a reason to panic.
Qualcomm’s diversification strategy has paid off, with its automotive business delivering another standout quarter. Revenue soared 61% YOY to $1.59 billion, driven by growing demand for connected and software-defined vehicles. The IoT division also remained resilient, with revenue rising 9% YOY to $1.83 billion.
CEO’s Vision for the Future
CEO Cristiano Amon reiterated the company’s ambitious vision, saying Qualcomm is well positioned to execute on its strategy. Management now expects non-handset revenue to reach $40 billion by fiscal 2029, nearly double the target it shared in November 2024. Even more notably, Qualcomm expects YOY growth in its non-handset businesses, including its emerging data center segment, to accelerate from 24% in fiscal 2026 to more than 60% in fiscal 2027, marking what Amon described as a significant inflection point in the company’s transformation beyond smartphones.
Analysts’ Take on Qualcomm Stock
Qualcomm’s handset business may have stumbled in the third quarter, but analysts say investors have little reason to panic. While weaker Android demand in China, memory shortages, and a faster-than-expected loss of Apple’s modem business weighed on results, experts believe the chipmaker’s future growth lies well beyond smartphones.
Morgan Stanley’s Joseph Moore said Android weakness in China is largely behind Qualcomm, although memory supply issues remain a hurdle. He also pointed out that Qualcomm is expected to lose more of Apple’s iPhone modem business than initially anticipated, with Apple-related chip sales declining 20% YOY to $5.09 billion.
Qualcomm’s Long-Term Growth Prospects
Despite the near-term headwinds, Qualcomm remains confident about its long-term growth trajectory. The company’s expanding opportunities beyond smartphones, including AI data centers, automotive, and IoT, are expected to drive growth in the coming years.
Qualcomm’s stock has struggled to gain traction this year, falling 13.36% year-to-date (YTD) and 6.83% over the past 12 months. However, analysts believe that the company’s strong competitive position and growing businesses make it a compelling investment opportunity.
