Qualcomm Earnings: Smartphone Setback

Qualcomm released its Q3 2026 results, and investors showed their disappointment as the company’s shares were down more than 10% at the open.

The company posted results the market viewed as weak, despite a slight beat on profit expectations. Diversification toward automotive and data centers is becoming more important, but for now it does not offset smartphone weakness and margin pressure.

Results

Revenue fell 7% year over year to USD 10.44 billion, still above market expectations of about USD 10.15 billion.
Adjusted net profit came in at USD 2.33 billion, down 28% year over year.
EPS was very close to analysts’ target and totaled USD 2.17.
EBT margin of 24% slipped by 5 percentage points year over year.

The company’s biggest problem is evident in the segment breakdown.

Revenue from smartphone chips fell to USD 5.14 billion, a decline of as much as 26% year over year.
Automotive performed much better. Sales of automotive chips rose 89% to USD 1.99 billion.
The drop in smartphone revenue was about USD 1.82 billion, while automotive and IoT together added about USD 1.02 billion.

Guidance

Management’s outlook for the coming quarters is mixed. The guidance does not suggest a quick rebound in profits, but there are still reasons for optimism over the longer term.

For Q4 2026, Qualcomm expects revenue of USD 10.4 to 11.2 billion and adjusted EPS of USD 2.15 to 2.35. The midpoint of the revenue range (USD 10.8 billion) is above the consensus of about USD 10.5 billion, while the EPS midpoint (USD 2.25) is slightly below the expected USD 2.26.

QCT is expected to deliver an EBT margin of 20 to 22%, but about 3 percentage points of pressure comes from including the Data Center business in the segment, along with investments ahead of sales growth. Management expects the full impact of price increases that offset more expensive components only in the second half of FY2027.

The strongest positive argument is new revenue sources. Management forecasts more than USD 650 million in data center sales in the next quarter and reiterates its USD 5 billion target for FY2027. It also expects a further quarter-over-quarter decline in smartphone sales, linked to the phase-out of product shipments to Apple. Renewed licensing agreements with Apple, Huawei, and Transsion secure a separate stream of QTL fees.

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