Morningstar

Qualcomm Earnings: Data Center Optimism Overshadows Handset Weakness

Qualcomm stock has rallied on the data center news, but we prefer to take a wait-and-see approach.

An illustration showing a close-up semiconductor chip connected to other semiconductor components, illustrating its integration in AI technology
Securities in This Article
Qualcomm Inc
(QCOM)

Key Morningstar Metrics for Qualcomm

  • Fair Value Estimate
    : $155.00
  • Morningstar Rating
    : ★★★
  • Morningstar Economic Moat Rating
    : Narrow
  • Morningstar Uncertainty Rating
    : High

What We Thought of Qualcomm’s Earnings

Qualcomm QCOM reported fiscal second-quarter revenue of $10.6 billion, down 3% year over year and at the midpoint of guidance. Qualcomm expects June-quarter revenue of $9.6 billion at the midpoint of guidance, down 7% year over year and below FactSet consensus estimates.

Why it matters: Qualcomm is seeing handset weakness due to high memory chip prices affecting smartphone production, but excellent automotive chip growth. Yet the highlight is Qualcomm’s disclosure of ”a leading hyperscaler custom silicon engagement” in late 2026.

  • We’re disappointed that Qualcomm will save the details of the engagement for its June 24 analyst day, as we have little insight into the content or revenue opportunity. However, we think this news drove the stock up 13% after hours, as any artificial intelligence chip deal is additive for Qualcomm.
  • In handsets, device production (particularly in China) was weak, as expected, and it should bottom out in the June quarter before recovering later this year. We like Qualcomm’s diversification efforts, but handset chipsets will likely remain a large and stagnant business unit for the firm.

The bottom line: We maintain our $155 fair value estimate for narrow-moat Qualcomm as we boost our data center revenue estimates for the firm (albeit with limited certainty) while trimming our handset revenue estimates. Shares have rallied on the data center news, but we prefer to take a wait-and-see approach.

  • Qualcomm’s recent acquisition of Alphawave Semi gives the company IP and expertise to participate in custom AI silicon opportunities, while it uses its organic processor IP for merchant (that is, non-custom) AI opportunities.

Coming up: Qualcomm’s automotive revenue forecast was the bright spot, calling for an acceleration of revenue growth to 50% year over year and hinting at another 45% growth in the September quarter to get to $1.5 billion.

Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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