Qualcomm (NASDAQ: QCOM) published a report in which revenue fell - and it is still one of the most important reports of the week, because of one paragraph in the outlook.
What Was Reported
| Metric | Result | Year ago | Change |
|---|---|---|---|
| Revenue | $9.95 billion | $10.37 billion | -4% |
| GAAP EPS | $1.87 | $2.43 | -23% |
| Adjusted EPS | $2.21 | $2.77 | -20% |
| GAAP net income | $2.00 billion | $2.67 billion | -25% |
CEO Cristiano Amon noted revenue came in at the high end of guidance - "despite a challenging memory and supply environment."
And that sentence is the key to the whole report. We will get to it.
The Breakdown: Two Businesses in Opposite Directions
| Revenue line (QCT) | Result | Change |
|---|---|---|
| Handsets | $5.09 billion | -20% |
| Automotive | $1.59 billion | +61% |
| IoT | $1.83 billion | +9% |
| Total chips (QCT) | $8.50 billion | -5% |
| Licensing (QTL) | $1.28 billion | -3% |
This is a classic transition picture. The historic business - smartphone chips - plunged 20%. And the new business is running: automotive surged 61%, marking a twenty-third consecutive quarter of double-digit growth. Automotive and IoT together grew 28%.
And the target was enlarged: at its recent investor day the company set a target of $40 billion of non-handset revenue by fiscal 2029 - nearly double the target set in November 2024. And near term: non-handset revenue growth, including Data Center, is expected to accelerate from 24% this year to more than 60% in fiscal 2027.
The quarter also saw the completed acquisition of Modular - an open software foundation for generative and agentic AI - part of Qualcomm's entry into the data-center market.
The Paragraph That Closes the Week
In the company's business outlook appears the following statement, almost verbatim:
"The semiconductor industry is experiencing a broad-based increase in input costs, across wafer fabrication, assembly, test, advanced packaging, memory and other materials. We are taking concrete actions to reflect the higher input costs in our product pricing."
Why this paragraph matters far beyond Qualcomm
All week we saw the other side of this equation: SK hynix with a 76% operating margin on memory, Seagate with a gross margin jumping from 37% to 52%, Microsoft with roughly $25 billion of its capex guidance attributed to higher component pricing. Qualcomm is the first company this week to say the next step out loud: those costs are being passed on, into product prices. A more expensive smartphone chip means a more expensive phone. A more expensive automotive chip means a more expensive car. This is how an HBM shortage in data centers becomes, within a year or two, consumer-goods inflation. And it connects directly to tonight's Fed decision: the statement attributed part of inflation to supply shocks. Here is the next supply shock, documented in real time in a chipmaker's outlook.
The company notes these actions are expected to benefit gross margins over time, as the new pricing gradually takes effect.
Guidance
| Metric | Fiscal Q4 |
|---|---|
| Revenue | $9.7-10.5 billion |
| QCT revenue | $8.4-9.0 billion |
| QTL revenue | $1.2-1.4 billion |
| Adjusted EPS | $2.05-2.25 |
And the company returned $2.3 billion to shareholders in the quarter - $973 million in dividends and $1.4 billion in buybacks.
The Bull Thesis
Whoever reads it positively will point to the diversification that is working: automotive +61% with 23 consecutive quarters of double-digit growth is no longer a promise - it is a business. And the $40 billion non-handset target by 2029, nearly double the previous one, with acceleration to 60%+ as soon as next year - signals management sees the inflection close.
Beyond that: revenue at the high end of guidance despite a hard environment, and declared pricing power - the company is passing costs on rather than absorbing them.
The Bear Thesis
Whoever reads it critically will recall that the core business is still contracting: handsets are 60% of chip revenue, and they fell 20%. Automotive and IoT are growing fast - but from a small base; together they are still smaller than handsets.
Second, profitability is eroding: adjusted EPS down 20% and QCT's EBT margin down from 30% to 26% - input costs hurt now, while the new pricing arrives only gradually.
And third, the dependence on memory and packaging that the company itself describes as a bottleneck - the same environment enriching the memory makers is currently a direct headwind for Qualcomm.
The debate in one line
The bulls see automotive surging 61%, a non-handset target nearly doubled, promised acceleration to 60%+ next year and declared pricing power. The bears see a core business contracting 20%, profit eroding 20%, and input costs biting now while the offsetting pricing arrives only gradually. Both sides are reading the same report.
My Angle
A personal opinion of Ilan Abramov - not advice, not a recommendation
What catches me in this report is the outlook paragraph - because it closes a loop built all week.
We saw SK hynix at a 76% margin. We saw Microsoft with $25 billion of "component price increases." And Qualcomm is the first to say the next step out loud: those costs pass to the consumer. A pricier chip = a pricier phone = a pricier car.
And it connects straight to tonight's Fed statement, which attributed part of inflation to supply shocks. The Fed spoke of energy - and here is the next supply shock, recorded in a chipmaker's outlook in real time. Whoever wants to know where 2027's inflation comes from reads company outlooks, not macro data.
And on the business itself: 23 consecutive quarters of double-digit automotive growth impresses me more than the quarter's 61%. One quarter can be timing; five-plus years of consistency is a business that has been built.
And what I will follow: the gap between the pace of new pricing taking effect and the pace of input-cost increases. QCT's margin fell from 30% to 26% - that is the price of the lag. If pricing catches up, the margin recovers within two quarters. If inputs keep running faster - profit keeps eroding even with stable revenue, and that is the story of every electronics maker in 2027.
Summary
Qualcomm reported revenue of $9.95 billion (-4%) at the high end of guidance, and adjusted EPS of $2.21 (-20%). The breakdown is split: handsets -20%, automotive +61% - a 23rd consecutive double-digit quarter - and the non-handset target was nearly doubled to $40 billion by fiscal 2029, with acceleration to 60%+ expected as soon as next year.
And the statement that matters beyond the company: the chip industry is experiencing a broad-based rise in input costs - fabrication, packaging, memory - and Qualcomm is passing it into prices. The memory makers' margin has officially become the chipmakers' cost, and on its way - product inflation.
The question for the investor is twofold: whether the automotive and data-center inflection arrives before handsets decay further - and whether the new pricing catches the inputs before the margin erodes more.
Sources: Qualcomm's official results announcement for the third quarter of fiscal 2026 (July 29, 2026), as filed with the U.S. Securities and Exchange Commission on Form 8-K, including revenue, GAAP and adjusted earnings, the QCT industry breakdown and QTL, CEO Cristiano Amon's remarks, the business-outlook paragraph on input costs, the fourth-quarter guidance ranges and the capital return. Data accurate as of the time of writing. The chart is shown in real time via TradingView. Nothing herein constitutes a forecast, recommendation or advice - see the full disclaimer at the bottom of the page.