Qualcomm Q3 Results Put Auto Growth and Handset Weakness in Focus

QCOM's Q3 Revenue Beat Masked an Earnings Miss

Fiscal third-quarter revenues declined 4% year over year to $9.95 billion but topped the Zacks Consensus Estimate of $9.71 billion by 2.4%. Non-GAAP earnings fell 20% to $2.21 per share and missed the consensus estimate of $2.22 by 0.5%.

Higher input costs and handset weakness weighed on profitability. Qualcomm CDMA Technologies revenues declined 5% to $8.50 billion, so gains outside smartphones did not fully offset the mobile slowdown.

Qualcomm's Auto Business Set Another Record

Automotive revenues surged 61% year over year to $1.59 billion, marking a record quarter and the 23rd consecutive quarter of double-digit year-over-year growth. The increase extended one of Qualcomm's clearest diversification trends.

Favorable mix and higher average selling prices added $381 million to automotive revenues, while higher shipments tied to digital cockpit, advanced driver-assistance and automated-driving launches contributed $223 million. Qualcomm raised its fiscal 2026 exit outlook for annualized automotive sales to about $7 billion.

QCOM's Handset Weakness Dominated the Quarter

Handset revenues fell 20% year over year to $5.09 billion as major original equipment manufacturers reduced chipset purchases and worked through inventory amid memory supply constraints and higher memory prices. The decline more than offset gains elsewhere in the product business.

Management expects China handset revenues to rebound by double digits sequentially in the fiscal fourth quarter. Apple Inc. AAPL, however, adds an insourcing risk after introducing C1, the first cellular modem designed by Apple, in the iPhone 16e.

Qualcomm's Q4 Guide Keeps Margins Under Pressure

Qualcomm forecasts fiscal fourth-quarter revenues of $9.7 billion to $10.5 billion and non-GAAP earnings of $2.05-$2.25 per share. Qualcomm CDMA Technologies revenues are projected at $8.4-$9.0 billion, with earnings before taxes margin of 23%-25%.

Automotive revenues are expected to rise about 60% year over year, but product costs remain a headwind. Qualcomm is raising prices to address higher wafer, assembly, testing, packaging, memory and other input costs, with gross-margin benefits expected to emerge gradually.

QCOM's Data Center Build Raises the Investment Bet

Research and development spending increased $381 million to $2.61 billion as Qualcomm funded wireless, integrated-circuit and growth initiatives. Its data center roadmap spans connectivity, custom silicon, artificial intelligence accelerators and server-class central processing units.

Two custom silicon wins with global-scale hyperscalers are expected to begin generating revenues in the December 2026 quarter. NVIDIA Corporation NVDA is advancing its Vera Rubin platform for agentic artificial intelligence infrastructure, illustrating the scale of the market Qualcomm is entering. Early custom silicon revenues are expected to dilute Qualcomm CDMA Technologies gross margin by 1.5-2 percentage points.

Qualcomm's Ratings Reflect the Mixed Setup

Qualcomm's third-quarter results strengthened the diversification case, but handset weakness and margin pressure still limit near-term visibility. The data center build adds another potential growth engine while increasing execution demands.

QCOM currently carries a Zacks Rank #3 (Hold). Its Value Score of C sits in the middle of the A-to-F scale, while its Growth Score of D, Momentum Score of F and VGM Score of F are weaker. The mix lacks the favorable A or B Style Score confirmation generally associated with stronger Zacks Rank setups.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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