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Should QCOM Stock Be Part of Your Portfolio Post Modest Q2 Earnings?
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Key Takeaways
QCOM posted modest fiscal Q2: adjusted EPS beat, but revenue fell and missed by 0.2%.
QCOM automotive revenue jumped 38% to a record $1.33B, powered by Snapdragon Digital Chassis.
Qualcomm handset revenue fell 13% to $6.02B as OEMs cut builds and drew down inventory.
Qualcomm Incorporated (QCOM - Free Report) reported relatively modest second-quarter fiscal 2026 results, with adjusted earnings exceeding the Zacks Consensus Estimate, driven by healthy demand trends in IoT and automotive businesses. Revenues decreased year over year and missed the consensus mark by 0.2%, despite the strength of the business model, diversification initiatives and the ability to respond proactively to the evolving market scenario.
Record Automotive Revenues Buoy QCOM
Qualcomm is witnessing healthy traction in EDGE networking, which helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation wearables and tablets. The company intends to harness artificial intelligence (AI) to meet increased demands for essential products and services that are the building blocks of digital transformation in a cloud economy.
The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification. Automotive revenues rose 38% year over year in the fiscal second quarter to a record $1.33 billion, driven by increased content in new vehicle launches powered by its Snapdragon Digital Chassis platform. Automakers continued to deploy high-performance, low-power computing and connectivity chips to bring next-generation experience to consumers. Management noted that more than 1 million cars are operating ADAS and autonomy on Snapdragon Ride processors, while indicating that commercial shipments of its next-generation digital chassis platform are expected to begin by the end of the fiscal year.
Lower Handset Revenues Dent QCOM Growth Momentum
Despite significant automotive traction, handset revenues declined 13% year over year to $6.02 billion, as OEMs (particularly in China) remained cautious on builds amid memory supply and pricing dynamics and continued to draw down channel inventory. Management reiterated that QCT handset revenues from China-based customers are expected to bottom out in the third quarter and return to sequential growth in the following quarter as the inventory drawdown cycle eases. However, near-term visibility remains influenced by memory supply constraints and related pricing.
Image Source: Zacks Investment Research
High R&D Costs Erode QCOM Margins
To add to the woes, Qualcomm's margins have declined over the years due to high operating expenses and R&D (research & development) costs. The company expects softness in the handset market and a weaker overall mix of devices to continue in the near future. The shift in the share among original equipment manufacturers at the premium tier has reduced the near-term opportunity to sell integrated chipsets from the Snapdragon platform.
In addition, Qualcomm faces stiff competitive pressures from rivals Hewlett Packard Enterprise Company (HPE - Free Report) and Broadcom Inc. (AVGO - Free Report) . Aggressive competition from low-cost chip manufacturers and established players in the mobile phone chipset market is also likely to hurt Qualcomm's profits. Although the global smartphone market is expected to maintain its momentum over the next three to four years, a major portion of this growth is likely to come from the low-cost emerging markets, which may weigh on Qualcomm's margins.
Price Performance
Qualcomm shares have gained 29.3% over the past year compared with the industry’s growth of 107%, lagging peers Hewlett Packard and Broadcom. While Hewlett Packard has gained 81.4%, Broadcom surged 112.6% over this period.
One-Year QCOM Stock Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend for QCOM
Earnings estimates for Qualcomm for fiscal 2026 have moved down 1.5% to $10.82 over the past seven days, while the same for fiscal 2027 has declined 2.2% to $10.82. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
End Note
With robust automotive traction, Qualcomm appears to be on solid footing. The company exceeded $5 billion in annualized automotive revenues for the first time in the fiscal second quarter and expects to exit fiscal 2026 at a run rate above $6 billion, driven by the Snapdragon Digital Chassis roadmap spanning connectivity, telematics, infotainment and advanced driver assistance. A strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers.
However, stiff competition and softness in key end markets are likely to put pressure on the bottom-line growth with near-term uncertainty in memory supply and pricing for handset OEMs. High R&D costs erode its profitability to a large extent. Negative earnings estimate revisions further portray that the stock is witnessing bearish investor sentiments. With a Zacks Rank #3 (Hold), Qualcomm appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Should QCOM Stock Be Part of Your Portfolio Post Modest Q2 Earnings?
Key Takeaways
Qualcomm Incorporated (QCOM - Free Report) reported relatively modest second-quarter fiscal 2026 results, with adjusted earnings exceeding the Zacks Consensus Estimate, driven by healthy demand trends in IoT and automotive businesses. Revenues decreased year over year and missed the consensus mark by 0.2%, despite the strength of the business model, diversification initiatives and the ability to respond proactively to the evolving market scenario.
Record Automotive Revenues Buoy QCOM
Qualcomm is witnessing healthy traction in EDGE networking, which helps transform connectivity in cars, business enterprises, homes, smart factories, next-generation wearables and tablets. The company intends to harness artificial intelligence (AI) to meet increased demands for essential products and services that are the building blocks of digital transformation in a cloud economy.
The automotive telematics and connectivity platforms, digital cockpit and C-V2X solutions are fueling emerging automotive industry trends such as the growth of connected vehicles, the transformation of the in-car experience and vehicle electrification. Automotive revenues rose 38% year over year in the fiscal second quarter to a record $1.33 billion, driven by increased content in new vehicle launches powered by its Snapdragon Digital Chassis platform. Automakers continued to deploy high-performance, low-power computing and connectivity chips to bring next-generation experience to consumers. Management noted that more than 1 million cars are operating ADAS and autonomy on Snapdragon Ride processors, while indicating that commercial shipments of its next-generation digital chassis platform are expected to begin by the end of the fiscal year.
Lower Handset Revenues Dent QCOM Growth Momentum
Despite significant automotive traction, handset revenues declined 13% year over year to $6.02 billion, as OEMs (particularly in China) remained cautious on builds amid memory supply and pricing dynamics and continued to draw down channel inventory. Management reiterated that QCT handset revenues from China-based customers are expected to bottom out in the third quarter and return to sequential growth in the following quarter as the inventory drawdown cycle eases. However, near-term visibility remains influenced by memory supply constraints and related pricing.
Image Source: Zacks Investment Research
High R&D Costs Erode QCOM Margins
To add to the woes, Qualcomm's margins have declined over the years due to high operating expenses and R&D (research & development) costs. The company expects softness in the handset market and a weaker overall mix of devices to continue in the near future. The shift in the share among original equipment manufacturers at the premium tier has reduced the near-term opportunity to sell integrated chipsets from the Snapdragon platform.
In addition, Qualcomm faces stiff competitive pressures from rivals Hewlett Packard Enterprise Company (HPE - Free Report) and Broadcom Inc. (AVGO - Free Report) . Aggressive competition from low-cost chip manufacturers and established players in the mobile phone chipset market is also likely to hurt Qualcomm's profits. Although the global smartphone market is expected to maintain its momentum over the next three to four years, a major portion of this growth is likely to come from the low-cost emerging markets, which may weigh on Qualcomm's margins.
Price Performance
Qualcomm shares have gained 29.3% over the past year compared with the industry’s growth of 107%, lagging peers Hewlett Packard and Broadcom. While Hewlett Packard has gained 81.4%, Broadcom surged 112.6% over this period.
One-Year QCOM Stock Price Performance
Image Source: Zacks Investment Research
Estimate Revision Trend for QCOM
Earnings estimates for Qualcomm for fiscal 2026 have moved down 1.5% to $10.82 over the past seven days, while the same for fiscal 2027 has declined 2.2% to $10.82. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
End Note
With robust automotive traction, Qualcomm appears to be on solid footing. The company exceeded $5 billion in annualized automotive revenues for the first time in the fiscal second quarter and expects to exit fiscal 2026 at a run rate above $6 billion, driven by the Snapdragon Digital Chassis roadmap spanning connectivity, telematics, infotainment and advanced driver assistance. A strong emphasis on quality, diligent execution of operational plans and continuous portfolio enhancements are driving more value for customers.
However, stiff competition and softness in key end markets are likely to put pressure on the bottom-line growth with near-term uncertainty in memory supply and pricing for handset OEMs. High R&D costs erode its profitability to a large extent. Negative earnings estimate revisions further portray that the stock is witnessing bearish investor sentiments. With a Zacks Rank #3 (Hold), Qualcomm appears to be treading in the middle of the road, and investors could be better off if they trade with caution. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.