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QCOM Lags Industry Year to Date: What's the Next Move for Investors?
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Key Takeaways
Qualcomm has risen 5.9% year to date, far behind the semiconductor industry's 205.5% gain.
QCT handset revenues fell 20% in fiscal Q3, while Apple-related revenues are set to drop faster than expected.
Qualcomm expects QCT margins to weaken further as input costs rise and data-center expansion adds risk.
Qualcomm Incorporated (QCOM - Free Report) has jumped 5.9% year to date compared with the Electronics - Semiconductors industry’s growth of 39.4%. It has lagged the broader technology sector and the S&P 500 during this time.
Image Source: Zacks Investment Research
The company has underperformed its competitors like Intel Corporation (INTC - Free Report) and Advanced Micro Devices (AMD - Free Report) . Intel has surged 205.5%, while AMD has improved 204.3%.
Handset Weakness Remains QCOM’s Biggest Near-Term Problem
Qualcomm’s core handset business is witnessing weak demand trends. In the third quarter of fiscal 2026, QCT handset revenues dropped 20% year over year to $5.09 billion. Management expects fiscal 2026 Android handset revenues to decline roughly 20%. Chinese OEM demand is expected to improve sequentially. However, this improvement is expected to be hindered by soft demand in other markets.
The company’s Apple exposure is changing faster than previously expected. Qualcomm now expects its modem share in the upcoming iPhone launch to be materially below the earlier 20% assumption. Apple-related product revenues could decline by about 50% sequentially from September to December 2026, while fiscal 2027 Apple product revenues are expected to fall below the earlier expectation of slightly more than $2 billion. Qualcomm expects this decline can be compensated by growth in non-handset business. But execution risks remain.
Higher Input Costs Are Hindering QCOM’s Margin
The semiconductor industry overall is witnessing increasing expenses across wafers, assembly, testing, advanced packaging and memory. Qualcomm is responding to these necessary price adjustments. But those increases will take time to get reflected in the financial results. Higher input costs are already impacting QCOM’s margin.
In the third quarter of fiscal 2026, its QCT segment’s EBT margin fell to 26% from 30% a year earlier, while QTL EBT margin declined to 69% from 71%. More importantly, Qualcomm expects QCT EBT margin to fall further to 23%-25% in the fourth quarter.
The Zacks Consensus Estimate suggests fiscal 2027 EPS at $10.02 versus $10.55 for fiscal 2026. At the same time, fiscal 2027 revenues are estimated at $44.34 billion compared with $42.89 billion for fiscal 2026. Revenues are expected to grow while EPS declines, highlighting the effect of margin and cost pressures.
Data-Center Expansion Offers Potential but it is Not Yet Proven
Qualcomm is investing heavily to establish itself in data-center infrastructure. It is venturing into custom silicon, AI accelerators, connectivity and server CPUs. The opportunity is vast, but requires substantial investment in the near term. Execution risk and competition from other major players such as AMD and Intel. AMD already offers a broad data-center portfolio spanning EPYC CPUs, Instinct AI accelerators, networking and software, while Intel continues to strengthen its Xeon, networking and AI accelerator offerings.
Estimate Revision Trend of QCOM
Earnings estimates for fiscal 2026 and 2027 have decreased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of QCOM
Going by the price/earnings ratio, the company's shares currently trade at 17.98 forward earnings, higher than 14.24 for the industry. From a valuation standpoint, QCOM appears to be trading at a premium compared to the industry.
Image Source: Zacks Investment Research
End Note
Qualcomm’s growth trajectory can be compelling if it can diversify its portfolio. However, in the short run, declining handset revenue, falling Apple contribution in revenue and higher input costs are major concerns. Its venture in the data center space can be affected by growing competition. Hence, with a Zacks Rank #4 (Sell), investors should avoid investing in Qualcomm stock at present.
View the Zacks #1 Rank List
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QCOM Lags Industry Year to Date: What's the Next Move for Investors?
Key Takeaways
Qualcomm Incorporated (QCOM - Free Report) has jumped 5.9% year to date compared with the Electronics - Semiconductors industry’s growth of 39.4%. It has lagged the broader technology sector and the S&P 500 during this time.
Image Source: Zacks Investment Research
The company has underperformed its competitors like Intel Corporation (INTC - Free Report) and Advanced Micro Devices (AMD - Free Report) . Intel has surged 205.5%, while AMD has improved 204.3%.
Handset Weakness Remains QCOM’s Biggest Near-Term Problem
Qualcomm’s core handset business is witnessing weak demand trends. In the third quarter of fiscal 2026, QCT handset revenues dropped 20% year over year to $5.09 billion. Management expects fiscal 2026 Android handset revenues to decline roughly 20%. Chinese OEM demand is expected to improve sequentially. However, this improvement is expected to be hindered by soft demand in other markets.
The company’s Apple exposure is changing faster than previously expected. Qualcomm now expects its modem share in the upcoming iPhone launch to be materially below the earlier 20% assumption. Apple-related product revenues could decline by about 50% sequentially from September to December 2026, while fiscal 2027 Apple product revenues are expected to fall below the earlier expectation of slightly more than $2 billion. Qualcomm expects this decline can be compensated by growth in non-handset business. But execution risks remain.
Higher Input Costs Are Hindering QCOM’s Margin
The semiconductor industry overall is witnessing increasing expenses across wafers, assembly, testing, advanced packaging and memory. Qualcomm is responding to these necessary price adjustments. But those increases will take time to get reflected in the financial results. Higher input costs are already impacting QCOM’s margin.
In the third quarter of fiscal 2026, its QCT segment’s EBT margin fell to 26% from 30% a year earlier, while QTL EBT margin declined to 69% from 71%. More importantly, Qualcomm expects QCT EBT margin to fall further to 23%-25% in the fourth quarter.
The Zacks Consensus Estimate suggests fiscal 2027 EPS at $10.02 versus $10.55 for fiscal 2026. At the same time, fiscal 2027 revenues are estimated at $44.34 billion compared with $42.89 billion for fiscal 2026. Revenues are expected to grow while EPS declines, highlighting the effect of margin and cost pressures.
Data-Center Expansion Offers Potential but it is Not Yet Proven
Qualcomm is investing heavily to establish itself in data-center infrastructure. It is venturing into custom silicon, AI accelerators, connectivity and server CPUs. The opportunity is vast, but requires substantial investment in the near term. Execution risk and competition from other major players such as AMD and Intel. AMD already offers a broad data-center portfolio spanning EPYC CPUs, Instinct AI accelerators, networking and software, while Intel continues to strengthen its Xeon, networking and AI accelerator offerings.
Estimate Revision Trend of QCOM
Earnings estimates for fiscal 2026 and 2027 have decreased over the past 60 days.
Image Source: Zacks Investment Research
Key Valuation Metric of QCOM
Going by the price/earnings ratio, the company's shares currently trade at 17.98 forward earnings, higher than 14.24 for the industry. From a valuation standpoint, QCOM appears to be trading at a premium compared to the industry.
Image Source: Zacks Investment Research
End Note
Qualcomm’s growth trajectory can be compelling if it can diversify its portfolio. However, in the short run, declining handset revenue, falling Apple contribution in revenue and higher input costs are major concerns. Its venture in the data center space can be affected by growing competition. Hence, with a Zacks Rank #4 (Sell), investors should avoid investing in Qualcomm stock at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.