Original Qualcomm, performance plummets

On November 4, 2026, Qualcomm released its fourth quarter and full-year financial reports for fiscal year 2026. Revenue in the fourth fiscal quarter was US$10.322 billion, a year-on-year decrease of 8%. Mobile phone chip revenue was US$5.137 billion, a year-on-year drop of 26%. Full-year mobile phone chip revenue was US$24.072 billion, a year-on-year decrease of 13%. Adjusted earnings per share were $2.17, down 28% year-on-year. After the financial report was released, Qualcomm’s pre-market decline was close to 10%, and its market value fell back to around US$181.8 billion.

Total revenue slightly exceeded expectations, but fell by nearly 10% before the market opened. The problem is not in the total revenue, but in the structure. Qualcomm’s largest business is shrinking at a rate beyond everyone’s expectations, and the reason for the shrinkage is not the company’s product competitiveness, but two external forces beyond its control.

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The bill for the storage price increase was sent to the chip company

Qualcomm’s mobile phone chip revenue plummeted 26%, and the most direct driver was storage.

In the third quarter of 2026, global smartphone shipments fell by 20% to 22% year-on-year, hitting the lowest level in the same period since 2013. The price of memory chips has soared by about 350% compared with the same period last year, and is still on an upward trend. Memory and flash memory account for 30% to 40% of the material cost of mobile phones. On some thousand-yuan phones, the cost of buying storage has exceeded that of buying SoC.

Mobile phone manufacturers have a highly consistent response: cutting off mid- and low-end models, lengthening the replacement cycle, and switching to the previous generation of mature chip platforms for high-end products to control costs. Qualcomm CEO Anmon’s statement during the earnings call was very restrained: rising memory chip prices have had a negative impact on the size of the global mobile phone market. Translated: Qualcomm’s largest customer base, those Android phone manufacturers, are buying less of Qualcomm’s new chips because they can’t afford memory.

Qualcomm itself is also suffering from cost squeeze. Costs in many aspects of wafer manufacturing, advanced packaging, and storage are rising simultaneously. Qualcomm has already raised product prices by double digits, but CFO Palkiwala admitted that the positive impact of price adjustments on gross profit margins is not expected to be fully released until the second half of fiscal year 2027. Qualcomm’s QCT business’s non-GAAP pre-tax profit margin has dropped to 24% from 29% in the same period last year, and the profit contraction has been significantly higher than the revenue decline.

Qualcomm is not a beneficiary of the increase in storage prices, nor is it a bystander. It sits in the middle of the mobile phone industry chain, being squeezed by both rising upstream costs and shrinking downstream demand.

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Apple’s baseband is disappearing from Qualcomm’s pocket

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The increase in storage prices is a cyclical squeeze, and Apple’s self-developed baseband is a structural replacement. Both events materialized simultaneously in the same quarter.

Qualcomm originally expected to have about 20% of the baseband chip share in the iPhone 18 series. However, supply chain constraints and the advancement of Apple’s self-developed C series are far faster than expected, and the actual share is “far lower” than this target. The guidance given by management at the conference call was more specific: Apple-related revenue fell by approximately 50% from the fourth fiscal quarter to the first fiscal quarter of fiscal year 2027. By 2027, Qualcomm’s share of Apple’s baseband hardware is expected to approach zero.

Apple is the best part of Qualcomm’s mobile phone chip business – high-end models, high unit prices, and stable shipment expectations. The disappearance of this part of income is not due to “a few fewer chips sold”, but because the thickest layer in the profit structure has been cut off. Qualcomm can partially offset it with the growth of Android customers, but the unit price and profit margin of the Android market are not at the same level as Apple. Anmon confirmed that Snapdragon chips are currently installed in about 70% of Samsung’s flagship models. This is one of the few positions Qualcomm can hold in the high-end Android market. But a Samsung cannot fill the gap left by an Apple.

Qualcomm’s long-term patent licensing agreements with Apple, Huawei, and Transsion have been renewed. The QTL business’s revenue in the fourth fiscal quarter was US$1.304 billion, maintaining a non-GAAP pre-tax profit margin of 70%. Patent fees are still being collected, but patent licensing and baseband chip procurement are two different income curves. The stability of patent fees cannot offset the loss of chip revenue.

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Cars are rising, data centers are on the way, and gaps are still there

Qualcomm’s transformation narrative can be supported in the financial report, but it is not enough to change the current quarter’s books.

The fourth quarter revenue of the automotive business was US$1.990 billion, a year-on-year increase of 89%, breaking the single-quarter mark of US$2 billion for the first time; the full-year revenue was US$6.004 billion, a year-on-year increase of 52%. Qualcomm’s goal at the Investor Day is to reach $10 billion in automotive revenue in fiscal 2029. Internet of Things revenue in the fourth fiscal quarter was US$1.888 billion, a year-on-year increase of 4% and a full-year increase of 8%. The two items totaled US$3.878 billion, a year-on-year increase of 36%, which still did not offset the contraction caused by the mobile phone business of US$5.137 billion, a year-on-year decrease of 26%.

Data center revenue in the fourth fiscal quarter was US$650 million, mainly from customized solutions and connectivity products. Qualcomm reiterated its data center revenue target of US$5 billion in fiscal year 2027. It is expected that the customized chip projects of the two large cloud service providers will begin to contribute revenue from the first fiscal quarter of fiscal year 2027, reaching an annualized run rate of US$7 billion by the end of fiscal year 2027, and exceeding US$15 billion in fiscal year 2029. Amazon has reached multi-generation product cooperation with Qualcomm in its AI data center, and SpaceX also plans to use Qualcomm components in its nationwide terrestrial wireless network.

These numbers are reasonable in the coordinates of fiscal year 2027. But they cannot answer the question in the fourth quarter of 2026: when mobile phone chips received less than US$1.8 billion in a quarter, and automobiles and data centers combined received less than US$1 billion more, what will be used to fill the gap in the middle.

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Qualcomm’s full-year revenue for fiscal year 2026 was US$43.12 billion, a year-on-year decrease of 3%. Non-GAAP net profit was US$11.311 billion, a year-on-year decrease of 15%. Book net profit was US$13.628 billion, a year-on-year increase of 146%, but approximately US$5.7 billion of it came from one-time income tax gains. After excluding this, operating-level profits were shrinking.

Qualcomm was squeezed from two directions by two forces at the same time. The increase in storage prices has suppressed its largest market, causing mobile phone manufacturers to cut orders, reduce configurations, and switch to old platforms. Apple’s self-developed baseband has taken away its best-quality share, and the replacement speed is faster than Qualcomm’s own prediction. Cars are growing at a rapid pace, and data centers are paving the way as planned, but their combined size is not large enough to catch the hole left by the mobile phone business in one quarter.

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