Qualcomm (QCOM) Q4 2026 earnings review
Qualcomm's car chip sales nearly double, but phone losses deepen
Qualcomm, the leading maker of smartphone processors and wireless chips, is growing rapidly in cars while its core phone business shrinks. Fourth-quarter sales excluding a legal settlement fell 7%, and profit per share dropped 28% as higher factory and engineering costs squeezed margins. Car chip sales jumped 89% to nearly $2 billion and chief executive Cristiano Amon kept his $5 billion data center target for fiscal 2027, but by our math the first-quarter plan has total revenue falling 12% from a year ago.
| Revenue, excluding one-offs | $10.44B -7% from a year ago (GAAP: $10.32B, -8%) |
|---|---|
| Profit per share, excluding one-offs | $2.17 -28% from a year ago |
| Automotive chip revenue | $1.99B +89% from a year ago |
| Q1 FY27 revenue outlook | $10.4B–$11.2B middle of the range: -12% from a year ago |
⚖️ Verdict: ⚪ Neutral
The story is unchanged because new deals in cars, licensing and data centers are offset by a deeper profit and phone slump through the first half of fiscal 2027. Renewing long-term patent licenses with Apple and Huawei removes a major contract risk, and a new AI server collaboration with Amazon puts a marquee customer behind the data center target. The bad news: higher chip prices will not restore gross margins until the second half of fiscal 2027, and folding data center sales into the chip division outlook hides the new business's quarterly progress.
The question now is whether non-phone growth adds to total revenue or merely replaces lost Apple and Android phone chips at a lower profit margin. If the data center ramp delivers $5 billion on top of the $8 billion car chip pace, total sales will return to growth; if phone losses and factory costs outrun them, earnings will keep shrinking. Second-quarter revenue and chip margins in the spring will settle it.
🐂 Bull Case
Car Chip Sales Nearly Doubled to $2 Billion
Qualcomm sells semiconductors through QCT, its chip division, and wants car and connected-device chips to replace lost phone business. Three months ago, management forecast 60% growth for car chips in the fourth quarter and an annualized sales pace of $7 billion exiting the year.
Car chip revenue grew 89% from a year ago to $1.99 billion, passing an $8 billion yearly pace by our math. Connected-device chips (IoT) rose 4.5% to $1.89 billion, beating the flat outlook. Together, chips outside of phones grew 36% and made up 43% of chip division revenue, up from 29% a year ago.
This rapid shift matters because carmakers are installing Qualcomm's higher-priced digital dashboard and automated-driving computers across new models. The division added $402 million in quarterly car chip sales over the last three months alone, proving that multi-year car contracts are turning into revenue ahead of management's own schedule.
What to watch: first-quarter car chip sales when the quarterly report arrives in February. Another step up above $2 billion would show the car ramp can carry the chip division while data center sales begin.
Amazon Data Center Deal Backs the $5 Billion Target
The San Diego chipmaker is expanding into artificial intelligence (AI) servers to build a new business line alongside cars. Chief executive Cristiano Amon said that "Non-handset revenues are projected to grow by more than 60% year-over-year, and we are reiterating our fiscal 2027 Data Center revenue target of $5B."
To back that goal, the company "Announced Multi-Generational Product Collaboration with Amazon for AI Data Centers" this quarter. That adds a major cloud customer alongside its earlier server processor agreement with Meta, giving investors a named buyer for its custom server chips as production begins.
What to watch: any standalone dollar figure for data center sales on the conference call or in the first-quarter filing. A disclosed quarterly run rate is needed to verify how fast the Amazon deal turns into shipments.
Apple and Huawei Patent Renewals Secure Licensing Cash
QTL, Qualcomm's patent licensing division, collects royalties on smartphones regardless of whose chips are inside and generates a 72% pre-tax profit margin. Investors worried that Huawei's unrenewed contract and Apple's move to build its own phone modems would hurt royalty collections.
This quarter, the company "Renewed Long-term QTL License Agreements with Apple, Huawei and Transsion", and set its first-quarter licensing outlook at $1.3 billion to $1.5 billion, up 7% from the fourth quarter at the middle of the range. Because both renewal deals and the forward outlook are now in place, the contract overhang is settled and Apple will keep paying patent royalties even as it buys fewer modems.
What to watch: full-year licensing revenue against global smartphone unit shipments in fiscal 2027. Steady collections per phone will confirm the new Apple and Huawei agreements kept similar royalty rates.
🐻 Bear Case
Phone Chip Slump Deepens the Revenue Drop
"Fiscal 2027 marks the start of our non-handset revenue inflection, including the ramp of our Data Center business," Amon said. He wants investors to focus on the new businesses, which he expects to grow by more than 60% this fiscal year.
The company's own first-quarter outlook shows the phone slump is still much larger than the new growth. Phone chip sales fell 26% from a year ago in the fourth quarter, and the first-quarter plan points to the steepest total revenue drop of the cycle.
- Fourth-quarter phone chip revenue: $5.14 billion, down $1.82 billion (26%) from a year ago
- First-quarter total revenue outlook: $10.4 billion to $11.2 billion, down 12% from a year ago at the middle of the range by our math
- First-quarter chip division (QCT) outlook: $9.0 billion to $9.6 billion, down 12% from a year ago at the middle of the range by our math
This matters because Apple is switching to its own modems while memory shortages limit Android phone production. Even with data center revenue included in the chip division's first-quarter plan, non-phone gains are only replacing lost phone sales rather than growing the whole company.
What to watch: second-quarter total revenue outlook in February against last year's $10.6 billion. A forecast below that mark would show the non-phone ramp is still only backfilling phone losses.
Price Hikes Will Not Fix Chip Margins Until Mid-2027
Qualcomm is raising chip prices to offset a "broad-based increase in input costs across wafer fabrication, assembly, test, advanced packaging, memory and other materials". Last quarter, management said higher prices would restore chip division margins as contracts rolled over.
In the fourth quarter, profit margins fell across the board as production and engineering costs took a much bigger slice of sales, and the company pushed the full pricing recovery out to the second half of fiscal 2027.
- Cost of revenues (cost of making chips and equipment): 49.3% of revenue, up 4.6 percentage points from a year ago by our math
- Research and development (engineering spend): 26.0% of revenue, up 5.0 percentage points from a year ago by our math
- Selling, general and administrative (sales and overhead): 9.3% of revenue, up 1.3 percentage points from a year ago by our math
- QCT pre-tax profit margin: 24%, down 5 percentage points from 29% a year ago
Because the full benefit of price increases will not show up in gross margins until "in the second half of fiscal 2027", earnings are squeezed from both sides. First-quarter profit per share excluding one-offs is planned at $2.25 at the middle of the range, down 36% from $3.50 a year ago.
What to watch: QCT pre-tax profit margin in the first-quarter report. A drop below 24% would show that early data center shipments and higher wafer bills are still outrunning price hikes.
Data Center Sales Will Be Hidden Inside QCT
Management reiterated its target of $5 billion in data center revenue for fiscal 2027, up from about $300 million in fiscal 2026. Previously, data center revenue sat in non-reportable segments, which totaled $123 million in the fourth quarter by our math.
Starting in the first quarter, Qualcomm's QCT revenue outlook is "inclusive of Data Center", folding the new business into the $37 billion chip division without adding a separate data center line to the QCT revenue streams table. At the same time, unsold chip inventories on the balance sheet rose 32% from a year ago to $8.64 billion, tying up $2.05 billion of cash during fiscal 2026 while chip sales declined.
Folding data center sales into QCT without breaking them out makes it harder for investors to verify whether the $5 billion ramp is on track, or whether rising inventory is for server chips or unsold phone parts.
What to watch: the QCT revenue streams table in the first-quarter filing. If Qualcomm does not add a standalone Data Center row, outside investors will have no way to audit the $5 billion target quarter by quarter.
Risks this quarter didn't answer
Three standing risks from prior quarters received no operational update in the fourth-quarter earnings release because the full annual filing and conference call remarks were not included.
- Customer concentration and Samsung chip share: the annual report (Form 10-K) and call Q&A are needed to see whether Samsung flagship share held near 70-75% and how fast Apple's share of total revenue fell.
- Arm litigation: Qualcomm's own lawsuit against Arm was scheduled for trial in October 2026 alongside Arm's appeal; the annual report's legal footnote will disclose any ruling or settlement.
- US and China trade restrictions: China concentration and export rules remain listed in standard risk factors; call commentary will show whether new AI data center shipments face export limits.
💲 Other KPIs
Free cash flow — operating cash left after capital spending — fell 32.5% in fiscal 2026 from $12.82 billion a year ago, and dropped 49.5% in the fourth quarter to $1.82 billion by our math. Operating cash flow fell on a $2.05 billion inventory build, while capital spending more than doubled to $2.49 billion (5.8% of revenue).
The chipmaker slowed its stock buybacks for a second straight quarter, spending $1.01 billion to retire 6 million shares after spending $1.40 billion in the third quarter and $2.80 billion in the second. Diluted shares excluding one-offs fell 1.1% from a year ago as share issuance for acquisitions offset most of the $7.82 billion full-year buyback.
🔮 Guidance
New. The plan calls for $10.8 billion at the middle of the range, up 4.6% from the fourth quarter's GAAP revenue but down 11.9% from last year's record $12.25 billion first quarter. Qualcomm has beaten the middle of its quarterly revenue plan four times in a row by an average of 1.6%; if the pattern holds, first-quarter revenue would land near $10.97 billion by our math.
New. The outlook points to $9.3 billion at the middle of the range, up 3.2% from the fourth quarter but down 12.4% from $10.61 billion a year ago by our math. Management noted that this range now includes Data Center sales, which were previously outside QCT, yet total chip sales still drop double digits against last year's phone peak.
New. Licensing revenue is planned at $1.4 billion at the middle of the range, rising 7.4% from the fourth quarter on holiday phone volume but down 12.1% from $1.59 billion a year ago by our math. The range reflects the newly signed long-term licensing agreements with Apple, Huawei and Transsion.
New. The middle of the range is $1.13 per share, down 3.4% from the fourth quarter and down 59.4% from $2.78 a year ago by our math. The forecast includes $0.99 per share of employee stock compensation and $0.13 per share of acquisition-related costs.
New. Profit per share excluding one-offs is planned at $2.25 at the middle of the range, up 3.7% from the fourth quarter's $2.17 but down 35.7% from $3.50 a year ago by our math. Higher wafer and memory costs continue to weigh on earnings ahead of second-half price increases.
Unchanged. Chief executive Cristiano Amon reiterated the plan for non-phone revenue to grow by more than 60% in fiscal 2027, accelerating from roughly 27% growth in fiscal 2026 by our math. Achieving that pace relies on ramping data center sales alongside the $8 billion car chip run rate.
Unchanged. Management kept its $5 billion fiscal 2027 target for the Data Center business, up from a $0.3 billion target in fiscal 2026. By our math, hitting $5 billion requires averaging $1.25 billion per quarter across fiscal 2027 as the new Amazon and hyperscaler programs ship.
❓ Key Questions
Will Qualcomm break out Data Center sales inside QCT?
First-quarter QCT outlook includes Data Center for the first time, but the fourth-quarter table only lists Handsets, Automotive and IoT. Without a standalone Data Center line, investors cannot track progress toward the $5 billion fiscal 2027 target.
What are the Q1 margin plans for QCT and QTL?
The earnings release omitted the usual pre-tax profit margin ranges for the chip and licensing divisions in the first-quarter outlook table. Investors need the QCT margin target to see if margins drop below 24% before price hikes take effect.
Why did inventories jump to $8.64 billion as sales fell?
Inventories rose 32% from a year ago and consumed $2.05 billion of cash in fiscal 2026 while QCT revenue dropped 3%. Management has not disclosed how much of that stock is wafers for the data center ramp versus unsold phone chips.
What royalty terms were agreed with Apple and Huawei?
Qualcomm renewed long-term patent licenses with Apple, Huawei and Transsion, but first-quarter QTL revenue is planned down 12% from a year ago at the middle of the range. Clarifying whether per-phone royalty rates changed is critical to modeling licensing cash flow.