Qualcomm (QCOM) posted a decent quarter this week, yet the market still turned on it. Revenue came in at $9.9 billion for its fiscal third quarter, hitting the high end of the company’s own guidance. Non-GAAP earnings of $2.21 marginally missed the Wall Street consensus, though it was also in line with the company’s guidance of $2.10 to $2.30. Automotive, being the standout, reached a record $1.6 billion and grew 61% from a year earlier. The stock, already weak over the past month, fell further after the earnings report. The selloff after a revenue beat came down to a few reasons, with Apple (AAPL) playing a big part in it. Qualcomm’s share of the next iPhone is set to come in well below the 20% it held before. Management itself expects the revenue through Apple products to decline sharply. A memory supply crunch is also squeezing the wider smartphone market, and handset chip sales already slipped 20% year-on-year (YoY) to $5.1 billion. Guidance for the next quarter, with EPS of $2.05 to $2.25, further disappointed investors.
Here’s the part that got buried, though. Qualcomm’s data center business is set to start generating revenue in the December quarter, just as the Apple decline deepens. The company reiterated its plan to reach $5 billion in data center revenue by fiscal 2027 and $15 billion by 2029, with two hyperscaler chip deals kicking in and wafer production already underway. CEO Cristiano Amon expects non-handset growth of more than 60% in fiscal 2027 to fully replace the Apple revenue lost this year. To protect margins, the company is rolling out double-digit price increases across its chips from September 1. For now, the market is focused on what Qualcomm is losing rather than what it is building.
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About Qualcomm Stock
Qualcomm Incorporated is focused on the commercialization and development of core technologies and products for mobile devices and other wireless products. The company operates through Qualcomm Technology Licensing (QTL), Qualcomm CDMA Technologies (QCT), and Qualcomm Strategic Initiatives (QSI) segments. It also offers technology services and solutions to the United States government agencies and is expanding into cybersecurity solutions, data centers, and government technologies.
QCOM stock is down roughly 4% over the past year. During the same period, the iShares Semiconductor ETF (SOXX) rose 103%, showing that the stock lagged the broader semiconductor market. The trend has continued this year, with Qualcomm down about 11% while the iShares Semiconductor ETF has gained roughly 68%. One of the factors behind the stock’s weak performance was declining modem revenue from Apple, as the company continued shifting to its own chips.
www.barchart.comQualcomm’s valuation looks cheap by its own standards. The forward GAAP price-to-earnings (P/E) of 12.86x sits 24% below the company’s 5-year average of 16.91x. And the forward price-to-sales (P/S) ratio of 4.03x is also marginally below the company’s 5-year average of 4.12x. On both measures, the company is trading at a discount to its historical average. The EPS outlook explains why. Analysts expect the earnings to fall roughly 11% in fiscal 2026 and stay flat in 2027. Growth is expected to improve to 20% in fiscal 2028 and 38% in 2029, right as the data center business scales up. While the EPS trajectory is getting better every year, the near-term outlook is what is worrying investors.
The balance sheet is in decent shape. The company holds $9.80 billion in cash against $15.27 billion in debt. The resulting net debt of around $5.5 billion seems insignificant for a company worth over $171 billion. For investors, the discount paired with an improving earnings outlook is the opportunity, provided the December quarter handoff goes to plan.
What Do Analysts Expect for QCOM Stock?
Following the earnings release, a number of research firms have lowered Qualcomm's price target. RBC Capital analyst Srini Pajjuri reduced the firm's price target from $250 to $160. Similarly, Bernstein analyst Stacy Rasgon also reduced the price target from $235 to $165. Both analysts reiterated a “Hold” rating for Qualcomm.
According to 34 Wall Street analysts covering QCOM stock, it carries a consensus “Moderate Buy” rating. Despite the recent target reductions, the average price target of $219.90 still implies a 45% upside from the current share price. In addition, the highest price target of $314 reflects an additional 107% upside from here.
www.barchart.com On the date of publication, Jabran Kundi did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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