Qualcomm’s Earnings Beat Big—but a $5.7 B Tax Hit and Apple Exit Fears Cloud the AI Dream

Qualcomm’s fiscal Q4 was the kind of “beat-and-raise” print that usually buys you a victory lap—just not this morning. Shares are slipping as investors sort through solid fundamentals, a chunky one-time tax charge, and the ever-present handset overhang. Revenue rose 10% to $11.27B (vs. $10.79B est.) and adjusted EPS landed at $3.00 (vs. $2.88 est.). Guidance points to another record quarter ahead: Q1 revenue of $11.8B–$12.6B (vs. $11.6B est.) and adjusted EPS of $3.30–$3.50 (vs. $3.31 est.). The stock is down modestly premarket; if it can’t reclaim $180, a check of the 20-day moving average near $171 is on the table today.

Results vs. expectations and notable items Qualcomm cleared both the top- and bottom-line bars, with upside concentrated in Handsets and steady execution in Automotive and IoT. GAAP optics were marred by a non-cash $5.7B tax charge (about $5.29/share) tied to new U.S. tax legislation, which establishes a valuation allowance and should reduce future cash taxes. The charge is excluded from non-GAAP metrics but takes GAAP to a net loss of $3.12B. Management also flagged that the U.S. corporate alternative minimum tax will apply beginning in fiscal 2026. Free cash flow hit a record $12.8B for the year, and capital returns remained robust, with nearly all FCF returned via buybacks and dividends.

Segment performance QCT (chips, software, and hardware) delivered a record quarter at $9.8B revenue and roughly 29% EBT margin, with all three end markets exceeding internal expectations. • Handsets: $6.96B, up 14% year over year, outpacing expectations on the back of premium Android launches—particularly in China, where holiday timing and new models helped. Management said non-Apple QCT revenue rose 18% YoY, underscoring Android momentum. Mix shift to higher-end Snapdragon SKUs should aid Q1. • Automotive: $1.05B, up 17% YoY, a new record as Snapdragon Digital Chassis wins translate into revenue. Management guides this line to be flat to slightly up sequentially in Q1. • IoT: $1.81B, up 7% YoY, with pockets of strength in industrial, Wi-Fi 7 access points, 5G fixed wireless, and smart glasses. IoT should see sustained growth albeit with normal seasonality into FQ1.

QTL (licensing) posted $1.41B, down 7% YoY but better than feared, with a hefty 72% EBT margin. Slightly higher handset units supported the outcome. Talks with Huawei continue, but there’s “nothing substantive” to add; investors should assume periodic noise here until a definitive update lands.

Guidance and what changes For Q1, management sees record QCT revenue of $10.3B–$10.9B and QTL revenue of $1.4B–$1.6B, with QCT EBT margin of 30%–32% and QTL EBT margin of 74%–78%. Sequential growth in Handsets should be low-teens percent, driven by flagship Android ramps. Automotive is guided flat to slightly up; IoT similarly positioned. Beyond Q1, the company refrained from explicit FQ2 guidance but reaffirmed a baseline 75% share on Samsung premium devices (vs. 100% on Galaxy S25), consistent with prior planning assumptions.

Strategic updates: AI data center and PCs move from slideware to timelines The call’s center of gravity was Qualcomm’s data center accelerator roadmap. Management now expects the initial revenue realization to pull forward to fiscal 2027 (from 2028) thanks to deployments with HUMAIN beginning in calendar 2026. The AI200 (2026) and AI250 (2027) roll out a rack-scale inference strategy focused on performance-per-watt and total cost of ownership, with annual cadence updates thereafter. While specs and ecosystem breadth still lag entrenched GPU incumbents, the multibillion-dollar opportunity over the next few years is credible if reference wins translate beyond the first customer. On PCs, Qualcomm continues to tout expanding Snapdragon AI PC designs into 2026, positioning for share gains as on-device AI proliferates.

Key drivers • Premium Android cycle: Stronger sell-in to Chinese OEMs (helped by holiday timing and new flagships) and a shift toward the premium tier supported Handsets and should carry into Q1. • Auto content ramp: Design win conversion and software attach in the Digital Chassis continue to compound; revenue visibility is improving. • IoT breadth: Industrial, access, and wearables/smart glasses give a diversified base with secular AI-at-the-edge tailwinds. • Data center optionality: AI200/AI250 provide a path into inference TAM with earlier-than-planned revenue timing.

Potential headwinds • Handset concentration: Smartphones remain ~71% of QCT revenue; Chinese OEM self-development (e.g., Xiaomi) and share normalization at Samsung (from 100% to a 75% planning floor) could pressure units and content in FQ2/FQ3. • Apple modem risk: The Apple modem exit over the next year remains a known drag. • Data center execution: Competing against Nvidia and AMD will require ecosystem depth, performance proof points, and customers beyond HUMAIN; margins may trail corporate average early on. • Licensing noise: Huawei negotiations and broader IP enforcement always carry headline risk. • Tax mechanics: AMT from fiscal 2026 adds complexity, though the Q4 charge should lower future cash taxes.

Street setup and positioning BofA reiterated Buy with a $215 PT; JPM kept Overweight with a $210 PT. Both highlight diversification (Auto, IoT) and the call-option in data center, while acknowledging intermediate handset risks and seasonality. Year-to-date, QCOM (+17%) trails the Nasdaq (+22%) and AI peers, leaving room for multiple expansion if non-handset ramps offset handset churn.

What to watch next • Near-term: Premium Android sell-through during the holiday quarter, Samsung share on Galaxy S26, and any updates on Huawei licensing. • Medium-term: Concrete milestones for AI200/250 (customers, benchmarks, software stack), incremental wins beyond HUMAIN, and AI PC adoption. • Financial: QCT margins as data center opex rises, QTL stability, and capital returns pace.

Technical setup The stock’s first job is reclaiming $180. Failure there invites a test of the 20-day near $171; a firm bounce from the 20-day would keep the uptrend intact into year-end catalysts. Put differently: fundamentals are improving, but the tape wants proof the handset cycle can hand the baton to diversification before gravity does its thing.