Qualcomm

Qualcomm makes money two ways. The larger business, QCT, designs and sells Snapdragon chips: application processors and modems for smartphones, automotive infotainment and driver-assistance systems, chips for IoT devices, chips for Windows laptops, and, most recently, chips for AI data centers. The smaller business, QTL, licenses Qualcomm's patents on mobile technology such as 3G, 4G, and 5G. QTL charges device makers a royalty based on the wholesale price of the phone, whether or not that phone uses a Qualcomm chip, which makes it a high-margin, steady stream of profit.

For years, most of Qualcomm's revenue came from smartphone chips sold to Android makers and to Apple. Qualcomm is now pushing to diversify: automotive chip revenue has grown by double digits every quarter for more than five years, and in December 2025 Qualcomm closed its $2.4 billion purchase of Alphawave Semi to gain the connectivity and compute building blocks for a new data-center AI chip line, the AI200 and AI250. Cristiano Amon is CEO. China, mostly through Chinese phone makers like Xiaomi, Oppo, and Vivo, made up about 46% of fiscal 2025 revenue.

QCOM trades above the analysts' fair value because investors are paying now for an AI data-center chip business that has not yet earned revenue. The market is betting Qualcomm's new AI200 and AI250 chips, and deals like the one with Amazon Web Services, will succeed against rivals such as Nvidia and AMD. For the premium to be earned, this AI chip revenue must start showing up as management expects, beginning in the December 2026 quarter, and then keep growing. Automotive and Internet-of-Things chip sales must also keep offsetting the well-known decline in handset chip sales to Apple, whose own modem keeps replacing Qualcomm's chip.

One old Apple risk has already eased. In September 2026 Qualcomm and Apple renewed Qualcomm's patent license, so Qualcomm keeps earning royalty income from Apple's phones even after Apple's modem fully replaces its chip. The core handset chip business is still shrinking today, and China's antitrust investigation into Qualcomm remains open. The next checkpoints are Qualcomm's fiscal Q4 2026 earnings report, expected near early November 2026, and the first reported AI chip revenue the quarter after.

If AI chip revenue shows real traction over the next two to three quarters, the premium looks earned. If it stays at zero past December 2026, the premium is likely to fade.

1. Nov 4, 2026 · est.Pending

   Fiscal Q4 2026 earnings: handset decline and AI chip outlookRevenue inside the $9.7 to $10.5 billion guidance and a December quarter outlook that includes first AI data-center revenue pass; a weaker outlook or a delay of AI revenue fails.
2. Feb 2027 · est.Pending

   Fiscal Q1 2027 earnings: first AI data-center chip revenueReported AI data-center revenue from Amazon or Humain and automotive growth that offsets lower Apple sales pass; zero AI revenue fails.
3. Apr 2027 · est.Pending

   Fiscal Q2 2027 earnings: AI chip revenue keeps growingAI data-center revenue that rises from the December quarter and stable licensing income pass; flat or falling AI revenue fails.

Every passed and failed checkpoint across all picks

Qualcomm funds itself mainly with cash from its chip and patent license businesses, but buybacks now come partly from cash and debt. All of its debt is unsecured debt that the parent company issues: fixed-rate notes plus $498 million of commercial paper. Read more

• Apple is replacing Qualcomm's modems with its own in-house chips. Qualcomm expects Apple-related product revenue to fall about 50% from fiscal Q3 to Q4 2026, its iPhone share to be "materially lower" than a prior 20% estimate, and its Apple business to end entirely by 2027.
• Much of the stock's premium over fair value depends on data-center AI chips (AI200/AI250) and deals like the Amazon and Humain partnerships turning into real revenue. None of this has generated revenue yet; Qualcomm expects it to start only in the December 2026 quarter, against established competitors like Nvidia and AMD.
• China, mostly through phone makers like Xiaomi, Oppo, and Vivo, made up about 46% of fiscal 2025 revenue. China's market regulator opened an antitrust investigation into Qualcomm in October 2025 over an undisclosed acquisition, adding regulatory risk in Qualcomm's largest market.
• The core handset chip business is shrinking. QCT handset revenue fell 20% year-over-year in fiscal Q3 2026 on memory supply constraints, higher input costs, and softer demand from Chinese smartphone makers. Qualcomm said it would raise chip prices from September 1, 2026 to offset costs, which could pressure demand further.
• The stock still trades about 8% above the analysts' fair value estimate, and the analysts rate the estimate's uncertainty "High." This leaves little cushion if the AI data-center or automotive growth stories disappoint.
• Arm Holdings continues to contest its licensing dispute with Qualcomm despite losing in court in 2024 and again in September 2025. A separate Qualcomm lawsuit against Arm went to a jury trial in Delaware on October 5, 2026. Continued litigation could raise costs or create uncertainty around Qualcomm's Oryon CPU cores.
• Qualcomm's new data-center push depends heavily on a small number of large customers, such as Amazon and Humain, echoing the customer-concentration risk it already has in smartphones.

• October 5, 2026A jury trial began in a federal court in Delaware on Qualcomm's lawsuit against Arm. Qualcomm claims that Arm broke their contract, for example by holding back chip testing tools. It asks the court to stop its royalty payments to Arm for up to five years. Arm denies the claims.
• October 5, 2026Qualcomm and Huawei announced a multi-year patent license agreement. Each company licenses its 5G, compute, AI and networking patents to the other. Qualcomm also buys some Huawei US patents, after regulatory approvals. The companies did not disclose financial terms. On October 6, Qualcomm said that reports that it is a net payer under the agreement are incorrect.
• September 24, 2026Qualcomm and Apple announced they renewed Qualcomm's global patent license agreement. The new deal starts April 1, 2027. It covers Qualcomm's wireless patents, separate from Qualcomm's chip supply deal with Apple, which is still shrinking.