Qualcomm Earnings Call: Auto Strength Amid Handset Slump

Qualcomm ((QCOM)) has held its Q2 earnings call. Read on for the main highlights of the call.

Qualcomm’s latest earnings call struck a cautiously optimistic tone, blending record results in automotive and solid gains in IoT with frank acknowledgment of cyclical pain in handsets. Management stressed that memory-driven weakness, especially in China Android, is temporary, while positioning long-term bets on AI, 6G and custom silicon as the key drivers of multi‑year growth.

Solid Quarter With EPS at Top of Guidance

Qualcomm reported fiscal Q2 revenue of $10.6 billion and non‑GAAP EPS of $2.65, landing at the high end of its prior guidance range. The company framed the quarter as operationally strong despite handset headwinds, emphasizing disciplined execution and resilience across its more diversified revenue base.

QCT and Licensing Margins Remain Robust

Chip business QCT generated $9.1 billion in revenue, while licensing arm QTL delivered $1.4 billion, highlighting the firm’s dual‑engine model. QCT posted an EBT margin of about 27% and QTL an impressive 72%, with licensing profitability sitting at the high end of guidance despite softer unit volumes.

Automotive Surges to Record, Passing $5 Billion Run Rate

Automotive was the standout, with QCT auto revenue hitting $1.3 billion, up 38% year over year and marking a record quarter. Qualcomm said it has now exceeded a $5 billion annualized auto revenue pace and expects to exit fiscal 2026 with a run rate above $6 billion, underscoring growing traction in digital cockpits and ADAS.

IoT Gains and Auto+IoT Show Diversification

IoT revenue reached $1.7 billion, up 9% year over year, supported by demand across industrial and connected edge devices. Combined automotive and IoT revenue grew about 20%, signaling that Qualcomm’s diversification strategy is taking hold and helping offset volatility in the smartphone market.

Accelerated Capital Returns to Shareholders

Qualcomm leaned into shareholder returns, distributing $3.7 billion in the quarter through buybacks and dividends. That included $2.8 billion of share repurchases and $945 million in dividends, reflecting an accelerated capital return program even as management invests heavily in new growth vectors.

Custom Silicon and Data Center Pipeline Builds

Management highlighted strong early momentum from the Alphawave integration, citing a growing funnel of hyperscaler and cloud opportunities. Qualcomm expects initial shipments of custom silicon for a leading hyperscaler in the December quarter, signaling an emerging data center revenue leg beyond its traditional mobile base.

Product Wins Across PC, Edge and Robotics

The Snapdragon X2 PC platform is now in production, with Qualcomm touting a roughly 30% performance lead versus competing offerings on NPU and CPU metrics. The company also passed one million cars running ADAS on Snapdragon Ride and pointed to Dragonwing IQ10 and embedded platforms as catalysts for new industrial and robotics design wins.

Strategic Bet on 6G and AI‑Native Networks

Qualcomm unveiled a 60‑company coalition and a detailed 6G roadmap, targeting prototypes and demos in 2028 and early launches in 2029. Management framed 6G as an AI‑native network opportunity, arguing that its early lead in wireless standards positions the company to monetize the next decade of connectivity upgrades.

Memory Volatility Driving Channel Inventory Drawdown

Executives described a challenging memory environment, with price and supply swings prompting handset OEMs to cut build plans. These customers, particularly in China, are drawing down channel inventory, causing Qualcomm to ship materially below end‑market demand in both Q2 and Q3.

Handset Revenues Face Steep Near‑Term Drop

QCT handset revenue came in at $6.0 billion for the quarter but is forecast to fall to about $4.9 billion in Q3, an 18.3% sequential decline. Management linked the downturn primarily to memory‑driven caution and weaker China Android builds rather than structural share loss, while flagging limited near‑term visibility.

QTL and Low‑Tier Segment Under Pressure

Guidance implies QTL EBT margins between 67% and 71%, a step down from Q2’s elevated level as licensing revenue softens. Executives cited weaker low‑tier handset units as a key factor, showing how macro and memory dynamics are weighing most heavily on price‑sensitive segments.

Longer‑Term Memory Outlook Remains Cloudy

Management acknowledged that visibility into memory supply, pricing and capacity additions is poor beyond the next few years. They stopped short of firm predictions for 2027, warning that memory cycles could affect device upgrade patterns and the pace of recovery in global smartphone shipments.

Guidance Points to a Near‑Term Dip Before Recovery

For fiscal Q3, Qualcomm guided revenue to $9.2 billion–$10.0 billion and non‑GAAP EPS of $2.10–$2.30, implying mid‑ to high‑single‑digit sequential revenue decline and roughly a 17% EPS drop at the midpoint. Segment guidance calls for QCT revenue of $7.9 billion–$8.5 billion, handset revenue around $4.9 billion, high single‑digit IoT growth and about 50% auto growth year over year, with management expecting China Android shipments to bottom in Q3 and improve thereafter.

Qualcomm’s call painted a picture of a company navigating a cyclical handset downturn while steadily building growth engines in auto, IoT, PCs, data center and 6G. For investors, the near‑term story hinges on memory and China normalization, but the longer‑term thesis rests on whether Qualcomm can turn its deep wireless and AI expertise into durable, diversified earnings power.