Can you provide insight into the shape of data center revenue contribution through fiscal 2027, given the material step-up in growth?

Revenue from two custom chip engagements with global hyperscalers starts in the December quarter and is expected to ramp through the year. POs are in place, and wafer production has begun, indicating high confidence. “the revenue starts in the December quarter, and you should expect a ramp as we go through the year.”

Elaborate on the magnitude and breadth of pricing actions, and how Qualcomm navigates rising prices in a demand-affected handset market.

Pricing actions are broad-based across different end markets, with double-digit increases consistent with industry peers, primarily passing through input cost increases. Management believes the magnitude of these increases is small compared to memory BOM increases and does not expect fundamental changes in premium tier demand. “the scale of the increase that we're looking at is double digit and consistent with some of the actions from other players.”

Is Qualcomm consciously choosing to reduce sales to Apple faster than previously planned, using supply elsewhere, or is it due to supply constraints?

The step-down is a combination of supply constraints and discussions leading to a materially lower share (less than 20%) for new iPhone launches. The accelerated exit of Apple revenue will be replaced by greater than 60% year-over-year growth in non-handset areas in FY27. “You should think of it as supply -- our supply constraints were a part of it and then where discussions ended up is that we'd have a share less than -- materially less than 20%.”

QCOM

QUALCOMM (QCOM) Q3 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q3 FY26)· Information Technology· Jul 29, 2026

Source: earnings call transcript

Executive summary

QUALCOMM Q3 FY26 — Record Automotive Revenue and Accelerated Diversification

Qualcomm reported strong Q3 FY26 results, driven by record automotive revenue and significant growth in IoT, underscoring the success of its diversification strategy. The company is actively addressing short-term gross margin pressures from rising input costs through price increases, while navigating a challenging handset market. With strategic investments in data center and AI, Qualcomm anticipates an inflection in non-handset revenues to drive future growth.

Highlights

Delivered Q3 FY26 revenues of $9.9 billion and non-GAAP EPS of $2.21, both at the high end of guidance.
Achieved record QCT Automotive revenues of $1.6 billion, up 61% year-over-year.
Raised annualized automotive revenue run rate outlook to approximately $7 billion exiting fiscal 2026, up from $6 billion.
Total non-handset revenues in QCT grew 28% year-over-year, with FY27 non-handset revenue growth expected to accelerate to greater than 60%.
Secured over $3.5 billion in industrial design wins this fiscal year, contributing to a pipeline exceeding $7 billion.

Concerns

QCT gross margins are slightly below historical range due to unprecedented memory prices, higher manufacturing/input costs, and supply chain shortages.
Expect materially lower share for upcoming iPhone launch, resulting in an approximate 50% decline in Apple product revenues from September to December quarter.
Handset market TAM is expected to be down low teens relative to 2026, with QCT Android revenue down 20% year-over-year, impacting EPS by over $1.50.

Guidance & targets

Category	Target	Timeline	Confidence
Revenue	$9.7 billion to $10.5 billion high materiality	Q4 · FY26	High
Non-GAAP EPS	$2.05 to $2.25 high materiality	Q4 · FY26	High
QTL Revenues	$1.2 billion to $1.4 billion medium materiality	Q4 · FY26	High
QTL EBT margin	68% to 72% medium materiality	Q4 · FY26	High
QCT Revenues	$8.4 billion to $9 billion high materiality	Q4 · FY26	High
QCT EBT margins	23% to 25% medium materiality	Q4 · FY26	High
QCT Handset Revenues	approximately $5.2 billion medium materiality	Q4 · FY26	High
QCT IoT Revenues	approximately flat medium materiality	Q4 · FY26	High
QCT Automotive Revenues growth	approximately 60% year-over-year growth high materiality	Q4 · FY26	High
Non-GAAP Operating Expenses	approximately $2.7 billion medium materiality	Q4 · FY26	High
Non-handset revenue growth	greater than 60% high materiality	FY27	High
Automotive and IoT revenue	more than $24 billion high materiality	FY29	High
Data Center revenue	more than $15 billion high materiality	FY29	High
Total non-handset revenue outlook	$40 billion high materiality	FY29	High
Data Center revenue	$5 billion high materiality	FY27	High
Data Center revenue	$15 billion high materiality	FY29	High
Non-handsets as % of QCT revenues	more than 50% high materiality	FY27	High
Non-handsets as % of QCT revenues	approximately 2/3 high materiality	FY29	High
Automotive annualized revenue run rate	approximately $7 billion high materiality	exiting FY26	High
Apple product revenues	less than $2 billion high materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
QCT Revenues were at the high end of guidance.	$8.5 billion	—	—	26% EBT margin
QTL Revenues and EBT margin were in line with expectations.	$1.3 billion	—	—	69% EBT margin
QCT Handset Revenues reflect the impact of industry-wide memory dynamics on the global smartphone market.	$5.1 billion	—	—	—
QCT IoT Growth driven by industrial networking and robotics category of products.	$1.8 billion	9%	—	—
QCT Automotive Another record quarter, driven by accelerating demand and increasing compute content per vehicle.	$1.6 billion	61%	—	—
Total non-handset (QCT) Underscores the continued execution of the diversification strategy.	—	28%	—	—

Orderbook & backlog

Industrial design win pipeline $7 billion Q3 FY26

Over $3.5 billion in design wins secured this fiscal year.

Product announcements

Product	Type	Timeline	Details
HBC Gen 1	milestone	tape-out completed; silicon demonstration in the coming quarters; launch in mid-2027
Fifth-generation Snapdragon digital chassis	launch	ramping in September

Deals & partnerships

Modular Inc. Strengthens ability to deliver an end-to-end software stack for data center and Edge AI deployments.

Will be hardware-agnostic, simplifying AI software complexity across multiple platforms and providing an open environment for heterogeneous compute.

BMW Lead compute silicon provider for their next-generation ADAS and digital cockpit. well into the next decade

Won a highly competitive selection process, extending across model programs.

Stellantis Collaboration to support automotive pipeline. well into the 2030s

Recently announced collaboration.

Risks & headwinds

Unprecedented memory prices, higher manufacturing and input costs, supply chain shortages. short-term

Creating short-term pressure on QCT gross margins, which will be slightly below our historical range.

Mitigation:Implementing price increases to realign gross margins to operating model.

Materially lower share for upcoming iPhone launch. Q4 FY26

Approximately 50% decline in Apple product revenues from September to December quarter.

Mitigation:Non-handset revenue growth expected to replace total Apple product revenues in FY27.

Handset market contraction. 2027

Handset market TAM down low teens relative to '26; QCT Android revenue down 20% year-over-year with EPS impact >$1.50.

Mitigation:Snapdragon product leadership and emergence of agentic AI experiences expected to reinstate QCT Android revenue scale and growth rates when memory industry dynamics stabilize.

What to watch in Q4 FY26

QCT Gross Margin Recovery

over the next couple of quarters

Current slightly below historical range

Target realign to our operating model

Why it matters

Gross margin recovery is key to profitability given input cost pressures.

We're implementing price increases and as they take effect, we expect to see gross margins realign to our operating model.

Find out whether QCOM delivers this. Inve re-checks your case every morning.

Q&A highlights

How should QCT gross margins return to prior levels, and how long will it take for ASP increases to match input cost rises?

Gross margin impact is due to weaker premium tier mix and higher input costs. Price increases are being implemented broadly, expected to benefit gross margins over the next couple of quarters as contracts and product cycles allow. The company expects to return to its historical 48%-50% gross margin range.

“with the price increases coming online over time, we expect to be at that range.”

asked by Joshua Buchalter · answered by Akash Palkhiwala

2 min read 6 chapters

Detailed narrative

Data Center Strategy and Progress

Qualcomm is strategically entering the data center market, leveraging its power-efficient compute leadership for agentic AI workloads. The company is developing connectivity (FY26), custom silicon and AI accelerators (FY27), and server-class CPUs (FY28). Two near-term custom silicon wins are expected to generate revenue in the December quarter, with wafer production already initiated.

The tape-out of HBC Gen 1, a high-bandwidth compute solution, has been completed, with silicon performance demonstrations expected in coming quarters and launch in mid-2027.

Automotive Momentum and Expansion

The automotive segment continues its strong growth trajectory, achieving record revenues of $1.6 billion in Q3 FY26, a 61% YoY increase. Qualcomm secured a landmark expanded agreement with BMW to be the lead compute silicon provider for next-generation ADAS and digital cockpit, extending into the next decade.

A collaboration with Stellantis also supports the automotive pipeline into the 2030s. The company raised its annualized automotive revenue run rate outlook to approximately $7 billion exiting fiscal 2026.

IoT and Industrial Diversification

QCT IoT revenues grew 9% YoY to $1.8 billion, driven by industrial networking and robotics. The industrial design win pipeline now exceeds $7 billion, with over $3.5 billion secured this fiscal year, reflecting strong customer demand for AI at the edge. Qualcomm's broad portfolio and channel presence, including partnerships with Arduino and Edge Impulse, are expanding its reach to over 30 million users.

Handset Market Dynamics and AI Transformation

The handset market is experiencing contraction due to memory prices and input costs, with QCT handset revenues at $5.1 billion. However, Qualcomm sees early signs of an agentic smartphone cycle, particularly in China, with OEMs preparing new on-device AI agents.

Snapdragon powers approximately 70% of Samsung's flagship devices, and collaborations with Google and Microsoft are expanding AI experiences to PCs, smart glasses, and other personal AI form factors.

Gross Margin Pressures and Mitigation

QCT gross margins are currently below the historical range due to unprecedented memory prices, higher manufacturing costs, and supply chain shortages. Qualcomm is implementing double-digit price increases across different end markets to pass through these higher input costs. These actions are expected to gradually benefit gross margins over the next couple of quarters, aiming to realign them to the historical 48%-50% range, though data center revenue will be dilutive.

Apple Revenue Step-Down and Non-Handset Growth

Qualcomm anticipates a significant step-down in Apple product revenues, with materially lower share for upcoming iPhone launches, leading to an approximate 50% decline from the September to December quarter. This accelerated exit of Apple revenue is expected to be fully replaced by the accelerated growth in non-handset revenues, which are projected to grow greater than 60% year-over-year in fiscal 2027.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.