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Qualcomm (QCOM) is not a business in trouble, having produced $10.4 billion of free cash flow over its last four fiscal quarters. The stock is what lags. It lost 6.7% over the past year, including dividends, while the S&P 500 returned 11.8%.
Over five years Qualcomm returned 30.5%, against 73.8% for the index. Imagine you were handed the keys on Monday: which problem would you fix first?
Qualcomm Keeps Less Profit Per Sale Than Most Peers
You would start with operating margin, the share of sales left as profit after running the business. Qualcomm kept 23.3% over its last four fiscal quarters, while the median of five chip peers , from NVIDIA down to Intel, kept 41.1%. That leaves a gap of 17.8 points.
On $44.1 billion of twelve-month revenue, that gap is worth about $7.85 billion of operating profit a year.
Matching the median is a long climb. Your first target would be Qualcomm's own level of 31.7% from five years earlier. The latest quarter shows the distance: operating margin was 16.3% in fiscal Q3 2026, down from 26.6% a year earlier.
Qualcomm's Automotive Chips Are Already Growing Fast
Automotive is the part of Qualcomm already working. During the July 29, 2026 call, management said sales of its chips for cars reached $1.6 billion in fiscal Q3 2026, up 61% from a year earlier.
Management used that same call to raise its target for automotive sales exiting fiscal 2026 to about $7 billion a year, up from the $6 billion it targeted a quarter earlier. The company also said that day that BMW Group had picked Qualcomm as its lead compute silicon provider for the digital cockpit and driver-assistance systems. This is the business you would keep funding.
Phone Chips Are Where Qualcomm Is Losing Ground
Phones are the second problem. Handset chips brought in $5.1 billion in fiscal Q3 2026, the largest part of Qualcomm's chip sales. Total revenue that quarter fell 4.0% from a year earlier. Management pointed to unprecedented memory prices across the industry, and expects the handset market to shrink by a low-teens percentage in 2026 compared with 2025.
Apple adds to the pressure. On the July call, management said Qualcomm's share of the then-upcoming iPhone launch would be materially lower than its earlier estimate of 20%.
Gross margin has slipped too, falling to 54.2% over the last four fiscal quarters from 59.8% five years earlier. Management is putting through a double-digit price increase to pass on higher input costs, and expects the benefit to show in gross margins over the next couple of quarters.
What You Would Protect, And What Qualcomm Pays Out
The licensing business is the part not to break. It brought in $1.3 billion in fiscal Q3 2026 at a 69% margin before tax, on management's adjusted measure. Its value is that margin, not growth: licensing revenue grew just 0.18% in fiscal 2025.
The harder call is the payouts. Over its last four fiscal quarters, Qualcomm spent $9.25 billion on buybacks and paid $3.83 billion in dividends. Together that is about $13.1 billion, more than the free cash flow it produced. Holding buybacks and dividends within free cash flow would be your call.
Investors pay 18.5 times Qualcomm's earnings, compared with 22.8 for the S&P 500. Over the last three years, its revenue grew 4.8% a year on average, against 6.2% for the index. Slower growth and a margin below its own past may be what buyers are marking down.
The fix starts with margin. Qualcomm's gross margin, 53.1% in fiscal Q3 2026, is the number to watch when it reports fiscal Q4 results, expected in November 2026.
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