Key Takeaways
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Qualcomm stock is down 10% over the past year, after a May rally on AI devices, cars and data centers unwound.
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Handset revenue fell 20% in the June quarter and Qualcomm's Apple revenue is fading faster than planned, while automotive revenue grew 61%.
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Qualcomm's CFO said in September that phones had hit bottom, but Intel warned on Oct. 29 that memory shortages will keep shrinking the PC market.
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Analysts expect fiscal 2027 EPS below fiscal 2026's and the stock trades above its usual multiple, so it looks like one to wait on until the Nov. 4 report puts a number on data center revenue.
Qualcomm ( QCOM:NASDAQ )stock is down 10% over the past year, and that number hides a round trip. Shares peaked on May 29 on excitement over AI devices, cars and data centers, and they've lost 35% since.
In September, CFO and COO Akash Palkhiwala said of smartphones , "we're at the low point in the cycle. Things can only go up from here." Since then, Intel ( INTC:NASDAQ )has warned that memory shortages will keep shrinking the PC market, and Qualcomm's sales to Apple ( AAPL:NASDAQ )are fading faster than it planned.
What exactly happened
Here's the year, report by report:
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Feb. 4: December-quarter revenue hit a record $12.3 billion, but March-quarter guidance of $10.2-$11.0 billion included the hit from memory shortages at handset customers.
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March 17: Qualcomm raised its dividend and added a $20 billion buyback.
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April 29: Handset revenue fell 13% and automotive rose 38%. CEO Cristiano Amon said a hyperscaler's custom chip was "on track for initial shipments later this calendar year."
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May 21: Stellantis said it would use Snapdragon processors in its cars.
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June 24: At its Investor Day, Qualcomm set a target of $40 billion of non-handset revenue by fiscal 2029, nearly double its November 2024 goal.
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July 29: June-quarter handset revenue dropped 20%, to $5.09 billion, while automotive jumped 61% to $1.59 billion. Adjusted EPS guidance of $2.05-$2.25 for the September quarter trailed the $2.36 analysts expected.
TIKR Tracks 37 Analysts on Qualcomm. How Many Say "Buy"?
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Phones are still the problem
Even after the June quarter's jump, automotive was less than a third the size of handsets. And Apple is slipping away: Qualcomm expects to supply well under the 20% of the next iPhone it once planned on, and expects its Apple revenue to roughly halve from the September quarter to the December quarter.
Then Intel added a second worry. After the close on Oct. 29, Intel guided fourth-quarter revenue to $15-$16 billion, short of the roughly $17 billion analysts wanted. It also said industry PC units should fall about 12% this year and 10% more in 2027 as memory gets pricier. Phones compete for the same memory, and Qualcomm sells PC chips too. Qualcomm's stock fell 11% the next day.
Qualcomm needs the data center money on Wednesday
Qualcomm reports after the close on Wednesday, Nov. 4. Management said in July that handset revenue from Chinese customers bottomed in the June quarter and should grow by double digits sequentially in the September quarter, the first check on Palkhiwala's call. The second is the December-quarter guide: analysts expect about $10.6 billion, and two custom chip wins are slated to start bringing in revenue.
For now, analysts see normalized EPS falling from $12.03 in fiscal 2025 to $10.52 in fiscal 2026 and $10.21 in fiscal 2027:
Fiscal 2029's $17.95, from just eight analysts, sits right under management's target of more than $18.00. So the Street already believes the plan.
Not a buy until the data center shows up
Investors are paying for that belief. Qualcomm traded at about 18x forward earnings at Friday's close, well above its five-year average of 14x, though below May's peak of 26x:
The $196 consensus target sits about 21% above Monday's close, and Bernstein cut its target to $155 from $165 on Monday, with a Hold rating.
The way I see it, paying 18x for falling earnings only makes sense if the data center revenue arrives on time. Palkhiwala may be right about phones, but I need more than a bottom to pay that price. I'd wait for a December-quarter guide with non-handset growth outrunning the handset decline.
Of course, if Qualcomm puts a number on data center revenue and guides above September-quarter sales, I'd change my mind fast.
So what is Qualcomm stock actually worth?
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