QUALCOMM Incorporated (קוואלקום)
Analytical review · Quarter ended June 28, 2026 (Q3 of fiscal year 2026)
Bakshi Finance — Family Office | Research Depth: Comprehensive
What this review is based on. Qualcomm's Form 10-Q for the quarter ended June 28, 2026, filed July 29, 2026; the Form 10-Qs for Q1 and Q2; the Form 10-K for fiscal 2025; the quarterly earnings releases from July 2025 to July 2026; and Form 8-K filings on the Modular acquisition and on the warrant issued to Amazon, including the registration statement of October 2, 2026. Qualcomm's fiscal year ends in late September. Market data: closing price on October 9, 2026; Bank of Israel representative USD rate for the same day.
Company Profile — פרופיל החברה
Qualcomm (QUALCOMM Incorporated, קוואלקום) designs chips — Snapdragon processors for phones and PCs, cellular modems, RF components and connectivity chips — and sells them to makers of phones, vehicles and connected devices. Manufacturing is mostly outsourced to third-party foundries. Alongside chip sales, the company holds a broad portfolio of cellular patents and collects royalties on most phones sold worldwide. Headquarters are in San Diego, California, and at the end of fiscal 2025 the company had about 52,000 employees.
The company reports three segments: QCT — the chip business (85% of revenue in the quarter); QTL — patent licensing (13%); and QSI — the strategic investment fund. The new data center business is reported within "nonreportable segments". Revenue for the 12 months ended June 2026 was $44.1 billion.
Qualcomm has no controlling shareholder and a single class of shares. In fiscal 2025 Apple, Samsung and Xiaomi each accounted for more than 10% of revenue, and 46% of revenue came from customers headquartered in China.
Financial Performance — ביצועים פיננסיים
The quarter: handsets down, automotive up, margins under pressure
In the April–June 2026 quarter revenue fell 4.0% to $9.95 billion. Handset chip revenue fell 19.6%. According to the filing, the reason was lower shipments to major OEMs, which cut build plans because of memory shortages and rising memory prices. Automotive revenue rose 61% and IoT revenue rose 9%. Operating income fell 41% to $1.63 billion: cost of revenue rose slightly, R&D rose 17%, and SG&A rose 27%.
What needs to be adjusted: three items distort reported earnings. (1) Tax: in Q4 of fiscal 2025 a non-cash tax charge of $5.7 billion was recorded following the new U.S. tax law, and in Q2 of fiscal 2026 it was reversed following IRS guidance. Both sides fall within the last 12 months. (2) Investment gains: in Q3, IPOs of companies in the investment portfolio added $768 million to pre-tax income — 31% of the quarter's pre-tax income. (3) Stock-based compensation: $827 million in the quarter, 7.4% of revenue over 12 months. The company replaced the annual cash incentive of its broader leadership team with a two-year equity award. The company's own earnings definition (non-GAAP) excludes all three items.
| $ millions | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 | Q3 FY26 |
|---|---|---|---|---|---|
| Revenue | 10,365 | 11,270 | 12,252 | 10,599 | 9,947 |
| Handset chips | 6,328 | 6,961 | 7,824 | 6,024 | 5,086 |
| Automotive | 984 | 1,053 | 1,101 | 1,326 | 1,588 |
| IoT | 1,681 | 1,807 | 1,688 | 1,726 | 1,830 |
| Licensing (QTL) | 1,318 | 1,409 | 1,592 | 1,382 | 1,278 |
| Gross margin, non-GAAP | 56.2% | 56.1% | 55.2% | 54.7% | 54.0% |
| Pre-tax margin, chip segment | 29.7% | 29.5% | 31.1% | 27.2% | 25.8% |
| Reported diluted EPS ($) | 2.43 | −2.89* | 2.78 | 6.88* | 1.87 |
| EPS, company definition ($) | 2.77 | 3.00 | 3.50 | 2.65 | 2.21 |
* Q4 FY25 includes a non-cash tax charge of $5.29 per share; Q2 FY26 includes its reversal, $5.33 per share. Non-GAAP gross margin was calculated from non-GAAP cost of revenue as published in the earnings releases.
The multi-year context and guidance
In fiscal 2021–2025 revenue grew 7.1% a year on average, with a 19% decline in 2023 (a handset inventory cycle) and a recovery in 2024–2025. According to management's guidance for Q4 of fiscal 2026, revenue will be $9.7–10.5 billion and EPS under the company's definition $2.05–2.25. The midpoint is 10% lower in revenue and 28% lower in EPS than the year-ago quarter. In the last four quarters results came in within the guidance range or in its upper part.
| Fiscal year, $ billions | 2021 | 2022 | 2023 | 2024 | 2025 | 12 months to 6.2026 |
|---|---|---|---|---|---|---|
| Revenue | 33.6 | 44.2 | 35.8 | 39.0 | 44.3 | 44.1 |
| Operating income | 9.8 | 15.9 | 7.8 | 10.1 | 12.4 | 10.2 |
| Reported net income | 9.0 | 12.9 | 7.2 | 10.1 | 5.5* | 9.3 |
| Operating cash flow | 10.5 | 9.1 | 11.3 | 12.2 | 14.0 | 12.4 |
| Capital expenditures | 1.9 | 2.3 | 1.5 | 1.0 | 1.2 | 2.0 |
* Includes a $5.7 billion non-cash tax charge, reversed in Q2 of fiscal 2026.
Balance Sheet & Capital — מאזן ומבנה הון
At June 28, 2026 Qualcomm held $8.3 billion in cash and marketable securities, against financial debt of $15.3 billion: long-term notes, $2.0 billion of notes maturing in May 2027, and $0.5 billion of commercial paper. Net debt rose from about $2.3 billion in September 2025 to $7.0 billion in June 2026. Relative to 12-month EBITDA ($11.8 billion), net debt is about 0.6 times. The current ratio was 2.0, and the credit facility was undrawn.
Capital return: in the nine months the company repurchased 42 million shares for $6.8 billion and paid $2.9 billion in dividends — together about 142% of free cash flow for the period. In March 2026 a new $20 billion buyback program was approved, and the quarterly dividend rose to $0.92. At the same time, shares were issued for acquisitions and employee compensation, so shares outstanding fell only 0.6% over the year: from 1,074 million in September 2025 to 1,068 million in September 2026.
Three notable balance sheet changes:
- Inventory: $8.4 billion, up 28% from September 2025. Most of the increase is in work in process (from $4.0 to $5.0 billion). According to the filing, the increase reflects customer demand impacts from memory supply constraints. Relative to the quarter's cost of revenue, inventory equals 163 days, vs 125 days a year earlier.
- Goodwill: $14.3 billion, up $2.9 billion in nine months, mainly from the Alphawave acquisition ($2.3 billion, December 2025) and seven smaller acquisitions. The Modular acquisition (about $3.1 billion in stock) closed after quarter-end and is not included.
- Deferred tax assets: $5.7 billion, vs $0.7 billion in September 2025 — a result of reversing the tax valuation allowance.
Segments — פילוח מגזרי
Qualcomm measures its segments by earnings before taxes. Some expenses — stock-based compensation, part of R&D and acquisition costs — are not allocated to segments.
| Q3, $ millions | Revenue FY25 | Revenue FY26 | Change | EBT FY25 | EBT FY26 |
|---|---|---|---|---|---|
| Chips (QCT) | 8,993 | 8,504 | −5.4% | 2,671 | 2,192 |
| Licensing (QTL) | 1,318 | 1,278 | −3.0% | 942 | 881 |
| Investments (QSI) | — | — | — | 149 | 768 |
| Nonreportable segments (data center, government) | 54 | 165 | — | −10 | −214 |
Chips: within the segment, handsets fell to 60% of revenue and automotive plus IoT rose to 40%. Of the automotive increase, $381 million came from higher revenue per unit (mix and price) and $223 million from higher shipments, mainly new vehicle launches with digital cockpit and driver-assistance systems. The segment's gross margin, as calculable from the segment note, fell from 50.0% to 47.6%. According to the filing, the reason was higher product cost, partly offset by higher average selling prices.
Licensing: licensing revenue was nearly flat over the last three years — $5.3, $5.6 and $5.6 billion — at pre-tax margins of 69%–77%. According to the filing, license agreements with key OEMs expire between fiscal 2027 and 2031, and Huawei has paid no royalties since its license agreement expired in early 2025.
Data center: the business is reported together with the government business. In Q3 revenue was $165 million and the pre-tax loss $214 million, vs a $10 million loss a year earlier.
Competitive Position — מיצוב תחרותי
The differentiation the company presents rests on combining a processor, a cellular modem and on-device AI in one power-efficient chip, together with a patent portfolio in the cellular standards (3G, 4G and 5G). That explains the two revenue layers: chip sales, and royalties paid even on phones that do not use the company's chips. In recent years the company has been taking the same technology into vehicles, PCs, industrial devices and robotics.
Where the filings show pressure: according to the filing, Apple uses its own modem in some of its phones, and the company believes Apple will expand that use — with a significant negative impact on chip revenue. Samsung and Xiaomi also develop their own chips. In China, Huawei has not bought the company's products since the export license was revoked. In data centers, Qualcomm is entering a market where larger suppliers already operate.
Proceedings with Arm: the company's processor cores (Oryon) rely on an architecture license from Arm. In September 2025 a final first-instance judgment was entered in Qualcomm's favor in the case Arm brought, and Arm appealed. A separate Qualcomm suit against Arm was set for trial beginning October 5, 2026. The company has recorded no accrual for these proceedings.
How to Think About This Company — איך לחשוב על החברה הזו
Qualcomm is two companies in one filing: a mature handset business that is shrinking, and a new business that is growing but is still smaller. In Q3 handset revenue fell by $1.24 billion while automotive and IoT revenue rose by $0.75 billion. The central question is which of the two lines moves faster, and at what cost.
Cycle or structure. Part of the handset decline is cyclical: according to the filing, OEMs cut production because of memory shortages and rising memory prices. In Q2 management wrote that handset revenue from Chinese customers would bottom in Q3 and return to sequential growth in Q4. Another part is structural: Apple is gradually moving to its own modem, and Huawei is no longer a customer. The filing does not break handset revenue down by customer, so the two forces cannot be separated from it.
Diversification is already at scale. Automotive revenue rose from $1.9 billion in fiscal 2023 to $4.0 billion in 2025, and reached $1.59 billion in Q3 of 2026 — according to the company, its 23rd consecutive quarter of double-digit growth. At its Investor Day in June 2026 management presented a target of $40 billion of non-handset revenue in fiscal 2029, and an outlook in which that revenue's growth rises from 24% in 2026 to more than 60% in 2027.
Reading earnings in three layers. Reported 12-month earnings contain a $5.7 billion non-cash tax charge and its reversal; the company's definition excludes stock-based compensation, which reached 7.4% of revenue; and IPO gains in the investment portfolio were about a third of Q3 pre-tax income. Measuring the company on each definition gives a different P/E: about 15 on the company's definition, and about 20 on reported earnings excluding the tax and investment items.
Margins: cost versus price. Gross margin under the company's definition fell for four consecutive quarters, from 56.2% to 54.0%. According to management, the whole industry is seeing a broad rise in costs — wafers, advanced packaging and memory — and the company is raising prices, which it says will gradually improve margins. Q4 guidance already reflects both forces.
Inventory and cash flow. Operating cash flow in Q3 was $991 million, vs $2.9 billion a year earlier, mainly because inventory rose by about $1 billion. Supplier prepayments recorded the previous year were used up in Q1 and Q2, so the Q3 inventory build was paid in cash. If demand returns, the inventory may turn into cash flow; if not, the filing itself mentions the possibility of excess-inventory charges.
New growth is also funded with stock. Alphawave was acquired mainly with stock, and Modular almost entirely with stock (about 18 million shares). In September 2026 Amazon was issued a warrant for up to 25 million shares at an exercise price of $161.26, vesting in tranches tied to purchases of server chips, systems and manufacturing services — up to $60 billion over the warrant's term. 3.75 million shares vested immediately, based on initial purchase commitments. The accounting treatment of the warrant has not yet been disclosed.
High capital return, nearly flat share count. In nine months $9.7 billion was returned to shareholders, more than free cash flow for the period, and cash declined. Because of share issuance for acquisitions and compensation, the share count fell only 0.6% over the year.
Historical multiple versus today's. The reported P/E at fiscal year-ends 2021–2025 ranged from 10.5 to 18.7 (2025 excluding the tax charge). On October 9, 2026 it stood at about 20, at a time when Q4 earnings are guided lower. Free cash flow yield on market cap was 5.6%. These figures describe the starting point; they do not set the direction.
This framework is intended to structure analysis, not to produce an investment conclusion. It does not take part in the decision — the decision is the reader's.
Risks & Monitoring — סיכונים ונושאים במעקב
Risks that emerge from the filings
- Customer vertical integration: according to the filing, Apple will expand use of its own modem, and Samsung and Xiaomi develop their own chips.
- Concentration: two customers were 23% and 20% of revenue in the quarter; 46% of fiscal 2025 revenue came from customers headquartered in China.
- Memory and manufacturing costs: according to management, memory constraints will weigh on demand from several handset OEMs in coming quarters, and rising manufacturing costs could pressure margins.
- Inventory: 163 days of inventory; the filing mentions the possibility of excess or obsolete inventory charges.
- Data center: a $214 million loss in the quarter, and about $6.5 billion of acquisitions in a year, mostly in stock.
- Arm: a pending appeal, and a counter-suit whose trial began October 5, 2026.
- Licensing: key agreements expire in 2027–2031; licensing revenue flat for three years.
- U.S.–China: export restrictions and tariffs.
Items to monitor in the Q4 report (early November 2026)
| # | Item | Latest reading |
|---|---|---|
| 1 | Gross margin, company definition | 54.0%, down steadily from 56.2% |
| 2 | Handset revenue vs the prior quarter | $5,086 million |
| 3 | Inventory and operating cash flow | $8.4 billion; $991 million in the quarter |
| 4 | Loss in nonreportable segments | −$214 million |
| 5 | Accounting treatment of the Amazon warrant | Not yet disclosed |
| 6 | Shares outstanding | 1,068 million |
| 7 | Licensing revenue | $1,278 million |
| 8 | Arm proceedings | Trial began Oct 5, 2026 |
| 9 | Net debt | $7.0 billion |
Scenario Framework — מסגרת תרחישים
The scenarios below are descriptive, not predictive. They contain no prices, no probabilities and no ranking of outcomes. Their only purpose is to organize the conditions that would need to hold for each state to materialize, so they can be checked against upcoming filings.
Scenarios are descriptive, not predictive.
- If handset revenue returns to sequential growth, as management described
- If price increases halt the decline in gross margin
- If inventory declines and turns into cash flow without material charges
- If data center revenue grows and further vesting appears under the Amazon warrant
- If growth in automotive and IoT roughly offsets the handset decline
- If margins stabilize around the latest quarter's level
- If data center keeps operating at a loss while the business is built
- If the Arm proceedings continue without a final resolution
- If memory constraints persist and inventory requires charges
- If Apple's move to its own modem accelerates
- If rising manufacturing costs pass into cost of revenue without being offset by price
- If the Arm proceedings end in an outcome that restricts the company's processor cores
Analytical Lens — עדשה אנליטית
The following six questions are identical in every company review we publish. They are deliberately open and do not lead to a single conclusion. Their role is to let the reader examine the company along the same six dimensions as every other company.
Key Observations — תצפיות עובדתיות
1. In the April–June 2026 quarter Qualcomm reported revenue of $9.95 billion (−4.0%) and reported diluted EPS of $1.87 (−23%); under the company's definition, $2.21 (−20%). Handset revenue fell 19.6% and automotive revenue rose 61%.
2. Gross margin under the company's definition fell for four consecutive quarters, from 56.2% to 54.0%. According to management's Q4 guidance, EPS under the company's definition will be $2.05–2.25, vs $3.00 in the year-ago quarter.
3. Operating cash flow in Q3 was $991 million, and inventory rose to $8.4 billion. In nine months $9.7 billion was returned to shareholders, and net debt rose to $7.0 billion.
4. After quarter-end the company completed the Modular acquisition for about 18 million shares, and issued Amazon a warrant for up to 25 million shares that vests with purchases of up to $60 billion.
Bakshi Finance operates as a Family Office for qualified clients only. Mr. Yaron Bakshi held an investment advisory license from 2008 to 2023. As of the publication date of this document, the company does not hold an investment advisory, investment marketing, or portfolio management license.
This document is intended for research and professional education purposes only. Nothing herein constitutes a recommendation to buy, sell, hold, or take any action in securities. It is not a substitute for advice that takes into account each person's individual data and needs. Any decision is the sole responsibility of the investor.
Past performance is not indicative of future results. Data was drawn from official sources: the Form 10-Q for the quarter ended June 28, 2026 (filed July 29, 2026), the Form 10-Qs for Q1 and Q2 of fiscal 2026, the Form 10-K for fiscal 2025 (November 5, 2025), the quarterly earnings releases, and the company's Form 8-K filings and registration statement with the U.S. Securities and Exchange Commission. Historical multiples: stockanalysis.com. Filing updates published after this date are not included.
Qualified-Client Review — Family Office
The full analytical review of Qualcomm (QCOM) for the quarter ended June 2026 is available to Bakshi Finance premium clients.
The review includes a 10-section analysis, "How to Think About This Company", a structured scenario framework, and a 6-dimension Analytical Lens.
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