Qualcomm closed fiscal 2026 with a shape that would have been unthinkable three years ago. Full year net income reached USD 13.628 billion, up 146 per cent, while the chip business that pays for everything else shrank.
The quarter explains the trade. Revenue for the three months to September came in at USD 10.322 billion, down 8.4 per cent year on year. Net income was USD 1.251 billion against a USD 3.117 billion loss in the same quarter a year earlier, a swing of USD 4.368 billion.
Phones down, cars and IoT up
Within the chip segment, which booked USD 9.015 billion in the quarter, handset revenue fell 26 per cent to USD 5.137 billion. Automotive reached USD 1.99 billion, up 89 per cent. Internet of things came in at USD 1.888 billion, up 4 per cent.
Licensing held the floor. The technology licensing business earned USD 1.304 billion, down 7 per cent, with pre-tax profit of USD 918 million, down 10 per cent.
For the full year, chip revenue totalled USD 37.208 billion, down 3 per cent, licensing was flat at USD 5.556 billion, and pre-tax profit eased 1 per cent to USD 4.022 billion. Earnings per share fell 28 per cent in the quarter to USD 2.17 and 12 per cent for the year to USD 10.54.
What management says it has cleared
Chief executive Cristiano Amon told investors the company has now worked through the items that weighed on results, listing the renewal of its licensing agreements, the loss of Apple’s modem business, and the effect of memory price inflation on handset industry volumes.
The Huawei licence has been renewed. Qualcomm also says its China Android business bottomed in the previous quarter and recovered sequentially.
Cash generation remains the strongest part of the case. Operating cash flow for the year reached USD 11.145 billion, with non-GAAP free cash flow of USD 8.651 billion. The company returned USD 11.671 billion to shareholders through USD 7.817 billion of buybacks and USD 3.854 billion of dividends.
The guidance is where the repositioning shows
For the December quarter Qualcomm guided revenue to USD 10.4 billion to USD 11.2 billion, with chips at USD 9.0 billion to USD 9.6 billion and licensing at USD 1.3 billion to USD 1.5 billion.
Chief financial officer Akash Palkhiwala put numbers on the pivot. Non-handset chip revenue is expected to grow more than 60 per cent year on year in fiscal 2027, and the data centre business should exceed USD 650 million in the first quarter alone.
The data centre line is built on a multi-generation custom silicon agreement with Amazon Web Services, covering optical interconnect at 1.6T and beyond.
Investors marked it down anyway. The stock fell 7.01 per cent to USD 161.05, leaving a market value of USD 171.976 billion, with a further USD 12.963 billion of value gone in after-hours trading.
The read across
A 146 per cent profit increase built on cost discipline and licensing is not the same thing as a 146 per cent profit increase built on demand. Handset is a third smaller than it was, and the replacement is being assembled from automotive, industrial and custom silicon deals that are still ramping.
For Chinese handset makers the practical question is simpler. A Qualcomm that earns more from cars and data centres than from phones has less reason to compete on phone chip pricing, which pushes the cost of a flagship further onto the customer.
Editor’s note: This is an adapted translation of the original Sohu Tech report. It has been trimmed and restructured for readability for an international business audience. The full original (in Chinese) is at https://www.sohu.com/a/1097432897_120159035.