Built by Claude FableFinancial Trends (2.5/10)
Bottom line: FQ3'26 did NOT show reacceleration at the company level. Total revenue fell 4.0% YoY after -3.5% in FQ2'26 and +5.0% in FQ1'26, GAAP operating income fell 41% YoY, and quarterly FCF collapsed 81% YoY to about $0.5B on a ~$1.0B inventory build. The one thing that did change, and it is real, is the AI-adjacent non-handset mix: Automotive reaccelerated to +61% YoY (from +15% in FQ1'26 and +38% in FQ2'26) and Auto+IoT combined accelerated for a third straight quarter (+11% to +20% to +28%). That is a segment-level inflection buried under a handset downturn (memory-cost driven smartphone contraction plus the Apple modem exit) and input-cost gross-margin pressure. Fiscal year ends late September; FQ3'26 = quarter ended June 2026.
| Metric ($M) | FQ4'24 | FQ1'25 | FQ2'25 | FQ3'25 | FQ4'25 | FQ1'26 | FQ2'26 | FQ3'26 | Trend |
|---|---|---|---|---|---|---|---|---|---|
| Total revenue | 10,244 | 11,669 | 10,979 | 10,365 | 11,270 | 12,252 | 10,599 | 9,947 | Decelerating, now negative |
| Total revenue YoY | +18.7% | +17.5% | +16.9% | +10.3% | +10.0% | +5.0% | -3.5% | -4.0% | |
| QCT revenue | 8,678 | 10,084 | 9,469 | 8,993 | 9,821 | 10,613 | 9,076 | 8,504 | Decelerating, negative 2 qtrs |
| QCT revenue YoY | +17.7% | +19.7% | +18.0% | +11.5% | +13.2% | +5.2% | -4.2% | -5.4% | |
| QCT Handsets | 6,097 | 7,574 | 6,929 | 6,328 | 6,962 | 7,824 | 6,024 | 5,086 | Sharp decel (memory, Apple) |
| QCT Handsets YoY | +11.7% | +13.3% | +12.1% | +7.3% | +14.2% | +3.3% | -13.1% | -19.6% | |
| QCT Automotive | 898 | 961 | 959 | 984 | 1,053 | 1,101 | 1,326 | 1,588 | Reaccelerating |
| QCT Automotive YoY | +67.9% | +60.7% | +59.0% | +21.3% | +17.3% | +14.6% | +38.3% | +61.4% | |
| QCT IoT | 1,683 | 1,549 | 1,581 | 1,681 | 1,806 | 1,688 | 1,726 | 1,830 | Stable high single digit |
| QCT IoT YoY | +21.7% | +36.1% | +27.2% | +23.7% | +7.3% | +9.0% | +9.2% | +8.9% | |
| QTL licensing | 1,521 | 1,535 | 1,319 | 1,318 | 1,409 | 1,592 | 1,382 | 1,278 | Flat |
| QTL licensing YoY | +20.5% | +5.1% | +0.1% | +3.5% | -7.4% | +3.7% | +4.8% | -3.0% | |
| Non-handset (Auto+IoT) | 2,581 | 2,510 | 2,540 | 2,665 | 2,859 | 2,789 | 3,052 | 3,418 | Reaccelerating |
| Non-handset YoY | +34.6% | +44.6% | +37.6% | +22.8% | +10.8% | +11.1% | +20.2% | +28.3% | |
| Gross profit | 5,777 | 6,508 | 6,042 | 5,759 | 6,237 | 6,684 | 5,699 | 5,277 | |
| Gross margin | 56.4% | 55.8% | 55.0% | 55.6% | 55.3% | 54.6% | 53.8% | 53.1% | Compressing |
| GM YoY chg (bps) | +135 | -83 | -124 | -0 | -105 | -122 | -126 | -251 | |
| GAAP op income | 2,581 | 3,555 | 3,120 | 2,762 | 2,918 | 3,366 | 2,309 | 1,626 | Down 3 qtrs |
| GAAP op margin | 25.2% | 30.5% | 28.4% | 26.6% | 25.9% | 27.5% | 21.8% | 16.3% | Compressing |
| Non-GAAP op income | 3,506 | 4,383 | 3,687 | 3,576 | 3,808 | 4,414 | 3,280 | 2,776 | |
| Non-GAAP op margin | 34.2% | 37.6% | 33.6% | 34.5% | 33.8% | 36.0% | 30.9% | 27.9% | Compressing |
| Non-GAAP OM YoY chg (bps) | +330 | +112 | -24 | +238 | -44 | -153 | -264 | -659 | |
| QCT EBT margin | 28% | 32% | 30% | 30% | 29% | 31% | 27% | 26% | Compressing |
| QTL EBT margin | 74% | 75% | 70% | 71% | 72% | 77% | 72% | 69% | Range-bound |
| EBITDA (GAAP OI + D&A) | 3,020 | 3,991 | 3,517 | 3,160 | 3,289 | 3,759 | 2,722 | 2,022 | Falling |
| D&A | 439 | 436 | 397 | 398 | 371 | 393 | 413 | 396 | |
| Operating cash flow | 2,647 | 4,587 | 2,554 | 2,875 | 3,996 | 4,965 | 2,449 | 991 | |
| Capex | -256 | -277 | -214 | -294 | -407 | -549 | -533 | -496 | Rising |
| FCF (OCF less capex) | 2,391 | 4,310 | 2,340 | 2,581 | 3,589 | 4,416 | 1,916 | 495 | Falling |
| FCF YoY | -37.0% | +57.6% | -30.6% | -3.2% | +50.1% | +2.5% | -18.1% | -80.8% | |
| FCF margin | 23.3% | 36.9% | 21.3% | 24.9% | 31.8% | 36.0% | 18.1% | 5.0% | Compressing |
| Non-GAAP EPS ($) | 2.69 | 3.41 | 2.85 | 2.77 | 3 | 3.5 | 2.65 | 2.21 | Down 2 qtrs |
| Non-GAAP EPS ($) YoY | +33.2% | +24.0% | +16.8% | +18.9% | +11.5% | +2.6% | -7.0% | -20.2% | |
| GAAP EPS ($) | 2.59 | 2.83 | 2.52 | 2.43 | -2.89 | 2.78 | 6.88 | 1.87 | Noisy (tax items) |
| Diluted shares (M) | 1,129 | 1,122 | 1,115 | 1,099 | 1,078 | 1,079 | 1,072 | 1,069 | Declining |
| Diluted shares (M) YoY | +0.4% | -0.4% | -1.3% | -3.1% | -4.5% | -3.8% | -3.9% | -2.7% | |
| Long-term debt | 13,270 | 13,212 | 13,258 | 14,788 | 14,811 | 14,817 | 14,772 | 12,781 | Flat |
| Short-term debt | 1,364 | 1,365 | 1,365 | n/t | n/t | n/t | 498 | 2,489 |
Notes: FCF = operating cash flow less capex (both Daloopa-linked). EBITDA = GAAP operating income plus D&A. Margins and YoY rates are computed from the linked values. "n/t" = short-term debt not tagged in Daloopa for that quarter. Data center revenue tagged by Daloopa from the 10-Q ("equipment and services revenues from our data center"): $97M in FQ2'26 and $88M in FQ3'26, i.e. under 1% of revenue today versus management's $5B FY27 target.
| Segment | FQ4'24 | FQ1'25 | FQ2'25 | FQ3'25 | FQ4'25 | FQ1'26 | FQ2'26 | FQ3'26 | FQ3'26 vs FQ2'26 / FQ1'26 |
|---|---|---|---|---|---|---|---|---|---|
| Total revenue | +18.7% | +17.5% | +16.9% | +10.3% | +10.0% | +5.0% | -3.5% | -4.0% | Decelerated (-50 bps vs FQ2, -900 bps vs FQ1) |
| QCT | +17.7% | +19.7% | +18.0% | +11.5% | +13.2% | +5.2% | -4.2% | -5.4% | Decelerated |
| Handsets | +11.7% | +13.3% | +12.1% | +7.3% | +14.2% | +3.3% | -13.1% | -19.6% | Decelerated sharply |
| Automotive | +67.9% | +60.7% | +59.0% | +21.3% | +17.3% | +14.6% | +38.3% | +61.4% | Reaccelerated (+2,310 bps vs FQ2, +4,680 bps vs FQ1) |
| IoT | +21.7% | +36.1% | +27.2% | +23.7% | +7.3% | +9.0% | +9.2% | +8.9% | Flat (high single digit) |
| Auto + IoT (non-handset) | +34.6% | +44.6% | +37.6% | +22.8% | +10.8% | +11.1% | +20.2% | +28.3% | Reaccelerated, 3rd straight qtr |
| QTL licensing | +20.5% | +5.1% | +0.1% | +3.5% | -7.4% | +3.7% | +4.8% | -3.0% | Decelerated |
Verdict on "did anything change in FQ3'26": yes at the segment level, no at the company level. Non-handset revenue of $3.4B (Auto $1,588M + IoT $1,830M) is now 40% of QCT ($8,504M) versus 30% a year ago, but Handsets ($5,086M, -19.6% YoY) still dominate the mix. Why: management attributes the handset decline to industry-wide memory price spikes shrinking smartphone builds, OEMs choosing lower-priced premium chips or prior generations, and China OEM channel destocking that it says bottomed in FQ3 (FQ3'26 call). Automotive growth comes from chipset shipments plus favorable mix and higher ASPs (Snapdragon Digital Chassis ramps). The FQ4'26 guide extends both trends: Auto about +60% YoY, IoT about flat, handsets about $5.2B, with Apple revenue stepping down roughly 50% sequentially into the December quarter.
| Margin | Peak (qtr) | Prior trough (qtr) | FQ3'26 | vs peak | vs prior trough |
|---|---|---|---|---|---|
| Gross margin | 56.6% (FQ1'24) | 55.0% (FQ4'23) | 53.1% | -350 bps | -190 bps (new low) |
| GAAP op margin | 30.5% (FQ1'25) | 16.3% (FQ4'23) | 16.3% | -1,420 bps | 0 bps (back at trough) |
| Non-GAAP op margin | 37.6% (FQ1'25) | 29.8% (FQ3'23) | 27.9% | -970 bps | -190 bps (new low) |
| QCT EBT margin | 32% (FQ1'25) | 24% (FQ3'23) | 26% | -600 bps | +200 bps |
Why margins are compressing: (1) broad input-cost inflation in wafers, assembly, test, advanced packaging and memory, with Qualcomm's price increases lagging; (2) weaker premium-tier mix as OEMs pick cheaper chips; (3) non-GAAP OpEx rising to about $2.7B in FQ4'26 with the Modular and Alphawave acquisitions and data center investment ahead of revenue; (4) management said early data center revenue (mostly custom silicon) carries gross margin "significantly lower" than the 48% to 50% QCT baseline, a 1.5 to 2 point drag on weighted gross margin as it ramps. GAAP op income fell further than non-GAAP (GAAP $1,626M vs non-GAAP $2,776M), a $1.15B gap from acquisition-related and other items.
- FQ3'26 operating cash flow of $991M was cut by a $996M inventory build (after $703M in FQ2'26); management framed inventory as a strategic hedge in a supply-short market. Capex rose to $496M, about 1.7x the year-ago $294M. TTM FCF fell to about $10.4B from $11.6B a year earlier (-10%), and from a $12.9B peak at FQ1'26.
- Share count is the one clear positive: diluted shares 1,069M vs 1,099M a year ago (-2.7%), after -4.5%, -3.8% and -3.9% in the prior three quarters. Buybacks were $1,364M in FQ3'26, half of FQ2'26's $2,792M, as cash and equivalents fell to $4,533M.
- Debt: total debt about $15.3B (LT $12,781M + ST $2,489M) versus LT $14,788M a year ago (ST not tagged). Debt is up low single digits while revenue declined in the last two quarters; that is 2 quarters, not 3, so the debt penalty does not trigger.
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|---|---|
| Total revenue | 33,566 | 44,200 | 35,820 | 38,962 | 44,284 | Back to FY22 peak |
| Revenue YoY | +42.6% | +31.7% | -19.0% | +8.8% | +13.7% | Accelerated FY24 to FY25 |
| QCT revenue | 27,019 | n/a* | 30,382 | 33,196 | 38,367 | +9.3%, +15.6% last 2 yrs |
| Handsets | 16,830 | 25,027 | 22,570 | 24,863 | 27,793 | +10.2%, +11.8% |
| Automotive | 975 | 1,372 | 1,872 | 2,910 | 3,957 | +41%, +36%, +55%, +36% |
| IoT | 5,056 | 6,948 | 5,940 | 5,423 | 6,617 | Cyclical, +22% FY25 |
| QTL licensing | 6,320 | n/a* | 5,306 | 5,572 | 5,582 | Flat |
| Gross profit | 19,304 | 25,565 | 19,951 | 21,902 | 24,546 | |
| Gross margin | 57.5% | 57.8% | 55.7% | 56.2% | 55.4% | Drifting lower |
| GAAP op income | 9,789 | 15,860 | 7,788 | 10,071 | 12,355 | |
| GAAP op margin | 29.2% | 35.9% | 21.7% | 25.8% | 27.9% | Expanding off FY23 trough |
| Non-GAAP op income | 11,772 | 17,067 | 11,460 | 13,320 | 15,453 | |
| Non-GAAP op margin | 35.1% | 38.6% | 32.0% | 34.2% | 34.9% | 370 bps below FY22 peak |
| D&A | 1,582 | 1,762 | 1,809 | 1,706 | 1,602 | |
| EBITDA (GAAP OI + D&A) | 11,371 | 17,622 | 9,597 | 11,777 | 13,957 | |
| Operating cash flow | 10,536 | 9,096 | 11,299 | 12,202 | 14,012 | |
| Capex | -1,888 | -2,262 | -1,450 | -1,041 | -1,192 | |
| FCF | 8,648 | 6,834 | 9,849 | 11,161 | 12,820 | Grew 3 straight yrs |
| FCF YoY / FCF margin | +96% / 25.8% | -21% / 15.5% | +44% / 27.5% | +13% / 28.6% | +15% / 28.9% | |
| Non-GAAP EPS ($) | 8.54 | 12.52 | 8.43 | 10.22 | 12.03 | Still below FY22 |
| GAAP EPS ($) | 7.87 | 11.37 | 6.42 | 8.97 | 5.01 | FY25 hit by FQ4 tax charge |
| Diluted shares (M) | 1,149 | 1,137 | 1,126 | 1,130 | 1,105 | -3.8% over 4 yrs |
| Long-term debt | 13,701 | 13,537 | 14,484 | 13,270 | 14,811 | Flat |
*Daloopa's FY2022 annual QCT (82,565) and QTL (16,154) tags are inconsistent with FY2022 total revenue of $44,200M and are excluded as a tagging error.
Annual picture: FY2025 was the high-water mark of this cycle (revenue +13.7%, FCF +15%, non-GAAP op margin 34.9%, shares -2.2%). FY2026 is rolling over: FY26 year-to-date (FQ1 to FQ3) revenue is $32.8B vs $33.0B in the same period of FY25, and year-to-date FCF is $6.8B vs $9.2B.
Street context (FMP consensus, from company_context.md): FY26E revenue $43.0B / EPS $10.54, FY27E revenue $45.0B / EPS $10.13. The street expects EPS to decline again in FY27 before the data center and non-handset ramp shows up in FY28E ($52.4B / $13.07).
| Rubric test | FQ3'26 reading | Signal |
|---|---|---|
| Revenue YoY accelerating? | -4.0% vs -3.5% vs +5.0%; 6 straight quarters of deceleration | Negative |
| Margins expanding 100+ bps? | GM -251 bps YoY, non-GAAP OM -659 bps YoY, GAAP OM -1,030 bps YoY | Negative |
| Share count declining? | -2.7% YoY, 6 straight quarters of decline | Positive |
| FCF YoY accelerating? | Quarterly FCF -81% YoY; TTM -10% | Negative |
| Segment offset | Auto +61%, non-handset +28% and accelerating | Partial positive |
Initial score 3.5 (three of four rubric legs negative; buybacks and the non-handset acceleration keep it off the floor). Penalty: revenue up but op income down, -1 (FQ1'26 revenue +5.0% with GAAP op income -5.3%; TTM revenue +1.9% with TTM GAAP op income -15%). No negative-FCF, dilution, or 3-quarter debt penalty. Final: 2.5/10. Gate: positive and growing FCF = No (FCF positive, but TTM down 10% and FQ3'26 down 81%).
Assessment: Qualcomm's consolidated financial trajectory is deteriorating, not reaccelerating: revenue has decelerated for six straight quarters into a -4.0% decline in FQ3'26, gross margin hit a 12-quarter low of 53.1%, GAAP operating margin fell back to its FY23 trough of 16.3%, and quarterly FCF dropped to about $0.5B as Qualcomm built inventory and lifted capex, leaving TTM FCF down 10%. The AI thesis does have a real foothold in the numbers, but only at the segment level: Automotive reaccelerated to +61% YoY and Auto plus IoT accelerated for the third consecutive quarter to +28%, lifting non-handset to 40% of QCT, while data center revenue is still under $100M a quarter against a $5B FY27 target. For the financials to score well, FQ4'26 and FQ1'27 need to show the handset decline bottoming (China OEM sequential recovery as guided), price increases restoring QCT gross margin toward the 48% to 50% baseline, and data center revenue actually appearing in the December quarter. Until then, the AI story is a mix shift funded by a shrinking core, and buybacks (-2.7% share count) are the only rubric leg working in shareholders' favor.
Data sourced from Daloopa.