Qualcomm Posts $2.65 EPS as Auto Revenue Jumps 38%, China Handsets Hit Bottom

Qualcomm (NASDAQ: QCOM) reported fiscal second quarter 2026 non-GAAP earnings of $2.65 per share on revenue of $10.6 billion, with record automotive segment revenue providing a bright spot amid continued handset market challenges.

Key Numbers

The chipmaker's quarterly revenue declined 3% year-over-year to $10.6 billion, while non-GAAP earnings per share fell 7% to $2.65 from $2.85 in the prior year period. GAAP earnings soared to $6.88 per share, but this included a one-time $5.33 per share tax benefit from the release of a valuation allowance.

The QCT (Qualcomm CDMA Technologies) segment, which houses the company's chip business, saw revenues drop 4% to $9.08 billion. Within QCT, handset revenues tumbled 13% to $6.02 billion, reflecting ongoing weakness in the smartphone market and memory supply constraints affecting several OEM partners.

However, Qualcomm's diversification efforts showed strong results. Automotive revenues surged 38% year-over-year to a record $1.33 billion, while IoT (Internet of Things) revenues grew 9% to $1.73 billion. Combined, automotive and IoT revenues increased 20% year-over-year, demonstrating the company's successful push beyond smartphones.

The licensing segment (QTL) provided stability with revenue rising 5% to $1.38 billion and operating margins expanding to 72% from 70% a year earlier.

What Management Said

CEO Cristiano Amon struck an optimistic tone despite near-term headwinds, emphasizing the company's position in emerging technologies. "We are in a period of profound industry transformation — the rise of AI agents is reshaping our roadmap across every platform we develop," Amon stated.

Management highlighted a critical milestone in data center diversification, confirming that a "leading hyperscaler custom silicon engagement is on track for initial shipments later this calendar year." This marks Qualcomm's entry into the lucrative data center market, historically dominated by companies like Intel, AMD, and Nvidia.

Regarding the China market, which has been a persistent concern for investors, management provided specific timing for a recovery. The company expects QCT handset revenues from Chinese customers to "reach a bottom in the third quarter and return to sequential growth in the following quarter."

For Q3 fiscal 2026 guidance, Qualcomm expects revenues between $9.2 billion and $10.0 billion, with non-GAAP EPS of $2.10 to $2.30. The midpoint implies continued pressure on the top line but relatively stable profitability. QCT revenues are projected at $7.9 billion to $8.5 billion, while QTL revenues should range from $1.15 billion to $1.35 billion.

What to Watch

Investors should monitor three critical areas in coming quarters:

China Recovery Timing: Management's call for a Q3 bottom in Chinese handset revenues represents a concrete prediction that will be closely watched. Any deviation from this timeline could impact investor confidence, as China remains a significant revenue contributor despite geopolitical tensions.

Data Center Traction: The hyperscaler engagement moving toward initial shipments marks a potential new growth vector. Success in data center could offset smartphone market maturity and provide a higher-margin revenue stream. The company plans to provide more details at its June 24 Investor Day.

Memory Supply Resolution: The current quarter's results were impacted by memory supply constraints affecting handset OEM demand. Resolution of these supply chain issues could provide a tailwind for handset revenues, though the timing remains uncertain.

Automotive Momentum: With automotive revenues up 38% and hitting records, this segment's ability to maintain growth rates will be crucial for the diversification narrative. The segment now represents nearly 15% of QCT revenues, up from 10% a year ago.

Qualcomm returned $3.7 billion to shareholders in Q2, including $2.8 billion in buybacks, and announced a new $20 billion share repurchase authorization. This aggressive capital return program signals management confidence despite near-term headwinds.

The company faces a transitional period as it navigates smartphone market weakness while building new growth engines in automotive, IoT, and data center markets. The next two quarters will be critical in validating management's China recovery timeline and demonstrating progress in newer market segments.

*Source: Qualcomm Q2 2026 Form 8-K filed with the SEC*

*StockCliff Research*