Qualcomm's Impressive Guidance Comes With a Big Catch
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Qualcomm's Impressive Guidance Comes With a Big Catch Moz Farooque ACCA Thu, November 5, 2026 at 12:41 PM EST 2 min read QCOM -11.28% AMZN -2.52% This article first appeared on GuruFocus . Qualcomm ( NASDAQ:QCOM ) issued stronger-than-expected first-quarter sales guidance Wednesday, but shares still fell more than 6% after hours as weakness in smartphones overshadowed rapid growth in AI data centers, automotive and other newer businesses. Warning! GuruFocus has detected 2 Warning Sign with QCOM. Is QCOM fairly valued? Test your thesis with our free DCF calculator. The chipmaker forecast fiscal first-quarter revenue of $10.4 billion to $11.2 billion , above Wall Street expectations. Qualcomm also reiterated that fiscal 2027 should mark an important inflection point, with non-handset revenue expected to grow more than 60% year over year . That diversification is becoming increasingly important. Qualcomm said its automotive business delivered a record quarter, with revenue topping $2 billion and rising 89% from a year earlier . The company also reiterated its target for $5 billion in data-center revenue in fiscal 2027 , helped by a growing AI infrastructure push and partnerships with companies including Amazon. But the handset business remains the problem. Smartphone chip revenue fell 26% to $5.14 billion in the quarter as global smartphone shipments declined roughly 20%. Apple-related revenue is also becoming a larger headwind as Apple continues shifting toward its own modem technology. Qualcomm's fiscal fourth-quarter non-GAAP revenue was $10.44 billion , down 7% year over year, while non-GAAP earnings per share fell 28% to $2.17 . For the full fiscal year, revenue slipped 2% on a non-GAAP basis. The company is trying to make up that gap with much larger bets outside phones. Qualcomm recently signed what it called its largest-ever 5G infrastructure agreement with SpaceX and is targeting $15 billion in annual data-center revenue by fiscal 2029 . I think Qualcomm's quarter shows why the stock can have a strong long-term diversification story and still sell off on good guidance. The newer businesses are clearly working. Automotive is growing rapidly, data-center revenue is starting to ramp, and management expects non-handset sales to accelerate sharply in fiscal 2027. But smartphones are still too large to ignore. A 26% decline in handset revenue means Qualcomm needs those newer businesses to scale fast enough to offset weakness in the franchise that still generates most of its chip sales. For investors, the key things to watch are handset stabilization, Apple modem exposure, data-center execution, automotive growth and whether non-handset revenue really reaches the 60%-plus growth management expects in fiscal 2027 . Qualcomm's diversification story is becoming more credible. The problem is that its old business is weakening at the same time.
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