Fiscal Q4 2026 earnings call, November 4, 2026

Data center moves from slideware to shipments, with two hyperscalers carrying the year

Qualcomm used its fiscal fourth-quarter call to put numbers around the part of the story investors care about most. Data center revenue is guided to exceed $650 million in the December quarter, the first period that includes shipments of custom silicon to two hyperscaler customers. Management reiterated the $5 billion fiscal 2027 target and said the business should exit the year at a $7 billion annualized run rate, which would be the starting point for fiscal 2028. The fiscal 2029 target of more than $15 billion was also reaffirmed. CFO Akash Palkhiwala said the company is "very well positioned from a supply perspective" and expects to be "constrained by supply rather than demand for upsides beyond the $5 billion."

The composition of that $5 billion is narrower than the headline implies. CEO Cristiano Amon said the majority comes from two hyperscalers, one of which is Amazon Web Services. Palkhiwala said most of the revenue is custom silicon for the main AI accelerator at those two customers, with connectivity the next material category. Merchant CPUs and the company's own AI accelerators do not meaningfully contribute until fiscal 2029. A third accelerator customer is in advanced discussions on subsequent custom silicon, but it is a story for fiscal 2028 and beyond, not a driver of this year's number. The concentration is a risk worth noting. The plan depends on two customers executing at scale, and Qualcomm's own framing is of "long-term, multi-generation, multi-product" relationships rather than diversified demand.

The Amazon relationship carries a potential revenue opportunity of up to $60 billion over 10 years. Custom accelerators began shipping in October and connectivity products ramp later in November. Qualcomm also secured a second optical connectivity customer. Asked whether the at-the-money warrants issued to Amazon would become a template, Palkhiwala called the structure "the exception" and said other data center engagements follow the traditional semiconductor model, with structures considered "on a deal-by-deal basis."

High Bandwidth Compute silicon is beating its own targets

The most substantive technical update concerned the AI250 and Qualcomm's High Bandwidth Compute technology. Amon said the design target at Investor Day was about 0.5 picojoules per bit, and lab results are running at about 0.3. Yields are exceeding expectations. The strongest early traction is in inference decode, the memory-bandwidth-bound phase of token generation. "It changes the conversation when you have a PowerPoint to where you have silicon," Amon said. Two major new prospects were added in the quarter, including memory partners, and HBC is now entering conversations about custom silicon, combined with Qualcomm's custom accelerators. Management did not provide revenue timing beyond the prior framework, and these are lab results, not production shipments.

On CPUs, the Dragonfly C1000 remains on schedule to ship to Meta, and Qualcomm is engaged with a large new potential customer. Amon said the $5 billion and $15 billion targets assume only Meta, so any additional CPU customer is upside. He also said the pending Arm remedies phase has no implications for the CPU road map. The jury found that Arm breached its architecture license agreement with Qualcomm and engaged in unfair competition.

Starlink 5G network is a new infrastructure leg, but revenue is a fiscal 2028 story

SpaceX selected Qualcomm to power Starlink Mobile's nationwide terrestrial 5G network in the U.S. under a multiyear agreement, with deployment starting in 2027. Qualcomm will supply radio silicon including massive MIMO, the accelerator for the digital unit and Layer 1 software. Amon said revenue should begin to appear as fiscal 2027 closes but is "more of a fiscal 2028" event. No dollar figures were disclosed beyond a description of it as "probably one of the largest build-outs" of a network in the country. The win is strategically notable for an infrastructure business that has been small, but investors have no sizing yet.

Licensing overhang clears, with royalty rates held

Qualcomm has now completed long-term agreements with Apple, Huawei and Transsion. There are no major handset OEM renewals for several years, and the next cycle begins in fiscal 2030. The key disclosure came when Morgan Stanley's Joe Moore asked about rates. Palkhiwala declined to discuss confidential terms but said the unchanged revenue run rate means Qualcomm "was able to hold the rates and the royalties as we renewed the contracts." For a segment that generated $1.3 billion at a 70% EBT margin this quarter, that removes a meaningful source of uncertainty. Guidance for the December quarter calls for QTL revenue of $1.3 billion to $1.5 billion and EBT margin of 72% to 76%.

Handsets: bottoming, but the market outlook looks optimistic

Management maintained that June was the trough for QCT handset and China Android revenue and that sequential growth has resumed. The company assumes global handset units fall low to mid-teens in calendar 2026 and are flat to down in 2027. Bernstein's Stacy Rasgon pushed back, noting that industry units appear to be down more than 20% year-over-year in the September quarter and asking whether recent Android strength reflects pre-buying ahead of price increases. Palkhiwala responded that fiscal 2026 was worsened by channel inventory drawdowns that should not repeat, and that channel inventory remains thin based on QTL data. Amon added that price increases are being applied mainly to new platforms, which are less exposed to pre-buying. The argument is reasonable, but the flat-market assumption still rests on memory pricing normalizing.

December-quarter handset revenue is guided down a mid-single-digit percentage sequentially as Android growth is offset by the Apple modem ramp-down. For the first time, December is not expected to be the strongest quarter of the year. Palkhiwala declined to reaffirm last quarter's suggestion that March would be up, saying only that the way investors have been framing the business is "reasonable." On Samsung, Amon said the new baseline share is "north of 70%," compared with the historical 50%, and told analysts to plan on that basis for future Galaxy generations.

Margins: a three-point segment reset and a gross margin squeeze before pricing arrives

Data center is now reported within QCT, which reduces QCT EBT margin by 3 percentage points as the company invests ahead of revenue. December-quarter QCT EBT margin is guided to 20% to 22% on revenue of $9.0 billion to $9.6 billion, compared with 24% in the September quarter. The long-term QCT target of 30% is unchanged, and management expects to reach it as revenue scales over the next 2 to 3 years. Total company guidance is unaffected, with revenue of $10.4 billion to $11.2 billion and EPS of $2.15 to $2.35. Operating expenses are guided to about $2.8 billion.

Gross margin faces two opposing forces. Price increases to offset higher semiconductor input costs begin to help in the March quarter and should be fully reflected in the second half of fiscal 2027. They should return baseline gross margin to the low end of the historical 48% to 50% range. Custom silicon is then layered on top as "accretive to our operating margins but dilutive to gross margins," pulling the reported figure below that baseline. Management did not quantify the dilution, so the gross margin trajectory through the ramp remains difficult to model.

Automotive outruns expectations as content per vehicle jumps

Automotive delivered its first $2 billion quarter, up 89% year-over-year, and exited fiscal 2026 at an annualized run rate of about $8 billion, $1 billion above the prior expectation. Amon rejected the suggestion of pre-buying, attributing the strength to the fifth-generation platform, where silicon content is 8x that of the third generation in cars on the road today. IoT revenue was $1.9 billion, up 4%, with industrial, networking and robotics up 20% but consumer products held back by memory constraints. Qualcomm expects non-handset QCT revenue to grow more than 60% in fiscal 2027 and to exceed 50% of QCT revenue, with combined auto and IoT roughly flat sequentially in the December quarter.

Optical interconnect and the edge AI opportunity

Amon said interconnect revenue is embedded within the data center targets but will not be broken out. The technology came from the Alphawave acquisition, and Qualcomm demonstrated co-packaged optics with Lumentum and Corning at ECOC. He likened coming optical industry consolidation to what happened in RF front ends and said Qualcomm is in discussions with laser companies about strategic partnerships. On the edge, management pointed to agentic smartphones and smart glasses as the next compute-content driver, with leading AI companies targeting phones that run 100 billion parameter models locally by 2028. Those claims are directional and unquantified for now.