QUALCOMM Incorporated

(NASDAQ Global Select)
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Somewhat Bullish +35

Qualcomm (QCOM) Has Amazon Now. Why Is It Still Priced Like a Phone Stock?

AI partnership Company update New features AI-generated analysis

🤝 Qualcomm signed a multi-generation collaboration with Amazon to build customized AI inference silicon for AWS data centers and optical connectivity.

💰 The Amazon deal includes a warrant for up to 25 million shares at $161.26, vesting upon binding orders up to a maximum of $60 billion in payments.

🚗 Automotive revenue reached $1,588 million in fiscal Q3 2026, marking the 23rd consecutive quarter of double-digit growth.

⚖️ The licensing arm (QTL) earned a 69% EBT margin in fiscal Q3 2026, down slightly from 71% but remaining highly profitable.

📉 Handset revenue fell 20% to $5,086 million in fiscal Q3 amid challenging memory and supply conditions.

📉 QCT EBT margins slipped to 26% from 30% as input costs climbed, squeezing smartphone chip suppliers broadly.

📈 Management expects non-handset revenue growth to accelerate from 24% in fiscal 2026 to more than 60% in fiscal 2027.

🎯 Qualcomm set a $40 billion non-handset revenue target for fiscal 2029, nearly double its earlier goal.

💹 The stock trades at 16.74x forward earnings, well below the sector's 23.35x multiple but above its 5-year average of 14.35x.

📊 Hedge fund ownership increased to 95 funds in the most recent quarter, up from 71 in the prior one.

⚠️ Apple continues to build in-house modems, posing a long-term competitive risk for Qualcomm's handset business.

🔮 Expected EPS growth is negative 2.74% in 2027 as earnings are expected to soften before new engines take over.

Bullish Signals
  • Qualcomm secured a massive multi-generation collaboration with Amazon to build customized silicon for AI inference in AWS data centers.
  • The deal includes a warrant for up to 25 million shares at $161.26, vesting only upon binding orders up to $60 billion in payments.
  • Automotive revenue reached $1,588 million in fiscal Q3 2026, representing a 61% year-over-year increase.
  • The licensing arm (QTL) achieved a 69% EBT margin in fiscal Q3 2026, demonstrating high profitability.
  • Automotive revenue has grown for 23 consecutive quarters, indicating strong stickiness with automakers.
  • Management raised its non-handset revenue target to $40 billion for fiscal 2029, nearly doubling the previous goal.
  • Non-handset revenue growth is expected to accelerate from 24% in fiscal 2026 to over 60% in fiscal 2027.
  • Hedge fund interest increased significantly, with 95 funds holding the stock compared to 71 in the prior quarter.
Risk Factors
  • Handset revenue fell 20% to $5,086 million in fiscal Q3 due to a challenging memory and supply environment.
  • Non-GAAP EPS fell 20% to $2.21 in fiscal Q3, reflecting the near-term impact of the handset downturn.
  • Apple is building in-house modems and expects to use them in some or all future devices, threatening Qualcomm's core business.
  • Expected EPS growth is negative 2.74% in 2027 as earnings are projected to soften before new engines take over.
Full Analysis
Qualcomm (QCOM) has secured a major strategic partnership with Amazon, signing a multi-generation collaboration to build customized silicon for AI inference in AWS data centers and providing optical connectivity. This deal includes a warrant for up to 25 million shares at $161.26 each, contingent on binding orders totaling up to $60 billion in payments, signaling strong commitment from the hyperscaler. The company is successfully diversifying beyond its traditional smartphone reliance, with automotive revenue reaching $1,588 million in fiscal Q3 2026, a 61% increase driven by long-term design cycles with automakers. Its licensing arm, QTL, continues to generate high margins at 69% EBT in the same period, providing a sturdy financial base despite challenges in the handset market. However, Qualcomm faces near-term headwinds as handset revenue fell 20% to $5,086 million due to a challenging memory and supply environment, causing QCT margins to slip to 26%. Management expects non-handset revenue growth to accelerate significantly from 24% in fiscal 2026 to over 60% in fiscal 2027, aiming for $40 billion in non-handset revenue by fiscal 2029. Currently trading at 16.74 times forward earnings, Qualcomm is priced below the semiconductor sector average of 23.35x but above its own five-year historical average of 14.35x. Investors are weighing the transition risks from a shrinking phone business against the potential upside of new data center and automotive engines, with hedge fund interest rising to 95 funds holding the stock.