Bernstein: Qualcomm’s revenue growth drivers shift to data centers as margin pressure weighs on guidance

Fourth-quarter revenue beats expectations—where did the growth come from?

Qualcomm’s fiscal 2026 fourth-quarter non-GAAP revenue was 10.442 billion dollars, above market consensus of 10.117 billion dollars; adjusted EPS was 2.17 dollars, only slightly above consensus of 2.16 dollars, as lower margins offset some of the revenue beat.
Chip business QCT revenue was 9.015 billion dollars, above market consensus of 8.797 billion dollars, but still down about 8% year over year. Automotive revenue was 1.99 billion dollars, up 89% year over year, supported by strong demand and higher computing-chip content per vehicle; IoT revenue was 1.89 billion dollars, up 4% year over year.
Handset-chip revenue was 5.14 billion dollars, down 26% year over year and below market consensus of 5.25 billion dollars, reflecting headwinds in the memory industry.

The midpoint of the company’s fiscal 2027 first-quarter revenue guidance is 10.8 billion dollars, above market consensus of 10.55 billion dollars; the midpoint of adjusted EPS guidance is 2.25 dollars, below consensus of 2.31 dollars.
The midpoint of QCT’s pretax margin guidance is 21%, below 23.8% last quarter and market expectations of 24.9%. Management said the inclusion of data-center revenue affects margins by about 3 percentage points; Bernstein estimates that even excluding this impact, margins remain about 1 percentage point below consensus, reflecting pressure from rising investment costs.
The company expects data-center revenue to exceed 650 million dollars in the quarter, with shipments of custom chips beginning to ramp up; meanwhile, to invest in its data-center product portfolio, operating-expense guidance rises to about 2.8 billion dollars, above market consensus of 2.77 billion dollars.

The company expects combined automotive, IoT, and data-center revenue to grow more than 60% year over year in fiscal 2027, while handsets’ share of chip revenue falls from about 64% in fiscal 2026 to below 50%. Bernstein estimates that Apple-related revenue will decline by about 6.5 billion dollars year over year, with growth in businesses beyond handsets offsetting the gap.
The company maintains its fiscal 2027 data-center revenue outlook of 5 billion dollars. Based on this figure, Bernstein calculates that automotive and IoT revenue combined would need to grow more than 30% year over year to support the company’s growth expectations for businesses beyond handsets.
The handset business remains an important constraint: the company expects first-quarter handset-chip revenue of about 4.77 billion dollars, down about 39% year over year; sequential growth in the Android business is offset by lower Apple revenue. Bernstein considers the company’s outlook for a broadly flat handset market in calendar 2027 optimistic.

Bernstein believes low-margin custom ASICs will be the main driver of data-center business growth in fiscal 2027, with their impact sufficient to offset the improvement from the company’s price increases in the second half. The firm expects QCT gross margin to remain around 46% at least through this fiscal year, below the company’s modeled range of 48% to 50%; improvement is tied to higher-volume shipments of additional general-purpose chips and CPU products beginning in fiscal 2028.
The firm raised its revenue forecasts for fiscal 2027 and 2028 from 42.2 billion dollars and 49.5 billion dollars, respectively, to 44.3 billion dollars and 51.3 billion dollars, but cut its fiscal 2028 adjusted EPS forecast from 11.81 dollars to 11.32 dollars, citing lower gross margins, higher expenses, and a higher share count.
Bernstein shifted its valuation base to fiscal 2028 and lowered its valuation multiple due to handset and margin risks, while maintaining its 155-dollar price target and Market Perform rating.