Earnings Recap — Q3 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 7 of last 7 quarters
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Qualcomm's accelerating diversification into data center, automotive, and industrial IoT is a direct signal of the AI infrastructure buildout extending beyond hyperscale compute into edge and distributed inference. The company's custom silicon ramp, HBC tape-out, and Modular acquisition position it to capture AI inference workloads across the compute continuum, while memory supply constraints highlight the broader industry-wide capacity crunch driven by AI data center demand.
Qualcomm delivered revenue of $9.9 billion and non-GAAP EPS of $2.21 in fiscal Q3, with QCT revenue of $8.5 billion and QTL revenue of $1.3 billion. Automotive revenue hit a record $1.6 billion, up 61% YoY, and IoT grew 9% YoY to $1.8 billion, driven by industrial networking and robotics. The company closed its acquisition of Modular Inc., completed tape-out of its HBC Gen 1 high-bandwidth compute solution, and signed a landmark expanded agreement with BMW for next-generation ADAS and digital cockpit. Management noted that industry-wide memory price increases and supply chain shortages pressured QCT gross margins, and they expect Apple product revenue to decline faster than previously guided.
Management raised its fiscal 2029 non-handset revenue target to $40 billion (from $22 billion), including $15 billion from data center and $24 billion+ from automotive and IoT. They expect non-handset revenues to be more than 50% of QCT revenues in fiscal 2027 and grow to roughly two-thirds by fiscal 2029, with non-handset growth accelerating to greater than 60% YoY in fiscal 2027. Data center revenue growth is expected to reach $5 billion in fiscal 2027, with initial custom silicon revenue beginning in the December quarter. The company guided Q4 FY26 revenue of $9.7–$10.5 billion and non-GAAP EPS of $2.05–$2.25, with QCT handset revenue of approximately $5.2 billion. They expect gross margins to recover to historical levels as price increases take effect over the next couple of quarters, despite a 1.5–2% drag from data center mix. Management also expects China handset revenue to bottom in Q3 and return to double-digit sequential growth in Q4, and they anticipate Apple product revenue to decline materially faster than previously expected.
“We are implementing price increases and as they take effect, we expect to see gross margins realign to our operating model.”
on Gross margin recovery
“We have the ambition to change the current industry approach to AI software from closed to open systems to promote enhanced competition, innovation and resilience.”
on Modular acquisition and AI software strategy
“We are forecasting approximately 50% decline from September to December quarter. This obviously accelerates, kind of, the exit of Apple revenue out of our model.”
on Apple revenue decline
Can you walk us through how we should think about QCT gross margins returning to their prior levels, how long between the ASP increases kind of match the input costs rising?
Akash explained that the gross margin impact is driven by weaker premium mix and higher input costs. Price increases are being implemented and will benefit gross margins over the next couple of quarters, gradually as contracts and product cycles allow, returning to historical range.
Can you just flesh out the pricing actions, like any commentary in terms of the magnitude of price increase that you're looking to take? And then whether these actions are broad-based or you're going to look to be more concentrated across the portfolio?
Akash said the pricing action is broad-based across end markets, with double-digit increases consistent with industry peers. Cristiano added that the increase is small relative to memory cost inflation and should not fundamentally change premium tier demand.
The wording on the paragraph in the slide, it sounded like you guys were making the conscious choice not to sell to them nearly as much as you were before. I mean, you sort of blame the supply -- is that true? I mean I don't want to be too dramatic, but are you basically starving Apple, getting them out quicker than you could have and using that silicon to send it elsewhere?
Akash clarified that supply constraints and discussions led to a materially lower share than 20% for the upcoming iPhone launch, resulting in Apple product revenue in 2027 being less than the prior guidance of a little over $2 billion. He emphasized that non-handset growth will replace the entire Apple product revenue within the year.