Qualcomm (NASDAQ:QCOM) Q3 2026: Handset Revenue Falls 20%, EPS Misses Estimates

Qualcomm (NASDAQ: QCOM) reported fiscal third-quarter results for the period ended June 28, 2026, with adjusted EPS of $2.21 missing the $2.27 analyst consensus by 2.7%, even as total revenue of $9.95 billion came in at the high end of guidance. The company's handset chip segment contracted sharply, offsetting growth in automotive and IoT, while Q4 non-GAAP EPS guidance at the midpoint of $2.15 implied further pressure ahead. Shares fell 4.42% on Wednesday, July 29, while the S&P 500 declined 1.54%.

Q3 Fiscal 2026 Results

• Revenue: $9.95 billion, down 4.0% year over year from $10.37 billion in Q3 fiscal 2025.
• GAAP EPS: $1.87, down 23.0% from $2.43 in the prior-year period.
• Adjusted EPS: $2.21, down 20.2% from $2.77 year over year, missing the $2.27 consensus.
• GAAP pre-tax income: $2.46 billion, with a pre-tax income margin of 24.7%, down 3.8 percentage points year over year.
• Adjusted pre-tax income: $2.69 billion, with a margin of 27.1%, down 7.1 percentage points year over year.
• Capital return: $2.3 billion returned to stockholders, including $973 million in dividends ($0.92 per share) and $1.4 billion in share repurchases covering 8 million shares.

What Drove the Results

Adjusted EPS of $2.21 missed the $2.27 consensus by 2.7%, with revenue of $9.95 billion landing at the high end of guidance but declining 4.0% year over year. The primary driver of the year-over-year deterioration was the QCT Handsets segment, where revenue fell 20% to $5.09 billion from $6.33 billion in Q3 fiscal 2025, reflecting weakness in smartphone chip demand. The adjusted pre-tax income margin compression of 7.1 percentage points, to 27.1%, reflects industry-wide increases in input costs across wafer fabrication, assembly, test, advanced packaging, and memory, according to the company's press release.

Automotive revenues rose 61% year over year to $1.59 billion, extending what the company described as 23 consecutive quarters of double-digit year-over-year growth in that segment. IoT revenues grew 9% to $1.83 billion, and combined Automotive and IoT revenues grew 28% year over year. The QTL licensing segment posted revenues of $1.28 billion, down 3% from $1.32 billion a year ago, with a pre-tax income margin of 69%, down from 71%.

Qualcomm also completed its acquisition of Modular Inc during the quarter, which the company said creates an open software foundation for generative and agentic AI. CEO Cristiano Amon stated that total non-handset revenues are targeted to grow to $40 billion by fiscal 2029, nearly double the target shared in November 2024, and that non-handset revenue growth is expected to accelerate from 24% in fiscal 2026 to greater than 60% in fiscal 2027.

Wall Street View

Q4 fiscal 2026 guidance calls for revenue of $9.7 billion to $10.5 billion, with non-GAAP diluted EPS in the range of $2.05 to $2.25 and GAAP diluted EPS of $1.22 to $1.42. The midpoint of non-GAAP EPS guidance of $2.15 falls below the current adjusted EPS of $2.21 reported for Q3, pointing to continued margin pressure from higher input costs. Qualcomm said it is taking pricing actions to pass on elevated input costs, with gross margin benefits expected to materialize gradually as new pricing takes effect.

Investor Takeaway

The 20% decline in handset revenues and the 7.1-percentage-point compression in adjusted pre-tax income margin are the central investor concerns this quarter, as Qualcomm's legacy smartphone chip franchise continues to shrink in revenue contribution. The long-term diversification thesis, anchored in a $40 billion non-handset revenue target by fiscal 2029 and accelerating data center exposure, remains intact in strategic terms, but the pace of margin recovery from industry-wide input cost increases will be the key variable to monitor in Q4 and into fiscal 2027.