Qualcomm (QCOM) delivered one other quarterly report card final week telling the identical previous story: declining hand-set numbers and total falling gross sales and revenue.
Q2 FY 2026 (ends Sep) non-GAAP earnings of $2.65 per share topped the Zacks Consensus Estimate of $2.57 by 3.1% however declined 7% 12 months over 12 months.
Non-GAAP revenues had been $10.60 billion, falling 2% 12 months over 12 months and lacking the consensus mark of $10.64 billion 0.2%.
Diversification remained the important thing constructive, with document automotive gross sales and continued IoT momentum serving to offset handset-related stress tied to a difficult reminiscence atmosphere and cautious construct habits amongst sure OEMs.
Why the Zacks #5 Rank and Why the 15% Rally?
Since their December quarter report in early February, analysts have been busy reducing EPS estimates and this newest report card was no exception. The total-year consensus has dropped 10% now up to now three months, from $12.14 to $10.93.
FY 2027 EPS estimates (begins October) have been slashed over 13% from $12.75 to $11.03, with one other nickel shaved since up to now week.
These dial downs by analysts are the only real cause for the Zacks #5 Rank.
For extra on the basic enterprise drivers and development alternatives, see this text from final week…
Qualcomm Surpasses Q2 Earnings Estimates on Strong Auto, IoT Demand
However why did shares pop 15% the day after earnings?
It is a basic instance of “trying by” mushy present numbers to a high-growth future.
Whereas whole income fell 3% year-over-year and Q3 steering got here in beneath analyst expectations—buyers aggressively pivoted to the “AI infrastructure” story for 3 main causes:
1. The “Main Hyperscaler” Customized Silicon Win
The only greatest catalyst was CEO Cristiano Amon’s affirmation that Qualcomm has secured a “main hyperscaler” (undisclosed, however possible Microsoft, Google, or Meta) for its customized knowledge heart silicon.
The Affect: This validates Qualcomm’s capacity to compete within the knowledge heart market utilizing its Oryon CPU cores.
Timeline: Preliminary shipments are scheduled for the December quarter, marking the primary time Qualcomm will generate significant income from the “AI buildout” past the sting (handsets/PCs).
2. Automotive is the New Progress Engine
Whereas the handset market stays stagnant (down 4% this quarter resulting from China stock builds), the Automotive phase hit document income of $1.3 billion (up 38% YoY).
Qualcomm is now on monitor to exit 2026 with an annualized income run price of over $6 billion for its Snapdragon Digital Chassis.
Buyers are starting to worth QCOM as a diversified “auto-tech” play relatively than only a smartphone chip provider.
3. The “AI PC” and Agentic AI Roadmap
The market is more and more optimistic in regards to the Snapdragon X2 platform. Qualcomm claims its NPU (Neural Processing Unit) outperforms Intel’s newest “Panther Lake” chips by practically 30% in on-device token technology.
Administration’s commentary on “Agentic AI”—the place AI brokers run domestically on PCs and sensible glasses—suggests a higher-margin substitute cycle for {hardware} beginning in late 2026.
Monetary “Sugar Excessive” and Shareholder Returns
There have been two technical elements that fueled the shopping for frenzy:
The $20 Billion Buyback: Qualcomm licensed an enormous new $20 billion share repurchase program, signaling confidence in its money move.
The EPS “Artifact”: Headline earnings per share (EPS) surged 173% to $6.88. Nevertheless, this was largely resulting from a $5.7 billion one-time tax profit. Whereas “low high quality” earnings, the large web earnings enhance allowed for the aggressive buyback authorization.
Backside line: I am really an enormous fan of Cristiano Amon and his efforts to show QCOM right into a key supplier of clever methods at “the sting” for IoT, robotics, automotive and the billions of recent “Bodily-AI” gadgets that can want customized silicon options. I wrote about it right here on my weblog in January: Qualcomm Got here to Play: 7 Product Releases at CES.
Zacks’ Analysis Chief Names “Inventory Most Prone to Double”
Our crew of consultants has simply launched the 5 shares with the best likelihood of gaining +100% or extra within the coming months. Of these 5, Director of Analysis Sheraz Mian highlights the one inventory set to climb highest.
This high choose is a little-known satellite-based communications agency. House is projected to turn into a trillion greenback business, and this firm’s buyer base is rising quick. Analysts have forecasted a significant income breakout in 2025. In fact, all our elite picks aren’t winners however this one might far surpass earlier Zacks’ Shares Set to Double like Hims & Hers Well being, which shot up +209%.
Free: See Our Prime Inventory And 4 Runners Up
QUALCOMM Included (QCOM) : Free Inventory Evaluation Report
This text initially revealed on Zacks Funding Analysis (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
