Qualcomm Keeps $5 Billion Data Center Target as Handset Revenue Falls

Qualcomm (QCOM ) reported fourth-quarter and fiscal 2026 results on November 4, 2026, with GAAP revenue for the quarter ended September 27, 2026 down 8% year over year to $10.322 billion. Handset revenue fell 26%, while the company reiterated a $5 billion fiscal 2027 Data Center revenue target as it prepares to add that business to its semiconductor segment’s reported revenue streams.

Quarterly diluted EPS on Qualcomm’s non-GAAP basis—which excludes QSI and specified share-based compensation, acquisition, tax and other items—fell 28% to $2.17 from $3.00. GAAP EPS was $1.17, against a loss of $2.89 a year earlier.

For fiscal 2026, GAAP net income rose 146% to $13.628 billion, but included a $5.7 billion income-tax benefit, worth $5.32 per share, from releasing a valuation allowance established in the fourth quarter of fiscal 2025. Non-GAAP net income fell 15% to $11.311 billion. The tax benefit helps explain why bottom-line GAAP profit surged even as non-GAAP earnings declined.

Handset Decline Offsets Automotive Growth

QCT, Qualcomm’s semiconductor segment, generated $9.015 billion of revenue, down 8%, while earnings before taxes fell 26% to $2.142 billion. Its EBT margin narrowed to 24% from 29%. Handsets generated $5.137 billion, down from $6.961 billion, leaving them the largest QCT stream and the main source of the segment’s decline.

Automotive revenue rose 89% to $1.990 billion, which Qualcomm described as a record, while IoT revenue increased 4% to $1.888 billion. QTL licensing revenue fell 7% to $1.304 billion, and its EBT margin narrowed to 70% from 72%.

Data Center Moves Into QCT

Starting in fiscal 2027, Data Center will join handsets, automotive and IoT as a fourth QCT revenue stream; it was included in nonreportable segments during fiscal 2026. Chief executive Cristiano Amon projected that non-handset revenue would grow by more than 60% in fiscal 2027, calling it “the start of our non-handset revenue inflection.”

Qualcomm’s earnings presentation projects at least $650 million of Data Center revenue in the first quarter of fiscal 2027, increases in each subsequent quarter, and a $7 billion annualized run rate on exiting the year. Its fiscal 2029 target remains more than $15 billion.

Disclosed multi-generation design wins comprise two connectivity customers, three custom-silicon or AI-accelerator customers, and Meta for CPUs, with Amazon among both the connectivity and custom-silicon customers. Qualcomm says it is already in production with Amazon and expects revenue to begin in the December 2026 quarter. The arrangement includes warrants covering up to $60 billion in potential Amazon purchases over ten years, with 15% of the warrants vested immediately based on initial purchase commitments. That amount represents potential purchases, not a purchase guarantee.

The Amazon collaboration was originally announced on September 8, 2026, covering customized silicon for AI inference and optical connectivity extending up to 1.6T. The earnings materials add production status, expected revenue timing and the warrant structure to that earlier disclosure.

Guidance Reflects Investment and Input Costs

For the first quarter of fiscal 2027, Qualcomm guided to revenue of $10.4 billion to $11.2 billion and non-GAAP diluted EPS of $2.15 to $2.35. QCT revenue is expected at $9.0 billion to $9.6 billion, with an EBT margin of 20% to 22%.

The QCT margin outlook includes a three-percentage-point effect from adding Data Center to the segment, reflecting investment in AI-accelerator and CPU roadmaps ahead of the revenue ramp. The reporting change leaves total-company guidance and Qualcomm’s long-term 30% QCT EBT-margin target unchanged.

Qualcomm is also raising product prices in response to broad cost increases across wafer fabrication, assembly, test, advanced packaging, memory and other materials. It expects the full benefit of those actions to appear in QCT gross margins in the second half of fiscal 2027.

Automotive growth is already visible in the results, while the Data Center targets depend on a ramp that remains in its initial production stage. The central question for fiscal 2027 is whether non-handset growth and Qualcomm’s pricing actions can offset handset weakness while Data Center investment weighs on the segment’s near-term margins.