Qualcomm (QCOM) shares surged in late trading Wednesday after the chipmaker reported fiscal second-quarter results that surpassed analyst expectations, even as its third-quarter outlook fell short of Wall Street targets. Investors appeared to look past the weak forecast, focusing instead on signs that the prolonged slump in China's smartphone market may be bottoming out and on Qualcomm's expanding ambitions in the data center and automotive sectors.
For the fiscal second quarter ended March 2026, Qualcomm posted revenue of $10.599 billion, a 3% decline year-over-year on a GAAP basis. Adjusted earnings per share came in at $2.65, exceeding the consensus estimate of $2.56 tracked by Seeking Alpha. The company's GAAP net income soared to $7.37 billion, or $6.88 per share, largely due to a $5.7 billion tax benefit that did not factor into the adjusted figures.
Qualcomm's semiconductor unit, QCT, reported handset revenue of $6.024 billion, down 13% from the prior-year period. However, automotive chip revenue jumped 38% to $1.326 billion, and the Internet of Things (IoT) segment posted a 9% gain to $1.726 billion. The sharp increase in automotive and IoT sales underscores Qualcomm's ongoing diversification beyond its core smartphone business.
Looking ahead, Qualcomm guided third-quarter revenue in the range of $9.2 billion to $10.0 billion, with adjusted EPS between $2.10 and $2.30. Both figures missed the LSEG consensus estimates. The company attributed the softer guidance to memory supply constraints, which have driven up costs for handset and PC manufacturers and dampened demand from several phone makers. According to Reuters, the memory shortage could persist until late 2026.
During the earnings call, Qualcomm CEO Cristiano Amon expressed confidence that the smartphone market would begin to recover after the fiscal third quarter. “We can now call the bottom,” Amon said, pointing to the company’s licensing business as a leading indicator of phone makers’ production plans for the remainder of the year. He also highlighted data centers as a key growth area, noting that Qualcomm expects to deliver custom silicon to a leading hyperscaler—industry terminology for a major cloud provider—before the end of 2026.
Amon emphasized that artificial intelligence agents are reshaping Qualcomm’s product roadmap across all platforms, including CPUs, inference accelerators, and application-specific integrated circuits (ASICs). This push positions Qualcomm closer to the custom-chip market served by Broadcom (AVGO) and Marvell (MRVL). “The company is developing CPUs, inference accelerators, and ASICs,” Amon said, signaling a strategic expansion beyond mobile chips.
Industry analysts see Qualcomm’s diversification as gaining traction but still in early stages. Bob O’Donnell, president and chief analyst at TECHnalysis Research, told Reuters that automotive and data-center segments are now part of Qualcomm’s narrative, though they are “building from a small base.” He added that the data-center initiative reflects a “maturation of their strategy.”
Despite the positive sentiment, risks remain. Qualcomm faces headwinds from soft memory demand, heavy reliance on the Chinese market, and the possibility that key customers may pursue vertical integration by developing their own chips. The company flagged these factors as potential causes for deviations from its projections.
On the capital returns front, Qualcomm returned $3.7 billion to shareholders in the second quarter, including $2.8 billion in share repurchases. For the first half of fiscal 2026, buybacks totaled $5.4 billion. The company also recently authorized a new $20 billion share repurchase program.
Investors will get a deeper look at Qualcomm’s long-term strategy at its upcoming investor day on June 24, where management is expected to outline growth projects in data center, physical AI, and other areas. For now, the market appears willing to accept those future bets as a counterbalance to the near-term weakness in the phone market.
