Qualcomm F2Q26 Earnings Follow-Up: Data Center Momentum Strengthens, Handset Business Expected to Bottom in C2Q

Overview

This report is a takeaway summary of J.P. Morgan's post-F2Q26 earnings investor follow-up discussion with Qualcomm IR senior director Sasmit Dwivedi. It focuses on data center, QCT margin target, Chinese Android OEM inventories, Apple business decline, Samsung share, and QCT handset trajectory in C3Q26.

Core views

The core view is that Qualcomm’s opportunity in data center is strengthening, especially through large customer-related custom silicon projects and Humain-related accelerator racks pilot shipments. Management’s 30% long-term EBT margin target for QCT remains supported, and scale in Automotive, IoT, and Data Center could eventually push margin above that target. Short-term handset pressure comes mainly from Chinese Android OEM inventory digestion and Apple share decline, while management believes C2Q may be the bottom for QCT Handsets and C3Q26 revenue could at least be flat sequentially.

Analysis framework

The report uses a post-earnings management commentary and investor Q&A follow-up approach, comparing management commentary on line-by-line revenue, margin, share, and inventory-cycle views against market consensus and investor concerns. The focus is not on rebuilding a full financial model, but on extracting incremental information that could affect revenue and margin trends over the next few quarters and in 2027.

Methodology notes

• Earnings monitoringPost-earnings investor communication

  Through investor relations communication after results, confirm management’s latest judgments on revenue, margin, inventories, and customer share.

  This report is centered on the F2Q26 post-results discussion and extracts key management commentary related to Data Center, QCT margin, Chinese Android OEM, Apple, and Samsung.

• Business-line analysisSegment driver decomposition

  Split Qualcomm into QCT Handsets, Data Center, Automotive, IoT, and Apple-related businesses, and assess growth, margins, and risks for each.

  The report emphasizes that each segment’s impact direction on revenue and margins differs: data center has stronger long-term incremental impact, while handsets are temporarily inventory-sensitive and Apple-related business continues to decline.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• QUALCOMM INC / QCOM.US

  Primary covered name in the report

  Strengths

  Data center momentum is strengthening, with custom silicon expected to ramp first; management reaffirmed the QCT long-term EBT margin 30% target; scale expansion in Automotive, IoT, and Data Center could push margin above the target.

  Weaknesses

  Apple business continues to decline and is expected to fall to about $2 bn in FY27; Chinese Android OEM inventory adjustments are putting short-term pressure on QCT Handsets; data center revenue ramp-up may be uneven.

  Comparison

  Compared with investor concerns over further Samsung share erosion, management expects Qualcomm share to stay in a normal 70%-75% range; compared with traditional handset business, data center is seen as a new medium-to-long term growth driver.

  Risks

  Apple decline worse than expected, weaker-than-expected recovery in Chinese Android OEM demand, slower-than-expected ramp of data center projects, and greater-than-expected margin pressure from custom solutions.

• Semiconductors

  Industry

  Strengths

  AI and data center custom chip demand is creating incremental opportunity for semiconductor companies, and Qualcomm is entering through custom silicon and accelerator racks.

  Weaknesses

  Industry custom solutions can often bring margin pressure, and customer ramp cycles can be phased and volatile.

  Comparison

  Qualcomm’s differentiation is expansion from mobile SoCs into data center, Automotive, and IoT rather than relying only on mobile handset cycles.

  Risks

  AI infrastructure demand pace, customer concentration, cancellation or delay of custom chip projects, and intensifying competition.

Key data

• RatingNeutralIn J.P. Morgan’s rating framework, Neutral corresponds to Hold.
• Target price$160The last row of the price chart shows a target price of $160.
• Current price$156.00The last row of the price chart shows a price of $156.00.
• QCT long-term EBT margin target30%Management remains confident in the long-term 30% target, and data center is expected to be margin-accretive after scaling.
• FY27 Apple business outlookabout $2 bnManagement broadly agrees with sell-side consensus that Apple business is expected to decline from more than $7 bn in FY26 to about $2 bn in FY27.
• Apple business declineabout $5 bnApple-related chip business expected to fall from above $7 bn in FY26 to about $2 bn in FY27.
• Samsung share outlook70%-75%Management expects Qualcomm's share at Samsung to remain in a normal range and disputes concerns about further share loss.
• Chinese Android OEM order adjustmentabout one-third below end demandOrders in C1Q26 were reduced by about one-third, and in C2Q26 management expects orders to remain about one-third below end demand, helping inventories fall to a significantly lower level.
• Data center revenue timing2027Management expects data center business to begin contributing meaningful revenue in 2027, usually at the tens-of-billions-of-dollars scale for Qualcomm.
• C3Q26 QCT Handsets revenueat least flat sequentiallyThe Apple decline is expected to be offset by a rebound in Chinese Android OEM shipments from the C2Q low.

Impact & implications

From an investment perspective, the report presents both medium-to-long term upside and near-term constraints. Data center custom silicon and accelerator racks open growth outside traditional handset chips and may support QCT margins once scaled; however, Apple decline, potential margin pressure from customized data center solutions, and the pace of Chinese Android OEM inventory digestion keep near-term valuation upside limited, which is consistent with the Neutral rating.

Risks

• Apple business continuing to exit could cause step-down revenue declines, with FY27 projected to be about $5 bn lower than FY26.
• If Chinese Android OEM inventory digestion is prolonged, the QCT Handsets bottom and 2H CY26 shipment recovery could be delayed.
• Although data center has momentum, initial revenue mix and project sequencing remain uncertain, so growth could be uneven.
• Custom silicon and customized solutions could create margin pressure, offsetting part of the margin expansion in operating profits.
• If Samsung share fails to hold in the 70%-75% range, handset pressure could worsen.
• J.P. Morgan and Qualcomm have disclosures regarding market-making, investment banking, client relationships, and compensation matters; investors should monitor potential conflicts of interest.

What to watch

• Whether data center in 2027 forms a tens-of-billions-of-dollars revenue contribution.
• The revenue structure and sequencing of ramp-up among custom silicon, accelerator racks, and custom CPUs.
• Whether QCT EBT margin is maintained at or above the 30% long-term target.
• Whether Chinese Android OEM inventories are materially lower at end Jun-Q and whether chip shipments in 2H CY26 are near end demand.
• Whether Qualcomm Apple business declines to about $2 bn in FY27 as expected.
• Whether Samsung share remains stable in the 70%-75% range.
• Whether C3Q26 QCT Handsets revenue is at least flat sequentially.