More earnings analysis: https://betafinch.com Groups: CHIPS (https://betafinch.com/groups/CHIPS) ────────── ALEX: Welcome to Beta Finch, your AI-powered earnings breakdown. Today we're digging into Qualcomm's fiscal Q3 2026 results — a quarter that's part strong execution, part serious cost headwinds. Before we get into it, quick note: this podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions. JORDAN: Alright, let's get into the numbers. Qualcomm posted revenue of $9.9 billion, high end of guidance, and non-GAAP EPS of $2.21. QCT — that's their chip business — brought in $8.5 billion, and licensing added $1.3 billion. On the surface, solid. But there's a real story underneath these numbers. ALEX: Right, and that story is memory prices. CEO Cristiano Amon was upfront that the whole industry is dealing with a spike in memory costs, plus higher manufacturing and packaging costs, and supply shortages tied to data center demand sucking up capacity. That's squeezing QCT gross margins below their historical range this quarter. JORDAN: Their answer is price increases — double-digit, broad-based across end markets, according to CFO Akash Palkhiwala. But here's the nuance: it phases in gradually because of existing contracts and product cycles. Amon actually made an interesting point on the call — even a double-digit chip price increase is small compared to the magnitude of memory cost inflation hitting device bills of materials. ALEX: So this isn't really Qualcomm gouging anyone, it's a pass-through of what's happening across the whole supply chain. And notably, they said they expect fiscal 2027 top-line growth despite all this, driven by an inflection in their non-handset businesses. JORDAN: And that's really the headline of this call — the diversification story. At their recent Investor Day, they raised their fiscal 2029 non-handset revenue target from $22 billion to $40 billion. That includes over $24 billion from automotive and IoT, plus more than $15 billion from data center. ALEX: Let's talk data center, because this is the new frontier for Qualcomm. They're rolling out four product lines over the next few years — connectivity starting this year, custom silicon and AI accelerators in fiscal 2027, and server-class CPUs by fiscal 2028. They've already got two custom silicon deals with what they describe as global-scale hyperscalers, and revenue from those starts in the December quarter. JORDAN: They also completed the tape-out of their High Bandwidth Compute chip — HBC Gen 1 — which integrates compute directly with high-density memory. First commercial HBC product is targeted for mid-2027. And they closed the acquisition of Modular, an AI software company, to build out an end-to-end, hardware-agnostic software stack. Worth noting though — Stacy Rasgon from Bernstein asked about margin drag from data center, and Akash confirmed it: expect a 1.5 to 2 percentage point drag on QCT's weighted average gross margin as that early revenue comes online, since it's mostly lower-margin custom chip work initially. ALEX: Automotive was the clear bright spot this quarter — record revenue of $1.6 billion, up 61% year-over-year. They also signed a landmark expanded deal with BMW to be the lead compute silicon provider for next-gen ADAS and digital cockpit, plus a Stellantis collaboration stretching into the 2030s. JORDAN: And they raised their automotive run-rate target — previously $6 billion annualized exiting fiscal 2026, now bumped up to about $7 billion. That's a meaningful upward revision in just one quarter. ALEX: Now let's talk about the elephant in the room — Apple. This was probably the most eyebrow-raising part of the call. JORDAN: Yeah, Akash disclosed that Qualcomm's share of the upcoming iPhone launch will be materially lower than This episode includes AI-generated content.
