Wolfe Research Reiterates Peerperform Rating on Qualcomm

Wolfe Research analyst Chris Caso reiterated a Peerperform rating on Qualcomm (NASDAQ: QCOM).

“QCOM reported DecQ revenue slightly above expectations, but provided disappointing MarQ guidance due to the impact of higher memory prices on handset OEM builds.

MarQ guidance of $10.6bn rev (-13% q/q, -2% y/y) is 5% below the Street $11.1bn; EPS guidance is $2.55, $0.35 below consensus.

While we don’t think that commentary will be a big surprise to investors, it is different from management’s commentary as recently as CES, when they expected minimal impact to the premium tier which represents the majority of QCT revenue.

We also believe MarQ guidance reflects the impact of lost share at Samsung flagship.

In contrast, auto continues to be strong, with MarQ guidance assuming more than 35% y/y auto growth (implying 20%+ q/q auto growth).

Nearer term, our concern is that memory issues aren’t likely to be resolved this year.

In addition, the impact on licensing hasn’t yet been felt, and we expect that to be a headwind for that highly profitable business later in the year.

And of course, the loss of AAPL revenue hasn’t yet been felt either – we expect that impact to begin in SepQ and have a more meaningful impact in FY27.

As a result, we are taking a conservative approach to our estimates for handsets (both QCT and QTL) for the remainder of CY26, partially offset by improvement in auto.

In total, our FY26 revenue drops from $45.5bn to $43.4bn, and our FY27 revenue is $42.8bn, vs. $45.7bn prior consensus.

We had downgraded the stock about 18 months ago, and have remained cautious on a thesis that the decline in handsets (with AAPL as the biggest driver) was highly certain, while offsetting gains in IOT/auto/datacenter were highly uncertain.

Of these, auto has clearly been the biggest success, but it simply isn’t large enough to offset handset.

We remain cautious as the ongoing memory shortage likely means that handset is likely to get worse before it gets better, and we don’t think the multiple (15x our $9.68 FY27 EPS) fully discounts the risk if conditions indeed worsen.”

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