QualcommNarrow moat

QCOM — overall economic moat

Investment snapshot
Narrow moat↘ NarrowingConfidenceMediumValuationFair
Strongest advantageA 72%-margin toll on every phone
Greatest threatApple built its own modem
Key metricHandsets vs automotive + IoT
Verdict: Two businesses at one address: a patent toll paid on handsets whatever chip is inside, and a chip franchise whose largest customer has just finished replacing it. At ~23x earnings the market is pricing the second and getting the first for very little — which is right only if automotive, growing 61%, stops.
📈 QCOM valuation, revenue & earnings — P/E, P/S, revenue, EPS →

Qualcomm is two companies that share a lobby, and only one of them has to sell you anything.

Qualcomm revenue by stream, FY2025QCT Handsets $27.8bn — 63%QCT IoT $6.6bn — 15%QTL Licensing $5.6bn — 13%QCT Automotive $4.0bn — 9%Other $0.3bn — 1%$44.3bn in total. The amber slice earns a 72% pre-tax margin; the green one earns 30%.
Thirteen percent of the revenue produces about a quarter of the profit.

The visible one is QCT, the chip business: $38.4 billion of revenue in fiscal 2025, mostly Snapdragon processors and modems for phones, and increasingly for cars and connected devices.1 It designs the silicon, TSMC and Samsung fabricate it, and Qualcomm sells it to handset makers. Handsets were $27.8 billion of that, automotive $4.0 billion and the internet of things $6.6 billion. It is a very good chip business, earning a 30% pre-tax margin.2

The other one is QTL, and it is stranger. QTL owns patents — a portfolio built over four decades that includes claims essential to how mobile phones talk to networks at all. It licenses that portfolio to handset makers, who pay a royalty on the price of every phone they sell. Not on Qualcomm chips. On phones. A handset built entirely with MediaTek silicon still generates a payment to Qualcomm, because the royalty is owed on the standard rather than on the part.3 QTL brought in $5.6 billion of licensing revenue in fiscal 2025 and turned $4.0 billion of it into pre-tax profit — a 72% margin, against 30% at QCT. Thirteen percent of the revenue, roughly a quarter of the profit.

Put together, fiscal 2025 was a record: $44.3 billion of revenue, up 14%, and $12.4 billion of operating income.4 Then look at the bottom line and it says $5.5 billion of net income, down from $10.1 billion. That is not the business. It is a $5.7 billion charge to establish a valuation allowance following the OBBB tax legislation, on a year in which operations set records.5 Roughly $4.1 billion of it reversed in fiscal 2026.6 For this company, more than most, operating income is the line to read.

The concentration is the part nobody can argue away. Apple, Samsung and Xiaomi each accounted for 10% or more of consolidated revenues in fiscal 2025. By customer headquarters, China including Hong Kong was $20.3 billion — 46% of everything, the United States $10.5 billion and South Korea $9.5 billion.7 Around 52,000 people, mostly engineers, in 38 countries.8

And the largest of those customers is leaving. Apple has been building its own modem, and in the quarter ended June 2026 Qualcomm's handset revenue fell 20% year over year to $5.09 billion while automotive rose 61% and IoT 9%.9 Management told investors that Apple-related revenue would fall by roughly half between the September and December quarters, and simultaneously doubled its fiscal 2029 non-handset revenue target to $40 billion.10 Those two sentences are the whole investment case, stated by the company: the hole is real, and the plan is to grow around it rather than to plug it.

The market has been pricing that for a while. At about $196 a share and $209 billion, Qualcomm trades at roughly 23 times earnings, 21 times what analysts expect next year and about 5 times sales.11 It is unusual to find a business earning these returns at these multiples, and the reason is not a secret.

Two structural facts explain why the two halves behave so differently. QCT owns no fabs — Qualcomm designs and TSMC and Samsung build, which is why $9.0 billion of research and development is the largest line in the cost structure and why returns on capital run in the twenties and forties rather than the low teens of a company that owns its factories.12 QTL owns nothing physical at all. Its cost base was $1.5 billion against $5.6 billion of revenue, and essentially all of it is people.

The risk in that arrangement is that both halves depend on the same customers, and there are very few of them. A handset maker that switches to a rival's chip still owes the royalty; a handset maker that stops making handsets, or builds its own silicon and litigates the licence, takes both. That is not hypothetical — it is precisely what happened between 2017 and 2019, when Qualcomm's largest customer withheld payments, regulators on three continents opened cases, and operating income fell from $6.5 billion to $621 million in two years before a settlement restored it. The company has been through this before. It is the only one in this collection that has. Its four revenue lines are taken in turn in The Revenue Lines.

The number that tests this moat
Reported
Revenue, and where it comes from
$44.3bn in FY2025 — handsets 63%, licensing 13%

QCT semiconductors were $38,367M (handsets $27,793M, automotive $3,957M, IoT $6,617M) and QTL licensing $5,582M. The two halves earn very differently: QCT at a 30% pre-tax margin, QTL at 72%. By customer headquarters, China including Hong Kong was $20,340M — 46% of the total. Watch the handset line against automotive plus IoT: the quarter they cross is the quarter this stops being a phone company.

Source: Qualcomm Form 10-K, FY2025 ↗
Moat scorecardHow ratings work →
Switching costs6/10
Network effects4/10
Pricing power7/10
Hard to replicate7/10
Disruption resistance4/10
Overall durability6/10

A licensing position built over four decades that cannot be assembled by anyone else, attached to a chip business whose largest customer has just demonstrated it takes six years to replace.

Dig deeper
DIG DEEPER 01
The Revenue Lines
The biggest line is shrinking, the most profitable is flat, and the two that are growing are not yet big enough to carry it.
DIG DEEPER 02
The Moat
The chip business is excellent and replicable — Apple just proved it takes six years — and the licensing business is neither.
DIG DEEPER 03
Competitors
The most dangerous competitor is a customer, the second is a supplier, and in two of the three growth markets Qualcomm is the challenger.
DIG DEEPER 04
Major Clients
Three customers each above a tenth, forty-six percent of revenue headquartered in China, and the largest name is leaving.
✦ Future bets — beyond today's moat
✦ FUTURE BET 01
The Future Bets
Forty billion dollars of non-handset revenue by 2029, from about fourteen today, with no margin for automotive slowing.
⚠ Threats to the moat
⚠ THREAT 01
The Customer Building Your Replacement
Apple bought Intel's modem business in 2019, shipped its own in 2025, and Qualcomm's handset revenue fell a fifth in a quarter.
⚠ THREAT 02
Forty-Six Percent of Revenue Answers to Beijing
Strip out the Apple story and nearly half of what remains is decided in a country where Qualcomm has no vote.
◆ What the market may be missing
◆ THE VARIANT VIEW
What the Market Isn't Pricing In
A 72%-margin toll being thrown in for free, two years of earnings nobody can read, and a 61% growth line nobody is counting.
◆ THE VARIANT VIEW
Inside the Latest Quarter (Q3 FY2026)
Handsets down twenty percent, automotive up sixty-one, and the non-handset target doubled on the same call.
References
  1. ReportedThe visible one is QCT, the chip business: $38.4 billion of revenue in fiscal 2025, mostly Snapdragon processors and modems for phones, and increasingly for cars and connected devices.
    Qualcomm Incorporated, Form 10-K FY2025 — Item 7, Management's Discussion and Analysis, and the reportable-segment note. QCT revenues $38,367M (2024 $33,196M, 2023 $30,382M) with EBT of $11,670M ($9,527M, $7,924M) at 30% of revenues (29%, 26%); QCT revenue streams handsets $27,793M ($24,863M, $22,570M), automotive $3,957M ($2,910M, $1,872M) and IoT $6,617M ($5,423M, $5,940M). QTL revenues $5,582M ($5,572M, $5,306M) against total costs and expenses of $1,539M ($1,545M, $1,678M), for EBT of $4,043M ($4,027M, $3,628M) — 72% of revenues in each of the three years. Reportable-segment revenues $43,949M, $38,786M and $35,716M against consolidated revenues of $44,284M, $38,962M and $35,820M. During the second quarter of fiscal 2025 Qualcomm executed final agreements for new long-term licensing arrangements. — FY2025 · publ. 2025-11-05 · source ↗
  2. ReportedIt is a very good chip business, earning a 30% pre-tax margin.
    Qualcomm Incorporated, Form 10-K FY2025 — Item 7, Management's Discussion and Analysis, and the reportable-segment note. QCT revenues $38,367M (2024 $33,196M, 2023 $30,382M) with EBT of $11,670M ($9,527M, $7,924M) at 30% of revenues (29%, 26%); QCT revenue streams handsets $27,793M ($24,863M, $22,570M), automotive $3,957M ($2,910M, $1,872M) and IoT $6,617M ($5,423M, $5,940M). QTL revenues $5,582M ($5,572M, $5,306M) against total costs and expenses of $1,539M ($1,545M, $1,678M), for EBT of $4,043M ($4,027M, $3,628M) — 72% of revenues in each of the three years. Reportable-segment revenues $43,949M, $38,786M and $35,716M against consolidated revenues of $44,284M, $38,962M and $35,820M. During the second quarter of fiscal 2025 Qualcomm executed final agreements for new long-term licensing arrangements. — FY2025 · publ. 2025-11-05 · source ↗
  3. ReportedA handset built entirely with MediaTek silicon still generates a payment to Qualcomm, because the royalty is owed on the standard rather than on the part.
    Qualcomm Incorporated, Form 10-K for the fiscal year ended 28 September 2025 (SEC, CIK 804328) — Item 1, Business, and the revenue-concentration and geographic disclosures. Qualcomm operates through QCT (semiconductors) and QTL (licensing), with QSI making strategic investments. QTL grants licences to portions of a patent portfolio including rights essential to and/or useful in the manufacture and sale of certain wireless products. In fiscal 2025 revenues from Apple, Samsung and Xiaomi each comprised 10% or more of consolidated revenues. Revenues by country, reported by customer or licensee headquarters: China including Hong Kong $20,340M (46%), United States $10,515M (24%), South Korea $9,542M (21%), other foreign $3,887M (9%), total $44,284M; the equivalent 2023 figures were $13,386M (37%), $10,503M (29%), $8,075M (23%) and $3,856M (11%). Approximately 52,000 full-time, part-time and temporary workers at 28 September 2025, in over 200 locations in 38 countries, with a voluntary turnover rate around 6%. Named registry and semiconductor competitors and the risk factors relating to customer vertical integration are set out in the same Item. — FY2025 · publ. 2025-11-05 · source ↗
  4. ReportedPut together, fiscal 2025 was a record: $44.3 billion of revenue, up 14%, and $12.4 billion of operating income.
    Qualcomm Incorporated, Form 10-K FY2025 — consolidated statements of operations and the income-tax note. Revenues: equipment and services $37,869M and licensing $6,415M, total $44,284M (2024 $38,962M, 2023 $35,820M). Cost of revenues $19,738M, research and development $9,042M, selling, general and administrative $3,110M, other $39M, total costs and expenses $31,929M; operating income $12,355M (2024 $10,071M). Income before income taxes $12,663M; income tax expense $7,122M, driven primarily by a $5.7 billion charge to income tax expense to establish a valuation allowance as a result of the tax reform legislation included in the One Big Beautiful Bill; net income $5,541M against $10,142M in 2024. Diluted earnings per share $5.01 ($8.97, $6.42) on 1,105 million diluted shares (1,130, 1,126). Qualcomm intends to continue paying quarterly cash dividends. — FY2025 · publ. 2025-11-05 · source ↗
  5. ReportedIt is a $5.7 billion charge to establish a valuation allowance following the OBBB tax legislation, on a year in which operations set records.
    Qualcomm Incorporated, Form 10-K FY2025 — consolidated statements of operations and the income-tax note. Revenues: equipment and services $37,869M and licensing $6,415M, total $44,284M (2024 $38,962M, 2023 $35,820M). Cost of revenues $19,738M, research and development $9,042M, selling, general and administrative $3,110M, other $39M, total costs and expenses $31,929M; operating income $12,355M (2024 $10,071M). Income before income taxes $12,663M; income tax expense $7,122M, driven primarily by a $5.7 billion charge to income tax expense to establish a valuation allowance as a result of the tax reform legislation included in the One Big Beautiful Bill; net income $5,541M against $10,142M in 2024. Diluted earnings per share $5.01 ($8.97, $6.42) on 1,105 million diluted shares (1,130, 1,126). Qualcomm intends to continue paying quarterly cash dividends. — FY2025 · publ. 2025-11-05 · source ↗
  6. ReportedIt is a $5.7 billion charge to establish a valuation allowance following the OBBB tax legislation, on a year in which operations set records. Roughly $4.1 billion of it reversed in fiscal 2026.
    Qualcomm Incorporated, Form 10-K FY2025 — consolidated statements of operations and the income-tax note. Revenues: equipment and services $37,869M and licensing $6,415M, total $44,284M (2024 $38,962M, 2023 $35,820M). Cost of revenues $19,738M, research and development $9,042M, selling, general and administrative $3,110M, other $39M, total costs and expenses $31,929M; operating income $12,355M (2024 $10,071M). Income before income taxes $12,663M; income tax expense $7,122M, driven primarily by a $5.7 billion charge to income tax expense to establish a valuation allowance as a result of the tax reform legislation included in the One Big Beautiful Bill; net income $5,541M against $10,142M in 2024. Diluted earnings per share $5.01 ($8.97, $6.42) on 1,105 million diluted shares (1,130, 1,126). Qualcomm intends to continue paying quarterly cash dividends. — FY2025 · publ. 2025-11-05 · source ↗
  7. ReportedBy customer headquarters, China including Hong Kong was $20.3 billion — 46% of everything, the United States $10.5 billion and South Korea $9.5 billion.
    Qualcomm Incorporated, Form 10-K for the fiscal year ended 28 September 2025 (SEC, CIK 804328) — Item 1, Business, and the revenue-concentration and geographic disclosures. Qualcomm operates through QCT (semiconductors) and QTL (licensing), with QSI making strategic investments. QTL grants licences to portions of a patent portfolio including rights essential to and/or useful in the manufacture and sale of certain wireless products. In fiscal 2025 revenues from Apple, Samsung and Xiaomi each comprised 10% or more of consolidated revenues. Revenues by country, reported by customer or licensee headquarters: China including Hong Kong $20,340M (46%), United States $10,515M (24%), South Korea $9,542M (21%), other foreign $3,887M (9%), total $44,284M; the equivalent 2023 figures were $13,386M (37%), $10,503M (29%), $8,075M (23%) and $3,856M (11%). Approximately 52,000 full-time, part-time and temporary workers at 28 September 2025, in over 200 locations in 38 countries, with a voluntary turnover rate around 6%. Named registry and semiconductor competitors and the risk factors relating to customer vertical integration are set out in the same Item. — FY2025 · publ. 2025-11-05 · source ↗
  8. ReportedBy customer headquarters, China including Hong Kong was $20.3 billion — 46% of everything, the United States $10.5 billion and South Korea $9.5 billion. Around 52,000 people, mostly engineers, in 38 countries.
    Qualcomm Incorporated, Form 10-K for the fiscal year ended 28 September 2025 (SEC, CIK 804328) — Item 1, Business, and the revenue-concentration and geographic disclosures. Qualcomm operates through QCT (semiconductors) and QTL (licensing), with QSI making strategic investments. QTL grants licences to portions of a patent portfolio including rights essential to and/or useful in the manufacture and sale of certain wireless products. In fiscal 2025 revenues from Apple, Samsung and Xiaomi each comprised 10% or more of consolidated revenues. Revenues by country, reported by customer or licensee headquarters: China including Hong Kong $20,340M (46%), United States $10,515M (24%), South Korea $9,542M (21%), other foreign $3,887M (9%), total $44,284M; the equivalent 2023 figures were $13,386M (37%), $10,503M (29%), $8,075M (23%) and $3,856M (11%). Approximately 52,000 full-time, part-time and temporary workers at 28 September 2025, in over 200 locations in 38 countries, with a voluntary turnover rate around 6%. Named registry and semiconductor competitors and the risk factors relating to customer vertical integration are set out in the same Item. — FY2025 · publ. 2025-11-05 · source ↗
  9. ReportedApple has been building its own modem, and in the quarter ended June 2026 Qualcomm's handset revenue fell 20% year over year to $5.09 billion while automotive rose 61% and IoT 9%.
    Qualcomm Incorporated, Form 10-K FY2025 — Item 7, Management's Discussion and Analysis, and the reportable-segment note. QCT revenues $38,367M (2024 $33,196M, 2023 $30,382M) with EBT of $11,670M ($9,527M, $7,924M) at 30% of revenues (29%, 26%); QCT revenue streams handsets $27,793M ($24,863M, $22,570M), automotive $3,957M ($2,910M, $1,872M) and IoT $6,617M ($5,423M, $5,940M). QTL revenues $5,582M ($5,572M, $5,306M) against total costs and expenses of $1,539M ($1,545M, $1,678M), for EBT of $4,043M ($4,027M, $3,628M) — 72% of revenues in each of the three years. Reportable-segment revenues $43,949M, $38,786M and $35,716M against consolidated revenues of $44,284M, $38,962M and $35,820M. During the second quarter of fiscal 2025 Qualcomm executed final agreements for new long-term licensing arrangements. — FY2025 · publ. 2025-11-05 · source ↗
  10. ReportedApple has been building its own modem, and in the quarter ended June 2026 Qualcomm's handset revenue fell 20% year over year to $5.09 billion while automotive rose 61% and IoT 9%. Management told investors that Apple-related revenue would fall by roughly half between the September and December quarters, and simultaneously doubled its fiscal 2029 non-handset revenue target to $40 billion.
    Coverage of Qualcomm's third-quarter fiscal 2026 results, July 2026 — revenue of $9.9 billion and non-GAAP earnings per share of $2.21, meeting the high end of revenue guidance and short of consensus on earnings. QCT handset revenue of $5.09 billion declined 20% year over year on industry-wide memory supply constraints, higher input costs affecting device pricing and demand, and inventory adjustments at major OEMs; automotive revenue of $1.59 billion rose 61% and IoT of $1.83 billion rose 9%. Management said a sharper-than-expected reduction in Apple modem-related sales contributed to a lighter fourth-quarter outlook, with Apple-related revenues expected to fall by approximately 50% between the September and December quarters, and doubled the fiscal 2029 non-handset revenue target to $40 billion. Fourth-quarter guidance was $9.7-10.5 billion of revenue and $2.05-2.25 of non-GAAP diluted EPS, both below consensus near $10.02 billion and $2.36. — Q3 FY2026 · publ. 2026-07-30 · source ↗
  11. ReportedAt about $196 a share and $209 billion, Qualcomm trades at roughly 23 times earnings, 21 times what analysts expect next year and about 5 times sales.
    Qualcomm (NASDAQ: QCOM) market data, 23 September 2026 - $196.03 a share, market capitalisation $209.37 billion on 1.07 billion shares, P/E 23.07, forward P/E 21.38, dividend yield 1.88% (cross-checked with companiesmarketcap, $209.47 billion) — September 2026 · publ. 2026-09-23 · source ↗
  12. ReportedQCT owns no fabs — Qualcomm designs and TSMC and Samsung build, which is why $9.0 billion of research and development is the largest line in the cost structure and why returns on capital run in the twenties and forties rather than the low teens of a company that owns its factories.
    Qualcomm Incorporated, Form 10-K FY2025 — Item 7, Management's Discussion and Analysis, and the reportable-segment note. QCT revenues $38,367M (2024 $33,196M, 2023 $30,382M) with EBT of $11,670M ($9,527M, $7,924M) at 30% of revenues (29%, 26%); QCT revenue streams handsets $27,793M ($24,863M, $22,570M), automotive $3,957M ($2,910M, $1,872M) and IoT $6,617M ($5,423M, $5,940M). QTL revenues $5,582M ($5,572M, $5,306M) against total costs and expenses of $1,539M ($1,545M, $1,678M), for EBT of $4,043M ($4,027M, $3,628M) — 72% of revenues in each of the three years. Reportable-segment revenues $43,949M, $38,786M and $35,716M against consolidated revenues of $44,284M, $38,962M and $35,820M. During the second quarter of fiscal 2025 Qualcomm executed final agreements for new long-term licensing arrangements. — FY2025 · publ. 2025-11-05 · source ↗
Sources
Generated September 23, 2026