◆ What the Market Isn't Pricing In

Qualcomm (QCOM) — the variant view

A 72%-margin toll being thrown in for free, two years of earnings nobody can read, and a 61% growth line nobody is counting.

📈 QCOM valuation, revenue & earnings — P/E, P/S, revenue, EPS →

Three things about Qualcomm are in the filings and mostly absent from the argument about it.

Three things in the filings72%QTL margin, pricedat close to nothing$5.7bntax charge thathalved FY2025earnings$4.1bnof it reversingin FY2026+61%automotive, in ashrinking quarterOperating income was $12,355M in FY2025, up 23% on record revenue.
Two years of earnings nobody can read, and a growth line nobody is counting.

The first is that the licensing business is a different company, and it is not the one being repriced. QTL produced $5.58 billion of revenue and $4.04 billion of pre-tax profit in fiscal 2025 — a 72% margin, against 30% at the chip business.1 It collects on handsets rather than on parts, so a phone built with a competitor's silicon still pays. Roughly a quarter of Qualcomm's profit comes from a business that does not need to win a single design. At the current market value, the chip business is being priced as though the toll came with it for nothing.

The second is that the earnings line has been unreadable for two years running, in opposite directions. Fiscal 2025 reported $5.54 billion of net income on record revenue and record operating income, because a $5.7 billion valuation-allowance charge landed in the tax line.2 The first nine months of fiscal 2026 then reported $12.38 billion of net income against $8.66 billion a year earlier — helped by $4.1 billion of that charge reversing.3 Neither number describes a year of trading. Operating income does: $12.36 billion in fiscal 2025, up 23%.4

The third is that the diversification is real and is being measured against the wrong thing. Automotive revenue rose 61% year over year to $1.59 billion in the June quarter and IoT 9% to $1.83 billion, while handsets fell 20%.5 Those growth rates are not in dispute; the arithmetic is. Automotive and IoT together are about $3.4 billion a quarter against a handset business of $5.1 billion that is shrinking at a fifth a year. Qualcomm has doubled its fiscal 2029 non-handset target to $40 billion, which would make the company mostly-not-a-phone-company for the first time since it was founded.6

What the market appears to be pricing at roughly 23 times earnings is that the handset business shrinks and nothing replaces it. That is a coherent view. It is worth being precise that it requires the automotive line — currently compounding at 61% with design wins already booked — to stall, and the licensing business to be renegotiated downward at the same time.

References
  1. ReportedQTL produced $5.58 billion of revenue and $4.04 billion of pre-tax profit in fiscal 2025 — a 72% margin, against 30% at the chip business.
    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. ReportedFiscal 2025 reported $5.54 billion of net income on record revenue and record operating income, because a $5.7 billion valuation-allowance charge landed in the tax line.
    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 ↗
  3. ReportedFiscal 2025 reported $5.54 billion of net income on record revenue and record operating income, because a $5.7 billion valuation-allowance charge landed in the tax line. The first nine months of fiscal 2026 then reported $12.38 billion of net income against $8.66 billion a year earlier — helped by $4.1 billion of that charge reversing.
    Qualcomm Incorporated, Form 10-Q for the quarter ended 28 June 2026 (SEC, CIK 804328). Revenues $9,947M for the quarter against $10,365M a year earlier, and $32,798M for the nine months against $33,013M; equipment and services $8,475M ($8,893M) and licensing $1,472M ($1,472M). Cost of revenues $4,670M, research and development $2,607M ($2,226M), selling, general and administrative $976M ($771M). Income before income taxes $2,462M ($2,952M); income tax expense $460M for the quarter, and a $4,136M income tax benefit for the nine months against a $1,034M expense — net income $2,002M ($2,666M) for the quarter and $12,377M ($8,658M) for the nine months. Diluted earnings per share $1.87 ($2.43) on 1,069 million diluted shares (1,099). QCT revenue streams for the quarter: handsets $5,086M ($6,328M), automotive $1,588M ($984M), IoT $1,830M ($1,681M), total QCT $8,504M ($8,993M). — Q3 FY2026 · publ. 2026-07-29 · source ↗
  4. ReportedOperating income does: $12.36 billion in fiscal 2025, up 23%.
    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. ReportedAutomotive revenue rose 61% year over year to $1.59 billion in the June quarter and IoT 9% to $1.83 billion, while handsets fell 20%.
    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 ↗
  6. ReportedQualcomm has doubled its fiscal 2029 non-handset target to $40 billion, which would make the company mostly-not-a-phone-company for the first time since it was founded.
    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 ↗
Sources
Generated September 23, 2026