QUALCOMM (QCOM) Q4 FY2026 Earnings Call: Q&A Summary

Q: How should we think about gross margins given the Data Center ramp?

A: Akash Palkhiwala explained that price increases will help gross margins return to the 48% to 50% range in the second half of fiscal '27, while Data Center remains dilutive to gross margins but accretive to operating margins.

Q: What workloads are seeing traction for accelerator parts?

A: Cristiano Amon noted that decode workloads are showing strong traction and that silicon performance is exceeding expectations, with yields on track.

Q: Can you provide color on the Data Center customer ramp and the third customer?

A: Akash Palkhiwala stated that Data Center revenue will ramp throughout the year to reach a $7 billion exit rate, while Cristiano Amon confirmed the majority of the $5 billion target comes from two hyperscalers, with a third customer on accelerators and new prospects for CPUs.

Q: How do you view handset revenue and the health of the market?

A: Akash Palkhiwala noted that the handset market is projected to be flat to slightly down in fiscal '27, and Android revenue has been growing since the June quarter bottom.

Q: Is the QTL royalty rate per device changing with new contracts?

A: Akash Palkhiwala confirmed that the revenue run rate remains unchanged, implying royalty rates were maintained during renewals.

Q: Is the Amazon warrant structure a model for other customers?

A: Akash Palkhiwala clarified that the Amazon warrant structure is an exception, and future Data Center engagements will generally follow the traditional semiconductor model.

Q: Can you provide an outlook for the March quarter?

A: Akash Palkhiwala declined to guide March specifically but noted that December is no longer the high quarter due to the Apple product ramp down, and non-handset revenue growth will offset that decline.

Q: How do you justify a flat handset market outlook given recent declines?

A: Akash Palkhiwala explained that the fiscal '26 decline included channel inventory drawdowns that are not expected to repeat in fiscal '27, and Cristiano Amon added that price increases are being applied to new platforms rather than existing inventory.

Q: Is the 75% share framework with Samsung still valid?

A: Cristiano Amon confirmed that the baseline share with Samsung is now north of 70% and that Qualcomm is expanding its business with them into wearables and other devices.

Q: Is the automotive growth sustainable or driven by pre-buying?

A: Cristiano Amon stated that the growth is driven by a significant increase in silicon content, with the fifth-generation platform offering 8x the content of the third-generation platform.

Q: How will QCT EBIT margins progress given the Data Center mix shift?

A: Akash Palkhiwala explained that the inclusion of Data Center in QCT reduces operating margins by 3 percentage points due to upfront investments, but the long-term target of 30% remains unchanged.

Q: How large is the connectivity business and does consolidation impact you?

A: Cristiano Amon stated that connectivity is part of the $5 billion and $15 billion Data Center targets and that Qualcomm is investing in optical technology, seeing potential for strategic partnerships similar to the RF front-end space.

Q: What is the upside for CPUs versus accelerators and does the Arm litigation impact the road map?

A: Cristiano Amon confirmed there are no implications for the CPU road map from the Arm litigation and that any new CPU customers beyond Meta represent upside to revenue targets.

Q: Will all three hyperscale customers be at revenue materiality exiting fiscal '27?

A: Akash Palkhiwala noted that two customers are at significant scale and will drive the $5 billion target, extending into fiscal '28 and '29.

Q: Is there a material OpEx step-up expected in fiscal '27?

A: Akash Palkhiwala stated that OpEx will focus on bringing in new skills for Data Center diversification and that expenses will reset in January consistent with previous years.

Q: What are the timing and magnitude of the Starlink agreement?

A: Cristiano Amon explained that deployment begins in 2027 with revenue impact starting as they exit fiscal '27, and the agreement covers silicon for radio, massive MIMO, and digital unit accelerators.

Q: What product categories make up the $5 billion Data Center target?

A: Akash Palkhiwala clarified that the $5 billion target is primarily driven by custom silicon for AI accelerators and connectivity, while CPUs and AI accelerators will contribute to the $15 billion target in fiscal '29.