Key Points:
- Qualcomm beat Wall Street estimates with $10.59 billion in second-quarter revenue and $2.65 in earnings per share.
- The company expects third-quarter revenue between $9.2 billion and $10 billion, missing the $10.23 billion analyst target.
- Global smartphone shipments dropped 4.1% to 289.7 million units in the first quarter of 2026.
- Chief Executive Officer Cristiano Amon will reveal a new data center strategy at the Computex conference in June.
Qualcomm shares surged more than 13% on Wednesday after the chipmaker delivered a surprising earnings report. The technology company beat Wall Street estimates for both its top- and bottom-line results during the second quarter. However, executives disappointed investors by providing a weak financial outlook for the upcoming third quarter. Despite the gloomy short-term forecast, traders focused on the positive business signs in the report and rushed to buy the stock.
For the second quarter, Qualcomm reported solid earnings of $2.65 per share. The company pulled in total revenue of $10.59 billion during the period. Both of these numbers easily topped the specific expectations set by Wall Street analysts. Financial experts originally predicted earnings of just $2.55 per share and total revenue of $10.56 billion. While the company beat the current estimates, the overall business still shrank compared to the same period last year. During the second quarter of the previous year, Qualcomm posted earnings of $2.85 per share and generated $10.83 billion in revenue.
The market’s main disappointment came when executives discussed the near future. Qualcomm announced it anticipates third-quarter revenue between $9.2 billion and $10 billion. This financial forecast fell noticeably short of strict market expectations. Financial analysts wanted the chipmaker to predict at least $10.23 billion in upcoming revenue.
Despite offering weak guidance, Qualcomm gave its investors two massive reasons to celebrate on Wednesday. First, company leaders said they believe the massive Chinese smartphone market will finally bottom out this quarter. A stabilizing market in China represents a highly positive sign for the chipmaker after months of weak consumer spending and excessive inventory buildups. Second, executives revealed that Qualcomm plans to ship custom silicon chips to an unnamed hyperscale computing company later this year. Landing a custom chip deal with a massive cloud provider proves the company can secure lucrative contracts outside of the traditional mobile phone space.
A closer look at the specific business segments shows mixed performance across the company. The primary semiconductor division, known as the QCT business segment, generated $9.07 billion in revenue for the quarter. This number slightly missed the $9.13 billion target expected by analysts. On the other hand, the highly profitable licensing segment performed exceptionally well. The licensing division brought in $1.38 billion, comfortably beating the $1.32 billion estimate from financial watchers.
The broader smartphone industry currently faces severe economic headwinds that directly impact Qualcomm. According to recent data from the International Data Corporation, global smartphone shipments declined by 4.1% in the first quarter of the year. Hardware companies shipped a total of 289.7 million mobile units worldwide. This sudden drop officially broke a solid 10-quarter streak of consistent growth that the mobile industry had enjoyed since the middle of 2023.
The short-term future looks even worse for these mobile hardware manufacturers. The market research firm warned that the recent first-quarter drop is merely a mild precursor to what the rest of 2026 holds. The research group expects the entire market to struggle in the coming months as global consumer demand continues to cool.
Stacy Rasgon works as a financial analyst for Bernstein Research. He quickly echoed these deep concerns regarding the global hardware market. Rasgon warned his clients that the broader smartphone market could easily see double-digit unit declines before the end of the current year. A drop of that size would severely impact the main revenue streams of companies that supply internal digital components.
Qualcomm still relies heavily on its mobile handset business for the vast majority of its overall revenue. However, the company is actively working to diversify its product lineup and escape its dangerous dependence on mobile phones. Executives want to expand into entirely new digital areas to secure the business’s long-term future. The company continues to push aggressively into data center chip sales, modern automotive technologies, and advanced robotics.
Unfortunately, these brand new business ventures take significant time to grow and become profitable. Rasgon noted that these early diversification efforts remain far too small to offset the massive drop in global smartphone shipments. The company simply makes too much money from selling mobile phone chips right now to ignore the shrinking global market.
Investors hope the company will provide better news about its ambitious expansion efforts in the coming months. Wall Street analysts will watch closely in June, when Chief Executive Officer Cristiano Amon travels to Taiwan. Amon plans to deliver the main keynote address at the annual Computex technology conference.
Amon titled his upcoming speech AI Together. Industry insiders expect the presentation to offer a much better look at the company’s overall data center strategy. Shareholders want to know exactly how Qualcomm plans to steal market share from its established rivals in the lucrative server space. If Amon delivers a strong business plan, the company might finally convince anxious investors that it can survive the current smartphone slump and thrive in the era of artificial intelligence.
