Qualcomm’s Largest Revenue Line Is Shrinking From Both Sides

The handset chip business still supplies most of Qualcomm’s revenue, and it is now shrinking year over year on the Android side and stepping down on the Apple side at the same time.

Qualcomm (QCOM) has given back about 15% over the past three months and trades at roughly 63% of its 52-week high, which is usually where bargain hunters start looking. The problem is not the valuation. It is a single line on the income statement, the one that still supplies most of the revenue, now contracting from two directions at once.

The $5.1 Billion Line That Still Carries The Company

Revenue in fiscal Q3 2026 was $9.9 billion, and QCT handset revenues were $5.1 billion of it, more than half the total. The data center business meant to diversify away from phones is not shipping yet: its two custom silicon wins first generate revenue in the December quarter.

Android Down 20% While The Apple Share Steps Down Faster

Memory prices have squeezed handset builds across the industry, and management puts QCT Android revenue down 20% year over year, with an earnings hit of more than $1.50 a share. At the other end, the company says its share of the upcoming iPhone launch will be materially lower than its prior 20% estimate, and forecasts Apple product revenue falling about 50% from the September quarter to the December quarter.

Management does say Chinese handset revenue bottomed in fiscal Q3 2026, and its September-quarter guidance puts QCT handset revenue at about $5.2 billion on sequential growth in Android, so the Android side has a floor in sight. There is no such floor on the Apple side.

The Replacement Revenue Arrives At A Thinner Margin

Management’s answer is a specific one. Non-handset revenue growth accelerates from 24% in fiscal 2026 to more than 60% in fiscal 2027, enough to replace all of fiscal 2026’s Apple product revenue. Its own numbers then add a catch. The first data center revenue comes mostly from custom chip engagements, which the company says carry margins significantly lower than its baseline gross margin range of 48% to 50%, a drag of 1.5 to 2 percentage points on QCT’s weighted average gross margin. QCT margins will be slightly below that range on higher input costs across wafer fabrication, assembly, test and packaging. Margins that hold up, and not only revenue that does, are among the things the Trefis High Quality Portfolio looks for in the businesses it holds.

Worth Weighing At 18 Times Trailing Earnings, Not Worth Fleeing

Proportion matters. Qualcomm still earned a 21% net margin over the past twelve months, and at 18 times trailing earnings the multiple suggests much of this difficulty is already in the price. The gap between the pain now and the payoff later is what the December quarter starts to answer: the two engagements are supposed to land their first revenue then, and management expects the price increases it is pushing through to show up in gross margins across the two quarters that follow fiscal Q3 2026. If neither lands, the largest business Qualcomm has is still shrinking and the data center revenue meant to offset it is still unproven, which is worth checking against other beaten-down names before treating this drawdown as a bargain.

At Its Worst, QCOM Fell 44% From A Peak

A warning in the fundamentals is manageable when you are diversified and dangerous when you are not. QCOM itself has fallen 44% from a peak within the past five years, and a fall like that lands very differently when one position carries too much of your wealth. Knowing what a repeat would do to your net worth is exactly what the Trefis Wealth team computes, with the same rules-based systematic discipline that runs our High Quality Portfolio. Request a free vulnerability audit of your biggest positions.