JPMorgan is changing into extra cautious on QUALCOMM Included (QCOM) forward of its upcoming earnings report, citing rising stress in its core handset enterprise. On the identical time, newer progress areas are usually not but giant sufficient to offset that weak point.
Here is JPMorgan’s message to Qualcomm buyers:
JPMorgan flags rising earnings threat forward
On April 16, JPMorgan downgraded Qualcomm to Impartial from Chubby, minimize its value goal from $185 to $140, and put the inventory on “Negative Catalyst Watch” forward of fiscal Q2 outcomes anticipated on April 29. Damaging catalyst watch is a time period JPMorgan makes use of when it sees significant near-term draw back threat and no clear occasion seemingly to enhance the outlook.
Qualcomm shares have already fallen 22% thus far in 2026 and almost 40% from their October peak, with the inventory presently buying and selling round $136 per share.
JPMorgan’s name displays rising draw back threat to near-term earnings as Qualcomm’s handset enterprise faces a number of pressures directly:
- Reminiscence provide constraints
- Weak smartphone demand in China
- Heavy buyer focus with Apple and Samsung
These dangers matter as a result of Qualcomm nonetheless relies upon closely on Qualcomm CDMA Expertise (QCT), its chip unit, for earnings. J.P. Morgan now expects QCT income to say no 22% in calendar 2026, worse than the 17% decline anticipated by the broader Avenue.
Qualcomm’s present ahead P/E a number of of simply over 12x solely appears to be like low-cost if earnings maintain. If handset weak point persists and publicity to premium clients shrinks, the inventory is probably not low-cost relative to normalized earnings energy.
Qualcomm’s margin reset places handset weak point again in focus
The setup for Qualcomm’s upcoming Q2’26 earnings report on April 29 was established with Q1 outcomes launched in late December. The corporate posted fiscal Q1 income of $12.25 billion and non-GAAP EPS of $3.50, each forward of consensus estimates of $12.21 billion and $3.39, respectively. However the market centered on weaker steering somewhat than the beat.
For fiscal Q2, Qualcomm guided to income of $10.2 billion to $11.0 billion and non-GAAP EPS of $2.45 to $2.65. Extra importantly, it guided QCT EBT margin to 26%-28%, down from 31% beforehand.
Extra Qualcomm:
- Galaxy S26 brings ‘agentic AI’ to telephones, and it’s greater than Samsung
- Qualcomm points pressing dividend alert for chip buyers
- Financial institution of America resets Qualcomm inventory value goal after earnings
QCT is Qualcomm’s predominant revenue engine, so a 3- to 5-point drop in profitability reduces revenue per handset greenback and will increase the chance that any income decline will translate into a bigger hit to EPS.
Whether or not the trigger is decrease utilization, weaker combine, pricing stress, or softer volumes, Qualcomm is incomes much less from its core enterprise simply as smartphone demand weakens. For that purpose, buyers need proof that earnings will enhance.
Diversification nonetheless not sufficient to offset handset stress
Qualcomm has made actual progress exterior smartphones, however these companies stay too small to offset weak point within the core franchise. In fiscal Q1, automotive income reached $1.1 billion, up 15% 12 months over 12 months, and administration expects greater than 35% progress in fiscal Q2.
CEO Cristiano Amon stated on the newest earnings name that “Demand for our Snapdragon Digital Chassis solutions remains incredibly strong, and we announced several collaborations with top automakers, OEMs, and service providers during the quarter.”
That’s significant progress, however buyers nonetheless view automotive as a partial offset somewhat than a substitute for handset earnings. The misplaced revenue pool in smartphones is bigger and extra rapid.
The identical drawback applies to information middle AI inference. The chance issues strategically, however income shouldn’t be anticipated to turn out to be significant till round fiscal 2027. By then, Qualcomm might be competing in a market the place Arm-based CPUs and Nvidia inference platforms are already urgent tougher.
Qualcomm’s diversification is gaining traction, however handset weak point nonetheless dominates, whilst AI-driven demand stays robust in superior chips.
Bloomberg/Getty Pictures
On the identical time, the core enterprise faces buyer dangers that diversification has not but neutralized. Apple’s modem insourcing may finally take away roughly $7 billion to $8 billion of enterprise from Qualcomm, whereas analyst assumptions for Samsung’s Galaxy S26 reportedly now level to a 75% Qualcomm share as an alternative of 100%. These shifts would stress the corporate’s scale within the premium phase that helps QCT margins.
Even Qualcomm’s licensing enterprise is seeing decrease expectations. JPMorgan minimize its FY2026 QTL income forecast from $5.5 billion to $5.3 billion, reinforcing the broader concern that the corporate’s higher-margin buffers are additionally coming below stress.
What may carry Qualcomm shares
- Handset demand is available in higher than feared, with QCT income holding above reset expectations
- Margins stabilize, signaling the earnings base is now not deteriorating
- Automotive progress accelerates, serving to assist the diversification story
- Stronger Snapdragon content material in premium Android launches helps chip income even when unit progress stays mushy
- Licensing collections are available in stronger, supporting higher-margin earnings
Qualcomm’s down 22% YTD. Here is what may ship it down additional
- Reminiscence constraints restrict smartphone manufacturing
- China’s demand weakens additional
- Decrease Samsung share reduces publicity to premium Android gadgets
- Apple’s modem insourcing accelerates, creating a bigger income hole
- One other QCT margin step-down, signaling a extra structural reset to earnings energy
Key takeaways for buyers
JPMorgan’s downgrade is pushed by the truth that Qualcomm’s earnings base could also be weaker than it appears to be like.
The inventory trades at simply over 12x ahead earnings, however that a number of depends upon earnings holding up. With margins falling, handset demand softening, and buyer dangers constructing, JPMorgan argues that buyers have to see clear indicators that earnings are stabilizing.
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