Financial institution of America is betting on Qualcomm’s momentum by elevating its worth goal from $200 to $215 and sustaining its purchase ranking.
The analyst acknowledged that Qualcomm recorded a “strong quarter with revenues up 10% vs Street’s 5.1%, driven by 13.2% QCT growth vs Street’s 7.7%.”
The analyst word mentioned that:
QCT development got here from all segments, with Handsets, Auto, and IoT up 14.2%, 17.1%, and seven.4%, respectively.
Financial institution of America mentioned that Qualcomm’s “intermediate term looks somewhat challenged with unsustainable handset trends, and we expect strength to slow in 2Q26.”
That mix of energy and prudence completely describes the corporate’s current state of affairs. Robust development within the automotive and IoT markets exhibits that Qualcomm is increasing exterior smartphones, however the financial institution argues that the corporate’s QCT income nonetheless comes from handsets, which can have already peaked for the cycle.
The message for traders is evident: Qualcomm’s AI-driven diversification is real, however the rise in handsets that helped it surpass expectations could not endure. Financial institution of America’s $215 worth goal means there’s nonetheless room for development, so long as the chipmaker can hold shifting towards cars, IoT, and new data-center prospects.
Qualcomm’s chip enterprise continues to evolve as demand for AI accelerates.
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By the numbers: Qualcomm’s QCT power in focus
Financial institution of America’s constructive name was primarily based on a clear beat in nearly each operational line. Qualcomm’s QCT division, which encompasses cellphones, vehicles, and the Web of Issues, did higher than anticipated in each space.
Right here’s how the quarter stacked up:
- Whole income:+10% 12 months over 12 months versus Avenue’s +5.1%
- QCT phase: +13.2% vs. Avenue’s +7.7%
- Handsets: +14.2%
- Automotive: +17.1% on digital chassis demand
- IoT: +7.4% on linked system adoption
- Working margin: 33.8%, about 20 foundation factors beneath Avenue expectations
- Earnings per share: 12 cents above consensus
- Valuation shift: Mannequin rolled to FY27E, a number of elevated to 17x from 15x FY26E
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The findings had been “strong QCT results across all segments,” analysts mentioned, indicating that the power was evenly distributed all through all its product strains, quite than concentrated in only one.
BofA’s new mannequin now expects Auto and IoT to contribute extra in the long run, which helps offset what it views as a transitory rise in smartphone gross sales.
The catch: Qualcomm handset power seems transitory
Financial institution of America’s constructive outlook for Qualcomm comes with a transparent asterisk: the rise in cellphone gross sales is cyclical, not structural.
Smartphone demand in China was the primary driver of the quarter, due to vacation releases of Android telephones and a pattern towards higher-end fashions. That blend change helped QCT broaden by double digits, however it most likely will not occur once more when seasonal influences put on out in early 2026.
On the identical time, Samsung’s portion of Qualcomm’s flagship chipset market is more likely to shrink from a uncommon 100% this 12 months to round 75% subsequent 12 months with the Galaxy S26. Apple’s association to offer modems is coming to an finish, and vital Chinese language corporations, together with Xiaomi, are nonetheless placing cash into their very own silicon.
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That blend signifies that Qualcomm can have a tougher time within the second half of fiscal 2026, when cellphone gross sales decelerate and regional tailwinds vanish.
Financial institution of America’s thesis is predicated on the concept that new sources of revenue, similar to vehicles, the Web of Issues, and information facilities, can offset the lack of revenue from cell telephones.
This is what would possibly spur Qualcomm’s sturdy development
Even when the smartphone cycle appears to be slowing down, Qualcomm’s total development story is discovering momentum in areas that Wall Avenue used to disregard.
The automotive engine continues to be probably the most obvious one. The phase expanded 17.1% from one 12 months to the following, as a result of demand for Qualcomm’s digital chassis platform, which now drives an increasing number of linked vehicles.
Automakers together with, BMW, Hyundai, and GM are providing the enterprise steadier visibility than cellphones ever may as a result of they’re placing extra materials in every automobile and profitable long-term design contracts.
IoT stored rising at a stable charge, up 7.4%, due to embedded methods, wearables, and an increase in the usage of sensible glasses. Analysts at present suppose that this half will do properly since gadgets will hold bettering, and generative AI can be added on the edge.
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On the identical time, Qualcomm’s drive into information facilities is steadily coming collectively. The corporate’s new AI200 and AI250 inference processors are scheduled for launch in 2026.
Financial institution of America described this as a “multi-billion-dollar opportunity” that might provoke a brand new product cycle. The latest $2.4 billion buy of Alphawave strengthens the DC portfolio by offering essential connectivity IP that matches properly with Qualcomm’s AI ambitions.
These elements type the idea for Qualcomm’s subsequent worth rerating, which is able to rely much less on telephones and extra on the event of linked gadgets and AI infrastructure.
What to observe in Q1 via Q3 2026
Over the following three quarters, we’ll see whether or not Qualcomm can flip its diversification technique into tangible outcomes.
Within the first quarter of 2026, the enterprise is anticipated to profit from its mixture of premium-tier handsets, as high-end Android fashions are anticipated to proceed arriving via the Christmas season and into early spring. That ought to hold margins excessive, at the same time as unit development ranges are down.
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Within the second and third quarters of 2026, Financial institution of America anticipates that the tailwind from handsets will disappear, making the check more difficult. Buyers ought to hold a detailed eye on the gross-margin pattern, which can develop into tighter if the combo shifts again to mid-range gadgets.
Qualcomm will be capable of keep its current worth if it could actually compensate for it with improvement within the automotive and IoT markets.
A number of milestones will form that path:
- Progress on the AI200/AI250 data-center ramp and early buyer adoption
- Updates on the Apple modem transition and attainable renewal
- Samsung share allocation on the following Galaxy S26 lineup
- China Android sell-through after the holiday-driven surge
- New automotive design wins or platform expansions in North America and Europe
When considered collectively, these information factors will present traders whether or not Qualcomm’s $215 estimate is predicated on long-term development or a short-term rebound earlier than cellphone gross sales begin to decide up once more.
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